Indian Economy News & Discussion - Nov 27 2017

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vina » 18 May 2018 17:25

nandakumar wrote:Theory doesn't say it is not possible. After all it is a fact that currently at least future prices are lower than spot. It would merely say it is an aberration.


Backwardation is the usual norm because of convenience yield (google it up /youtube it up, and why it is so or just open any standard textbook. this is normal stuff) in a normally supplied market. Contango happens usually happens in an oversupplied market when spot prices crash. Then the arbitrage play of inventorying stuff and selling delivering later and pocketing the spread works (as long as you are a giant like Vitol /Trafigura or the operations of large global biggies) who have the infra and the physical assets and the supplies and capital to be able to do the arb. In fact Vitol took it to the chin recently when the oil prices rose, because this inventorying and selling later arb play stopped being as profitable.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Austin » 18 May 2018 18:05

A_Gupta wrote:tradingeconomics.com reports:

Foreign Exchange Reserves in India decreased to 417700 USD Million in May 12 from 418940 USD Million in the previous week.


RBI intervened in market to stabilise the rupee ?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby JayS » 18 May 2018 18:26

Austin wrote:
A_Gupta wrote:tradingeconomics.com reports:

Foreign Exchange Reserves in India decreased to 417700 USD Million in May 12 from 418940 USD Million in the previous week.


RBI intervened in market to stabilise the rupee ?


RBI as well as PSBs sold USD on behalf of RBI to stop Rupee fall.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Austin » 18 May 2018 21:54

I thought so as Rupee was heading towards 69 and physiological barrier of 70

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby hanumadu » 18 May 2018 22:08

https://timesofindia.indiatimes.com/business/india-business/tata-steel-completes-acquisition-of-controlling-stake-in-bhushan-steel/articleshow/64226210.cms

NEW DELHI: Bamnipal Steel Ltd (BNPL), a wholly-owned subsidiary of Tata Steel, has successfully completed the acquisition of controlling stake of 72.65 per cent in Bhushan Steel Ltd (BSL).
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Congrats to PM @narendramodi ji & @arunjaitley ji for a historic breakthrough in resolving legacy issues of Banks. Lenders recovered almost entire principal loan of Bhushan Steel through Rs 36,400 cr transparent bid by Tata Steel and also got 12% stake in the company.
8:31 AM - 18 May 2018
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Liquidation value of Bhushan Steel was Rs 14,541 cr but creditors received almost 4 times the amount. This was possible due to the robust and transparent Insolvency & Bankruptcy Code brought by this Government #NPAturnaround
14 replies 290 retweets 469 likes
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For the first time such a large loan resolution has been achieved through upfront payment received by Banks through sale of a company. This is a record step towards resolving the legacy of unprecedented amount of bad bank loans inherited by this Government. #NPAturnaround

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 19 May 2018 00:11

The Bhushan Steel process is a watershed moment indeed. Such a demonstration of a functioning process for such a high value NPA enables others to go through the same with confidence.

After reaching its target, Centre unlikely to sanction new mega food parks
The Union Ministry of Food Processing Industries is unlikely to sanction new mega food parks as it has achieved the target of establishing 42 such parks in the country.

“The target was to establish 42 mega food parks. We have sanctioned all food parks. Out of them, 12 are operational and 30 are under implementation. During the current year we hope to make others (parks) operational as well”, Gargi Kaul, additional secretary at the ministry said at a National Seminar on 'Agri-Food Processing Connect through Prime Minister Kisan Sampada Yojana' in Cuttack.

Monsoon to hit Kerala on May 29, three days ahead of schedule
Southwest monsoon, the lifeline for millions of farmers across the country, is expected to hit Kerala coast on May 29, three days ahead of normal arrival date, the India Meteorological Department (IMD) said on Friday.

The forecast is with a model error of plus and minus four days.

The normal onset date of southwest monsoon is June 1 over the Kerala coast.

Thereafter, it covers the entire country in next 45 days.

With strong demand, India's biggest steelmakers plan record output
India’s biggest steelmakers are set to expand production to a record after reporting solid quarterly earnings amid strong steel prices.
JSW Steel Ltd. posted record net income Wednesday and outlined a $6 billion plan to raise output. Tata Steel Ltd., which aims to double domestic capacity, swung to profit, helped by a one-time gain.

Both mills are ramping up to meet an anticipated surge in domestic consumption with the government set to spend trillions of dollars on expanding infrastructure. Paving the way are the best market conditions in years as prices are bolstered by lower exports from China, the world’s biggest producer.

JSW sees Indian steel consumption rising by as much as 7.5 percent in the 2019 financial year, supported by a government push for infrastructure projects and strengthening consumer demand, said joint-Managing Director Seshagiri Rao.

Tata Steel is aiming to double capacity in India to 26 million tons in five years. Both producers will expand their own facilities while seeking to snap up some of the distressed assets for sale under India’s new bankruptcy laws.

Govt to push wage code, table social security code in Monsoon Session
Labour Minister Santosh Gangwar on Wednesday said the Wage Code Bill 2017 would be pushed for passage while the Labour Code on Social Security Bill 2018 would be tabled for consideration in the monsoon session of Parliament.

The Wage Code will enable the Centre to set benchmark minimum wages for different regions across the country. The bill's provision provides that states cannot set minimum wages below the benchmark set by the Centre.

The draft code on the bill was introduced in the Lok Sabha in August 2017. Thereafter, it was referred to the committee for scrutiny which is expected to submit its report in the Monsoon session.

The bill also seeks to combine Payment of Wages Act, 1936, the Minimum Wages Act, 1949, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976, into one code.

The draft Labour Code on Social Security 2018 provides concept of community service order to reform offenders and linking pecuniary penalty with inflation. At present, violation under social security laws attracts either fines, imprisonment or a combination of both.

Once the code is implemented, the government will not have to approach Parliament for increasing fines under the social security legislation.

The draft code would subsume 15 social security laws including Unorganised Workers’ Social Security Act, 2008; Employees’ State Insurance Act, 1948; Employees’ Provident Funds and Miscellaneous Provisions Act, 1952; Maternity Benefit Act, 1961; Payment of Gratuity Act, 1972 and Building and Other Construction Workers Cess Act, 1996, among others.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Karthik S » 19 May 2018 08:37

Minimum wage leads to inflation and also layoffs due to higher costs to business. Govt has to be careful in doing more harm than good.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vina » 19 May 2018 10:52

Deleted. Poster banned for trolling.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby hanumadu » 19 May 2018 11:41

^^^Your post is a political rant and has nothing to do with economics.

Fix the financial system? How? And how would have fixing the financial system solved the NPA problem?
Yes Modi could have had the IBC in place earlier if congress had the brains to vote for it and not repeatedly stall the parliament.

Yet, IBC was passed within 2 years after the current govt came to power and the process of auctioning the companies started a year later. And now the results are being seen. All in all, good progress starting from scratch.

If the auctioning had started earlier, no one would have bid for these companies as the bidding companies were themselves struggling. Modi steadily increased spending on infrastructure till the capacity utilisation of steel plants increased and profitable companies were looking to add new capacity. You wouldn't get the prices these troubled companies are getting now three years ago. There would have been zero bids.

Lot of people suggested a TARP program, a bad loan bank (Arun Shourie chief among them). But the govt took the long, painful but the right path. It waited for demand to increase and the NPAs to fetch a good price. You couldn't have asked for a better timing.

Among the two major NPA sectors, steel and power, steel is fixed. Power is difficult to fix given the prices of solar power are going down continuously.

Gas power capacity in India is very less, only about 20GW. That is about 20,0000 crore in investment. In the scheme of things it is not much.

Even among the thermal power plants, other than Lanco and Bhushan power I don't see any major defaulters.

And no, the govt did not pump prime the economy anymore than ordinary. It reduced the deficits continuously year after year. And what ever money was collected from fuel taxes and by reducing subsidies was spent wisely on infrastructure.

Even a lay man could understand the strategy, even in 2014. It was the obvious thing to do.

Pump priming would have been creating a bad bank and printing money to recapitalize the banks like you suggested.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby chetak » 19 May 2018 12:17



The RBI governor is, in the end, a paid govt employee, appointed by the govt and he serves the Govt at it's sweet will and pleasure. No two ways about it.

Any RBI governor's sweet will and wish notwithstanding, they would have had bugger all to say, if the govt of the day decided to go ahead on any policy matter it deemed politically expedient, looking at the big picture, of course.

For anyone to be "eased" out, their TERM would have to be cut short. This did not happen.

The three year term given to him on his appointment to the RBI by the MMS govt ended after it's full and uninterrupted completion. The new govt was magnanimous enough to let him complete his term without interference, though there were much better candidates available at the time. The widespread expectations were also that the incumbent guv would be asked to leave but he was not and therein lies the rub. A sense of indispensable familiarity and a feeling of TINA may have set in and such circumstances can only breed contempt. It would have been best all around, if sleeping dogs were simply allowed to lie undisturbed.

Generally speaking, any "expectations" of further employment simply evaporate when culturally illiterate folks start to badmouth their employers. Sometimes one needs to study genetics to understand failure. Academics are not usually renowned for their political acumen, and tend to get carried away, especially when egged on by presstitutes with their own agenda and also craftily knowing which string to pull for which response.

When someone's TERM is over, reappointment or otherwise is the govt's SOLE and inviolable prerogative. The incumbent's personal views, social media "opinion" and optics do not take precedence over policy. This once again buttresses the fact that the RBI chappie is merely a govt employee, period.

Rightly or wrongly, RBI heads cannot even take a leak without the express approval of the govt. The law may say what it want's to say and wasn't it Dickens who said that "the law is a jackass"??

Their so called "independence" of the RBI head is a well crafted "myth" and no one at the RBI had/has/will have the courage, moral or otherwise, to test the veracity of this red line firmly drawn in the sand on Mint road, decades ago.

For every RBI guv appointed, there are dozens of equally well qualified, experienced and highly competent candidates walking the corridors of power in the govt as well as industry/other academia who could easily have made the grade but luck or the prevailing winds did not favor them at that specific point in time.

Though he was ultimately eased out, because with him in place, there is NO way the hare brained DeMo would have happened. He would have flatly refused and resigned (Y V Reddy on TV said that if he had been the RBI gov when the DeMo was announced, he would have checked himself into a hospital ICU claiming chest pain.. but then YV Reddy was a bureaucrat and RRR was an academic..


It is also truthfully said that those who can, do and those who can't, teach.

Sadly, academic "brilliance" =/= street smart competence on the ground.

needless focus on "managing" inflation and tight interest rates have actually done us more harm than good. The most sought after quality in the RBI Guv is compatibility and not confrontation.

Also, if anyone had " flatly refused", then you would be right and that person would have been "eased" out, for sure. This Govt is certainly not one to be trifled with.

Over the years, there has been no " flatly refused" ever, though there may have been rare but very occasional cases of petulance.

Just as one swallow does not a summer make, a hospital ICU involving a hypothetical "chest pain" does not a lion make, and especially on a TV channel, far removed from the hot seat and again especially when a true blue alpha male Gir lion is already on the prowl, no??.
Last edited by chetak on 19 May 2018 15:13, edited 1 time in total.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 19 May 2018 15:10

Claim: "Every $10 increase in the price of a barrel knocks 0.2% to 0.3% off India's growth rate, according to the country's latest economic survey. "

From CNN: http://money.cnn.com/2018/05/18/news/ec ... index.html

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby arshyam » 19 May 2018 15:11

Just curious, what did Raghuram Rajan actually do about NPAs when he was governor? NPAs were brewing from before the day he took office, didn't they?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby chetak » 19 May 2018 15:24

arshyam wrote:Just curious, what did Raghuram Rajan actually do about NPAs when he was governor? NPAs were brewing from before the day he took office, didn't they?



It's called the "turn a Nelson's eye" management technique.

Practiced only by the top management.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Uttam » 19 May 2018 21:58

A_Gupta wrote:Claim: "Every $10 increase in the price of a barrel knocks 0.2% to 0.3% off India's growth rate, according to the country's latest economic survey. "

From CNN: http://money.cnn.com/2018/05/18/news/ec ... index.html



One should be very careful in establishing causality from a simple correlation. That relation between economic growth and oil prices probably was more prominent when the oil prices were controlled by the government. Any increase in oil price used to result in an increase in fiscal deficit, followed by an increase in govt borrowing, and thus crowding out of private investment. The unregulated prices will also have similar effect but much less because the economy will adapt to increase in fuel prices and this adaptation itself will create more economic activity.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby yensoy » 19 May 2018 22:49

chetak wrote:
arshyam wrote:Just curious, what did Raghuram Rajan actually do about NPAs when he was governor? NPAs were brewing from before the day he took office, didn't they?

It's called the "turn a Nelson's eye" management technique.
Practiced only by the top management.


You don't try to call out or solve a problem you know you can't fix.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby yensoy » 19 May 2018 22:53

A_Gupta wrote:Claim: "Every $10 increase in the price of a barrel knocks 0.2% to 0.3% off India's growth rate, according to the country's latest economic survey. "

From CNN: http://money.cnn.com/2018/05/18/news/ec ... index.html


Higher oil prices will benefit us indirectly in some ways too (i) lesser pressure on Indian workers in the middle East, hopefully salaries get paid, more remittances, (ii) oil refiners for export may be able to maintain margins and earn a little more, (iii) renewed focus on lessening our dependence on oil, move to electrics, recycling of plastics etc.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 19 May 2018 23:02

My dear that is precisely why he was appointed RBI governor. And no high oil prices don't help India at this stage of its economic development. In any case oil is controlled by a cartel which would like to keep it as high as just below pain point for buying economies. India has no meat in the game.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby chetak » 20 May 2018 01:00

yensoy wrote:
chetak wrote:It's called the "turn a Nelson's eye" management technique.
Practiced only by the top management.


You don't try to call out or solve a problem you know you can't fix.


Even though it is in one's job description?? and even though one was the economic advisor earlier with full knowledge of all the goings-on in the counrty's financial space??

Its a bit of a stretch, no??

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 20 May 2018 02:35

For goodness’ sake, stop wasting space on this thread on one guy who’s got nothing to do with the present day. Please get a clue - this thread was just cleaned up for a reason, and it’s not to keep going on derailing it .

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby VKumar » 20 May 2018 20:01

hanumadu wrote:https://timesofindia.indiatimes.com/business/india-business/tata-steel-completes-acquisition-of-controlling-stake-in-bhushan-steel/articleshow/64226210.cms

NEW DELHI: Bamnipal Steel Ltd (BNPL), a wholly-owned subsidiary of Tata Steel, has successfully completed the acquisition of controlling stake of 72.65 per cent in Bhushan Steel Ltd (BSL).
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Congrats to PM @narendramodi ji & @arunjaitley ji for a historic breakthrough in resolving legacy issues of Banks. Lenders recovered almost entire principal loan of Bhushan Steel through Rs 36,400 cr transparent bid by Tata Steel and also got 12% stake in the company.
8:31 AM - 18 May 2018
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Liquidation value of Bhushan Steel was Rs 14,541 cr but creditors received almost 4 times the amount. This was possible due to the robust and transparent Insolvency & Bankruptcy Code brought by this Government #NPAturnaround
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For the first time such a large loan resolution has been achieved through upfront payment received by Banks through sale of a company. This is a record step towards resolving the legacy of unprecedented amount of bad bank loans inherited by this Government. #NPAturnaround
[/quote


My question is who is going to bear the loss. The difference between the loans given and the money recovered. This should be recovered from the group companies of the borrowers, the collateral, the guarantors, and personal assets of directors.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby suryag » 20 May 2018 20:43

Sir - half of the loan amounts are annual interest compounded, IMO if you recover the principal it is a good first step and whatever comes beyond is a bonus

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 20 May 2018 21:01

VKumar wrote:My question is who is going to bear the loss. The difference between the loans given and the money recovered. This should be recovered from the group companies of the borrowers, the collateral, the guarantors, and personal assets of directors.

That's not how insolvency and bankruptcy codes work. Everyone could take a loss; any loan can go bad, after all. When resolved by sale to a bidder or liquidation, entities get paid in an order of preference set forth in the bankruptcy code. E&Y has a nice presentation on how the new IBC works:
The Indian Insolvency and Bankruptcy Code, 2016 (PDF)
Order of priority for distribution of assets
• Insolvency related costs
• Secured creditors and workmen dues upto 24 months
• Other employee’s salaries/dues up to 12 months
• Financial debts (unsecured creditors)
• Government dues (up to 2 years)
• Any remaining debts and dues
• Equity

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby VKumar » 21 May 2018 00:02

Suraj wrote:
VKumar wrote:My question is who is going to bear the loss. The difference between the loans given and the money recovered. This should be recovered from the group companies of the borrowers, the collateral, the guarantors, and personal assets of directors.

That's not how insolvency and bankruptcy codes work. Everyone could take a loss; any loan can go bad, after all. When resolved by sale to a bidder or liquidation, entities get paid in an order of preference set forth in the bankruptcy code. E&Y has a nice presentation on how the new IBC works:
The Indian Insolvency and Bankruptcy Code, 2016 (PDF)
Order of priority for distribution of assets
• Insolvency related costs
• Secured creditors and workmen dues upto 24 months
• Other employee’s salaries/dues up to 12 months
• Financial debts (unsecured creditors)
• Government dues (up to 2 years)
• Any remaining debts and dues
• Equity


Now that Bhushan steel is sold to Tata, for a sum that is lower than the amount loaned plus accumulated interest, in that case the difference must be absorbed by the bank or supported by the government, in either case it is a hit on the tax payer. This difference amount should be recovered to the maximum amount possible from collateral, guarantors to the loan, personal assets of directors, assets of defaulting group, but I don't read about this anywhere although these are standard clauses in loan agreements.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby pravula » 21 May 2018 00:18

Well, any loan is an investment and as such has a risk associated with it. Higher the risk, more the interest rate. What you are claiming is there should be no haircut, which is fine, as long as the interest rate is 0 or lower.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby hanumadu » 21 May 2018 01:00

VKumar wrote:
Suraj wrote:That's not how insolvency and bankruptcy codes work. Everyone could take a loss; any loan can go bad, after all. When resolved by sale to a bidder or liquidation, entities get paid in an order of preference set forth in the bankruptcy code. E&Y has a nice presentation on how the new IBC works:
The Indian Insolvency and Bankruptcy Code, 2016 (PDF)


Now that Bhushan steel is sold to Tata, for a sum that is lower than the amount loaned plus accumulated interest, in that case the difference must be absorbed by the bank or supported by the government, in either case it is a hit on the tax payer. This difference amount should be recovered to the maximum amount possible from collateral, guarantors to the loan, personal assets of directors, assets of defaulting group, but I don't read about this anywhere although these are standard clauses in loan agreements.


3% of loan amount turning NPA is normal as per some accounts. So there will be some NPAs and some losses. The banks also got 12% of equity in Bhushan steel. Given the situation and vast NPAs and also that the banks have been taking losses on these NPAs for several years now and have written them off, even 60-70% recovery is a very good thing. It will give a tremendous boos to the banks and fresh lending can start in earnest.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Vayutuvan » 21 May 2018 05:48

Suraj wrote:
Order of priority for distribution of assets
...
• Equity


Equity itself is divided into several classes. Holders of common stock are last in the line. These are the retail investors at large and/or indirectly through MFs.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Katare » 21 May 2018 06:53

arshyam wrote:Just curious, what did Raghuram Rajan actually do about NPAs when he was governor? NPAs were brewing from before the day he took office, didn't they?


Brought it out in open and forced banks to disclose NPAs and put money away for provisions. Rajan was good governor and a goid man. His time was over and he left, lets leave it at that.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby VKumar » 21 May 2018 09:45

hanumadu wrote:
VKumar wrote:
Now that Bhushan steel is sold to Tata, for a sum that is lower than the amount loaned plus accumulated interest, in that case the difference must be absorbed by the bank or supported by the government, in either case it is a hit on the tax payer. This difference amount should be recovered to the maximum amount possible from collateral, guarantors to the loan, personal assets of directors, assets of defaulting group, but I don't read about this anywhere although these are standard clauses in loan agreements.


3% of loan amount turning NPA is normal as per some accounts. So there will be some NPAs and some losses. The banks also got 12% of equity in Bhushan steel. Given the situation and vast NPAs and also that the banks have been taking losses on these NPAs for several years now and have written them off, even 60-70% recovery is a very good thing. It will give a tremendous boos to the banks and fresh lending can start in earnest.


In the above good feeling of something better than nothing, we should not overlook that the difference between everything and something will be debited to taxpayers. This is not what we work for, instead we would have wished the money to be spent on infrastructure and social upliftment.

Now if only taxpayers were permitted to vote, politicians and bureaucrats would be far more circumspect.

Just my POV.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby yensoy » 21 May 2018 10:48

hanumadu wrote:
VKumar wrote:
Now that Bhushan steel is sold to Tata, for a sum that is lower than the amount loaned plus accumulated interest, in that case the difference must be absorbed by the bank or supported by the government, in either case it is a hit on the tax payer...


3% of loan amount turning NPA is normal as per some accounts. So there will be some NPAs and some losses...


And this is actually a good thing. If loans are fully guaranteed and there are no NPAs, that only means that banks are lazy in lending (have exceedingly high lending standards which shuts out much of the market), and entrepreneurs are risk-averse. Entrepreneurship by definition is risky. Nobody wants to fail but often they do. Entrepreneurs cannot and should not be penalized for business failures beyond the limited liability drawn up during company formation, otherwise entrepreneurship itself will collapse with it any form of future growth and innovation. (they should very much be penalized for fraud, that is a different story)

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby VKumar » 21 May 2018 11:23

yensoy wrote:
hanumadu wrote:
3% of loan amount turning NPA is normal as per some accounts. So there will be some NPAs and some losses...


And this is actually a good thing. If loans are fully guaranteed and there are no NPAs, that only means that banks are lazy in lending (have exceedingly high lending standards which shuts out much of the market), and entrepreneurs are risk-averse. Entrepreneurship by definition is risky. Nobody wants to fail but often they do. Entrepreneurs cannot and should not be penalized for business failures beyond the limited liability drawn up during company formation, otherwise entrepreneurship itself will collapse with it any form of future growth and innovation. (they should very much be penalized for fraud, that is a different story)



The point I am making is whatever be the justification, in the end the loss is borne by you and me.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby pravula » 21 May 2018 11:28

VKumar wrote:
yensoy wrote:
And this is actually a good thing. If loans are fully guaranteed and there are no NPAs, that only means that banks are lazy in lending (have exceedingly high lending standards which shuts out much of the market), and entrepreneurs are risk-averse. Entrepreneurship by definition is risky. Nobody wants to fail but often they do. Entrepreneurs cannot and should not be penalized for business failures beyond the limited liability drawn up during company formation, otherwise entrepreneurship itself will collapse with it any form of future growth and innovation. (they should very much be penalized for fraud, that is a different story)



The point I am making is whatever be the justification, in the end the loss is borne by you and me.


And the profits too :wink:

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby chetak » 21 May 2018 11:36

yensoy wrote:
hanumadu wrote:
3% of loan amount turning NPA is normal as per some accounts. So there will be some NPAs and some losses...


And this is actually a good thing. If loans are fully guaranteed and there are no NPAs, that only means that banks are lazy in lending (have exceedingly high lending standards which shuts out much of the market), and entrepreneurs are risk-averse. Entrepreneurship by definition is risky. Nobody wants to fail but often they do. Entrepreneurs cannot and should not be penalized for business failures beyond the limited liability drawn up during company formation, otherwise entrepreneurship itself will collapse with it any form of future growth and innovation. (they should very much be penalized for fraud, that is a different story)


Entrepreneurship by definition is risky. Nobody wants to fail but often they do. Entrepreneurs cannot and should not be penalized for business failures beyond the limited liability drawn up during company formation, otherwise entrepreneurship itself will collapse with it any form of future growth and innovation.


The fruits or lack of it thereof in any enterprise, is the sole responsibility of the so called "entrepreneur" In India this has taken on a very peculiar definition of it's own, one that always capitalizes profits and insists on socializing losses, losses that are invariably backstopped by the taxpayer while the serial "entrepreneur" moves on to his next scam err, enterprise. Rinse and repeat.

If an entrepreneur "fails" its because his due diligence was not good enough, he failed miserably because he did not understand the risk or simply did to care to understand it, failed also to correctly assess the market conditions, current and expected future trends and make provisions for it, entered a business which was not conducive to his particular brand of entrepreneurship, or finally, failed due to sheer incompetence or, as is more usually the case, the sly bugger simply intended to swallow the loan under the guise of "business failure" and never ever intended to pay back, depending on some mummy or daddy to stop all due legal processes for recovery.

If a loan dependant entrepreneur fails for any reason, screw the effing b@$turd, let him carry the can, sell off his wife's jewels or peddle his gluteus maximus on dalal street. Whose father what goes??

That's where the question of >100% collateral comes into play. If you and I are always expected by the banks to pony up >100% collateral for loans that we take, why not the so called "entrepreneur"??

If you and I, purchase a house/flat, are we not "entrepreneurs" in our own right?? Isn't an asset created?? resulting in sureshot jobs created for plumbers, drivers, carpenters, gardeners, delivery guys and housemaids?? just to name a few.

Don't we help local businesses by purchasing their goods and services from nearby areas, spending money in kirana shops, malls, vegetable vendors, hotels, schools, hospitals and other businesses, pay local taxes etc etc??

Yes, we too are legitimate "entrepreneurs" but no one recognizes that very simple fact.

If you and I, default on our "loan", the bank does not hesitate, even for a single minute, to take over the pledged collateral and auction it off.

Collateral that always exceeds in value the very loan that it is pledged against. The bank is always risk free and completely covered in all cases.

However "entrepreneurs" are in a different category. For them, it is all no risk and only profit, Business failure or success is irrelevant and immaterial because mummy and daddy are always watchful and they rush to head off the debt collectors at the proverbial pass. We, the taxpayers, are always the buggered party.

Just look at newspaper ads announcing "auctions" of bank seized flats, houses, cars, trucks, small industrial sheds etc.

Aren't they all bank loan defaulters whose assets after seizures are mercilessly being auctioned??

Do we even care for such "business failures"?? Of course, we don't because they don't matter, no??

Sauce for the goose and sauce for the gander story all over again.

Such ads never appear for huge conglomerates defaulting on their loans.

We have no mummy or daddy to intervene on our behalf, but they all have, no??

But as taxpayers, we are routinely taken for granted and forced to endlessly fund an ever growing parade of expensively dressed in designer clothes "entrepreneurs", who blithely and confidently scam their way from one loan funded "enterprise" to the next.

so, entrepreneurs can and should be penalized for business failures. Failures are an undoubted learning opportunity, both for the lenders, in terms of refinements in risk evaluation processes, refinement of lending metrics tailored to market and industry segments and also for borrowers in terms of risk incorporated business plans, using sectoral consultants to understand and forecast emerging trends and evaluate and factor in risks for ensuring business continuity but sadly, they also have tangible consequences and entrepreneurs must be accountable. There are no free lunches.

Such a specious discussion would not even be taking place in any other civilized society where people are routinely expected to live or die by the market and not look for perpetual handouts to line their pockets from public funds.

This is the tradition the world over. No need to make any exceptions in India for genuine "entrepreneurs" or crooks in "entrepreneur's clothing".

It is but natural that some wheat will always be lost with the chaff.

Just let it go. It is a jungle out there. Only the fittest should survive.

If, as a loan taking "entrepreneur", you fail, first cut your own protected throat because what such a failure actually does is, it sure cuts someone else's unprotected throat, and that someone may have worked even harder than you, just to get where he is at.
Last edited by chetak on 21 May 2018 15:20, edited 1 time in total.

A_Gupta
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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 21 May 2018 15:20

^^^ The current US President is a billionaire, but has his businesses go into bankruptcy four times.
http://money.cnn.com/2015/08/31/news/co ... index.html

Who took the haircut in each case?

I suppose the civilized world is an imaginary construct.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby chetak » 21 May 2018 15:24

A_Gupta wrote:^^^ The current US President is a billionaire, but has his businesses go into bankruptcy four times.
http://money.cnn.com/2015/08/31/news/co ... index.html

Who took the haircut in each case?

I suppose the civilized world is an imaginary construct.


Point is well taken, A_Gupta ji, but sadly, you are talking american apples to Indian oranges.

We are not there just yet, even after 70 odd years.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 21 May 2018 17:24

Please keep a check on philosophical diatribes . If you’d like , compare and contrast US chapter 11 or 7 bankruptcy procedure with the Indian IBC, but please stop using this thread to wail and cry .

VKimar, for someone who doesn’t know the bankruptcy code , please take time to learn before you make assertions here .


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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Philip » 21 May 2018 18:57

Thete is a big scare in the minds of the Muddle Class about the security of their bank deposits which the GOI must address.Firstly that only one 1 lakh is guaranteed on deposits with PSBs.Secondly that at any time the govt. can freeze their accts.limiting their withdrawals as happened during demonitisation.
The answer to restore confidence is to guarantee 100% for all deposits and 100% withdrawals at any time.A small increase in interest rates will see billions of deposits enriching the coffers of PSBs reeling under scams and huge NPAs.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 21 May 2018 19:44

Philip wrote:Thete is a big scare in the minds of the Muddle Class about the security of their bank deposits which the GOI must address.Firstly that only one 1 lakh is guaranteed on deposits with PSBs.Secondly that at any time the govt. can freeze their accts.limiting their withdrawals as happened during demonitisation.
The answer to restore confidence is to guarantee 100% for all deposits and 100% withdrawals at any time.A small increase in interest rates will see billions of deposits enriching the coffers of PSBs reeling under scams and huge NPAs.


Even 50 lakhs or 1 crore insurance will be fine. Even in US, only $150,000 is insured.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby nam » 21 May 2018 20:01

Philip wrote:Thete is a big scare in the minds of the Muddle Class about the security of their bank deposits which the GOI must address.Firstly that only one 1 lakh is guaranteed on deposits with PSBs.Secondly that at any time the govt. can freeze their accts.limiting their withdrawals as happened during demonitisation.
The answer to restore confidence is to guarantee 100% for all deposits and 100% withdrawals at any time.A small increase in interest rates will see billions of deposits enriching the coffers of PSBs reeling under scams and huge NPAs.


If there is a fear of money disappearing, there would have been a run on the banks already. Frankly no one can help people who believe they will be out of their own money from a GoI undertaking. No political party is foolish enough to do this. I am amazed,"educated" middle class people believe such stuff.

Regarding interest rates. It goes both way. Interest in rates means good for saving, at the same paying more in house loans. Banks cannot use customer savings to resolve NPAs. This has been told multiple times by the banks.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby nam » 21 May 2018 20:03

vijayk wrote:Even 50 lakhs or 1 crore insurance will be fine. Even in US, only $150,000 is insured.


This applies for private banks. Similarly for UK, it is 50k. Northern Rock in UK was nationalized when there was a run on it during 2008-09.

It is not an issue for PSB, as they are GoI undertaking, not private entity.


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