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RBI’s revised debt resolution rules likely post Lok Sabha election 2019




The RBI’s revised stress assets resolution circular is likely to be out after the elections to clear the model code of conduct, and also the regulator may need time to have consultations with legal experts, industry and government before bringing the framework out, official sources said.

This would mean that the widely anticipated RBI circular would not be issued before June. The delay could also halt resolution of several stressed assets as lenders are looking for clear directions from the banking regulator before moving ahead to resolve accounts.

“After the court judgement, the RBI is extra careful to issue any other circular without proper consultation and vetting. This could result in some delays, but ultimately better regulations would flow,” said an official source.

The Supreme Court on April 2 struck down a February 12, 2018 circular of the RBI that asked banks to initiate insolvency process against companies even if there was a day’s delay in payment of dues.

As per the circular, banks were told to start the resolution process as soon as a borrower defaulted on a term loan and were given 180 days to cure it, failing which the account would have to be referred to the National Company Law Tribunal (NCLT).

While the new circular on debt resolution is still being discussed and debated, it is expected that RBI is likely to adopt a more accommodative approach towards resolution of stressed assets in the new circular.

Sources said the major contention in the controversial February 12, 2018, circular that got challenged in court leading to the quashing of the circular will be done away with in the new circular. Instead, banks will be given more time to identify and qualify an account as bad debt and also be given more time to resolve a case.

The RBI is likely to retain the main contours of its February 12, 2018 circular while making the referral to NCLT non-compulsory, sources told IANS.

It may, however, be guided by suggestions earlier given by Indian Banking Association (IBA) for debt resolution for classification of NPA and resolution of bad assets.

Bankers had suggested qualifying a loan as bad debt if the default was for a period of at least 90 days and not one day as was the case in the February 12 circular. A bank-led resolution should start only after that, according to bankers.

Moreover, it had suggested a 60-day incubation period post this time for identifying the default. After this, banks would resolve a case within 180 days and consider referring the case to NCLT post that period, if the majority of the lenders agreed.

The revised circular on NPAs, however, is unlikely to include the pre-IBC restructuring tools like Strategic Debt Restructuring (SDR), Corporate Debt Restructuring (CDR), Sustainable Structuring of Stressed Assets or S4A that were phased out by RBI earlier.

In the previous circular the RBI had withdrawn all existing debt restructuring schemes – S4A, CDR, JLF, and SDR – and asked banks to draw up resolution plans for all assets where the banking sector’s exposure was more than Rs 2,000 crore

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Freecharge launches new features to empower SMBs




Digital payments platform Freecharge on Tuesday launched several features like Paisa Plus, Payment Links, Dynamic QR, Digital Khata and On-demand Settlement for small and medium businesses (SMBs).

Available on Freecharge Business App, Paisa Plus allows small merchants to issue digital shopping/gift vouchers to customers either as a reward or at a discounted price. With these vouchers, customers are encouraged to make a purchase in lieu of a discount or a refund.

The Payment Links tool provides a swift and secure way to send and receive payments. Through this product, businesses can send SMS, e-mail or WhatsApp messages to their customers with a link for making the pending payment.

The consumer, on receiving the link can pay using UPI, cards or netbanking, the company said in a statement.

“In the present scenario when social distancing has set the precedence, such secured modes of payments are eliminating the need of in-person transactions and aiding small businesses continue during uncertain times,” said Siddharth Mehta, CEO, Freecharge.

Freecharge Khata is a customised digital record book of the good old ‘Khata’, which enables merchant partners to maintain an account of all of their customer transactions.
Merchants can easily add customers through a simple mobile verification process.

Once verified, they can give credit and make debits in the customer account and can also send automated reminders to customers to settle their pending credit amount.

“We are hopeful that our customers and merchants would continue to have an impeccable experience on the app which would strengthen the merchant and customer relationship,” Mehta added.

A 100 per cent subsidiary of Axis Bank, Freecharge also introduced on-demand settlement, enabling the merchant to request for payments whenever they want at a click of a button.

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NTPC power plants to host industrial parks of cos, MSMEs




In a key initiative to promote ‘Make in India’ and give a boost to the government’s vision of ‘Atmanirbhar Bharat’, the country’s largest power producer NTPC Ltd has thrown open a vast land bank within its power plants to Indian companies interested in setting up industrial parks and manufacturing facilities.

The power producer has invited expression of interest (EoI) from companies and MSMEs for setting up energy intensive manufacturing plants such as bulk chemicals, geopolymer, cooling & heating solutions, aluminum, mineral processing (ceramics, tiles, pottery, brick, glass etc), metallurgical and metal industries (foundries, forging, alloys, heat treatment, steel rerolling, etc) in the industrial parks to be developed at its existing power plants.

The pilots in this regard would be set up in the NTPC Thermal Power plants at Solapur (Maharashtra), Kudgi (Karnataka) and Gadarwara (Madhya Pradesh), a company statement said.

These industrial parks will be subjected to requisite approvals from respective state and central government. NTPC will process these approvals based on responses received in the EoI, the statement added.

The government has announced a slew of economic packages aimed to build self-reliant India by creating conducive investment environment and developing manufacturing hubs.

NTPC’s power plants across the country have evolved into economic centres with robust infrastructure system in place.

Capitalising on the economic ecosystem developed over a period of time, NTPC is exploring ideas to improve utilisation of land within its plant locations for enhancing economic activity and further contributing to economic growth of the country.

The initiative will create industrial parks within the power plants which, besides offering advantage of reliable electricity supply at competitive prices, will provide other benefits of readily available infrastructural services like adequate water supply, accessibility through road and rail network, robust connectivity with internet lease lines, accessibility to township, medical facilities and local market along with various testing facilities which will be co-opted on need basis.

As part of the plan, NTPC will enter into separate agreement with prospective entities for allotment of spaces.

With a total installed capacity of 62.9 GW, NTPC Group has 70 power stations comprising of 24 coal, 7 combined cycle gas/liquid fuel, 1 hydro, 13 renewables along with 25 Subsidiary & JV power stations. The group has over 20 GW of capacity under construction, of which 5GW comprises of renewable energy.

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SEBI may issue norms for minimum holding in liquid assets for MFs




The Securities and Exchange Board of India (SEBI) may soon come up with guidelines to mandate minimum asset allocation in liquid assets by debt mutual funds in their schemes.

Speaking at the Annual General Meeting of the Association of Mutual Funds in India (AMFI), SEBI Chairman Ajay Tyagi said that such a move is aimed at improving liquidity in schemes and it would also help schemes to meet sudden redemption pressures.

He was of the view that as far as the performance of the mutual fund industry is concerned, overall, the industry has weathered the pandemic’s storm well, which, he said demonstrates the robustness of the regulatory framework as well as the maturity of the industry.

Tyagi also noted that the mutual fund industry, however, also went through several patches of challenges, especially on the debt mutual fund side.

“Some of the issues that arose during the period are now addressed and some are in the process of being addressed. The contemplated policy measures inter-alia include stress testing, minimum asset allocation in liquid assets and a swing pricing like mechanism,” he said.

Tyagi said that an expert committee will be constituted to frame a stress testing methodology for all open ended debt mutual fund schemes.

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