Monday, May 13, 2019

Haircuts: A way to address NPAs in banking system

What is a Haircut (in finance)?

In finance, a haircut refers to the reduction applied to the value of an asset for the purpose of calculating the capital requirement, margin, and collateral level. In other words, it is the difference between the amount of loan given and the market value of the asset to be used as collateral for the loan. The value reduction is expressed in the form of a percentage.
A haircut can also be referred to as the complement of the loan-to-value ratio (when added together, they make 100%). For example, when central banks lend money to commercial banks, the central bank asks for collateral. However, it will apply a haircut – a reduction in the value of the collateral. Let’s say, an asset worth $1 million at market price, given a haircut of 30%, would be sufficient to collateralize a loan of only $700,000. By devaluing the assets provided as collateral, the lender gets a cushion, a measure of risk protection to defend against market value drops.
The level of haircut is decided by the level of risk surrounding the loan. The level of risk includes all factors that may result in a fall in the market value of the collateral. Some variables that influence the amount of haircut include interest rate, creditworthiness, and the collateral’s liquidity.
Other definitions of a Haircut
A haircut can also be referred to as the difference between the buying and selling price of a stock share, bond, futures or options contract, or any other financial instrument. The difference is generally the handling fee for the transaction.
In common financial jargon, a haircut is also used to describe a financial loss on an investment. To “take a haircut” corresponds to accepting or receiving less than what was owed.

What is Collateral Haircut

A haircut refers to the lower-than-market value placed on an asset being used as collateral for a loan. The haircut is expressed as a percentage of the markdown between the two values. When they are used as collateral, securities are generally devalued, since a cushion is required by the lending parties in case the market value falls. When collateral is being pledged, the degree of the haircut is determined by the amount of associated risk to the lender. These risks include any variables that may affect the value of the collateral in the event that the lender has to sell the security due to a loan default by the borrower. Variables that may influence that amount of a haircut include price, volatility, credit quality of the asset's issuer (if applicable), and liquidity risks of the collateral.
 Factors that Determine the Haircut Amount
Generally speaking, price predictability and lower associated risks result in compressed haircuts, as the lender has a high degree of certainty that the full amount of the loan can be covered if the collateral must be liquidated. For example, 
Treasury bills are often used as collateral for overnight borrowing arrangements between government securities dealers, which are referred to as repurchase agreements (repos). In these arrangements, haircuts are negligible due to the high degree of certainty on the value, credit quality, and liquidity of the security.
Securities that are characterized by volatility and price uncertainty have larger haircuts when used as collateral. For example, an investor seeking to borrow funds from a brokerage by posting equity positions to a margin account as collateral can only borrow 50% of the value of the account due to the lack of price predictability, which is a haircut of 50%.
While a 50% haircut is standard for margin accounts, a risk-based haircut can be increased if the deposited securities pose liquidity or volatility risks. For example, the haircut on a portfolio of leveraged exchange-traded funds (ETFs), which are highly volatile, may be as high as 90%. Penny stocks, which pose potential price, volatility and liquidity risks, typically cannot be used as collateral in margin accounts.

Haircut Market Maker Spreads
A haircut is also sometimes referred to as the market maker's spread. Since market makers can transact with razor-thin spreads and low transaction costs they can take small slivers or haircuts of profits (or losses) constantly throughout the day.
With advances in technology and markets becoming more efficient, spreads in many assets have dropped to haircut levels.
Retail traders can transact at the same spreads market makers do, although retail traders costs are still higher which may make trading the spread ineffective. In a stock, both retail traders and market makers can buy and sell for a Rs0.01 spread in an active and liquid stock, but buying and selling 500 shares to make Rs5 (500 * Rs0.01) when each trade typically costs Rs5 to Rs10 (varies by broker) is not a profitable strategy for the retail trader.

Long-Term Capital Management's (LTCM) Failure and Collateral Haircuts Example
LTCM was a hedge fund started in 1993. By 1998 it had amassed massive losses, nearly resulting in a collapse of the financial system. The basis of LTCM's profit model, which worked very well for a while, was to suck up small profits from market inefficiencies. This is commonly called arbitrage. The firm used historical models to highlight opportunities and then deployed capital to profit from them.

Each opportunity typically only produced a small amount of profit, so the firm utilized leverage—or borrowed money—in order to increase the gains. The firm had Rs 5 billion in assets, yet controlled over Rs 1 trillion worth of positions.

Banks and other institutions allowed LTCM to borrow or leverage so much, with little collateral, mainly because they viewed the firm and their positions as non-risky. Ultimately, though, the firm's model failed to predict inefficiencies accurately, and those massively sized positions began to lose far more money than the firm actually had and more money than many of the banks and institutions that lent to them or allow them to purchase assets had.

The failure of LTCM, which required a 
bailout of the financial system, resulted in much higher haircut rules in terms of what can be posted as collateral, and how much the haircut has to be. LTCM had basically no haircuts, yet today an average investor buying regular stocks is subject to a 50% haircut when using those stocks as collateral against the amount borrowed on a margin trading account.

Market Maker Haircut Example
In many markets, the market maker's spread is the same as the retail trader's spread, although the trading costs for the retail trader makes trying to profit from a haircut spread ineffective.
One market where retail traders often cannot trade at the same spreads as the market makers is the forex market. This is because forex brokers often mark-up the spread, which is how they make money. In the EUR/USD forex pair the raw spread available to market makers is 0.00001, yet retail traders may be paying a spread of 0.00005 to 0.00015 (or even higher), a mark-up of five to 15 times the raw spread.
Forex brokers that provide raw spreads to their clients charge a commission on each trade. They make their money off of trading fees instead of marking-up the spread.
Haircut in Economy:
A haircut is the difference between the loan amount and the actual value of the asset used as collateral. It reflects the lender's perception of the risk of fall in the value of assets.
1. What are haircuts in the Indian banking system?
A haircut is the difference between the loan amount and the actual value of the asset used as collateral. It reflects the lender's perception of the risk of fall in the value of assets. But in the context of loan recoveries, it is the difference between the actual dues from a borrower and the amount he settles with the bank.

2. When do lenders opt for haircuts in India?Haircuts are not common in India. However, there have been instances in the past when a lender settles for some equity of a borrower to compensate for a loan loss.
But it is often a last re sort when there is absolutely no hope of a recovery and the loan is written off for a one time settlement. The regulators in the recent past have made many other options for banks like the corporate-debt restructuring or allowing sale of bad loans to asset reconstruction companies among others.

3. Why would lenders opt for such a route?
This is done because the lender gets at least some amount back instead of not getting any mon ey at all. Besides, the lender's provisioning liability comes down to the extent of the write-off, thus it ends up freeing capital in the process. Also, there is a regulatory pressure to clean up banks' balance sheets by March 2017.

4. Why would lenders avoid this option?
Experts say there is no single model to arrive at a haircut for a particular loan. Besides, lenders also fear that investigative agencies may get back at them for their judgement on a particular valuation of a haircut. For instance, there was one-time settlement of over Rs 6,000 crore for a Kingfisher loan of Rs 9,000 crore, which was not accepted by the investigators.

5. How does opting for a haircut impact a balance sheet?
By opting for an haircut in settling a loan, the entire loan is written off by the bank con and to that extent, the assets cerned and to that extent, the assets shrink. But if the loan is settled through a bond subscription of equity sale, the nature of assets changes. If there is a one-time cash settlement, it gets reflected in the profit-and-loss account. 

KEY TAKEAWAYS
  • A haircut is the lower-than-market-value placed on an asset when it is being used as collateral for a loan.
  • The size of the haircut is largely based on the risk of the underlying asset. Riskier assets receive larger haircuts.
  • A haircut also refers to the sliver or haircut-like spreads market makers can create or have access to.


Source: Economic Times, Investopedia article by Cory Michell,  &  https://corporatefinanceinstitute.com/resources/knowledge/finance/haircut/

Friday, April 19, 2019

The Regulatory Sandbox: Principles and Objectives

An Ideal FinTech Sandbox

What is Regulatory Sandbox?
• A regulatory sandbox is a regulatory approach,  typically summarized in writing and published, that allows live, time-bound testing of innovations under a regulator’s oversight. Novel financial products,technologies, and business models can be tested under a set of rules, supervision requirements, and appropriate safeguards.
• A sandbox creates a conducive and contained space where incumbents and challengers experiment with innovations at the edge or even outside of the existing innovations at the edge or even outside of the existing regulatory framework. 
• A regulatory sandbox brings the cost of innovation down, reduces barriers to entry, and allows regulators to collect important insights before deciding if further regulatory action is necessary. 
• A successful test may result in several outcomes, including full-fledged or tailored authorization of the innovation, changes in regulation, or a cease-and desist order.
• The first regulatory sandbox was launched in 2015 in the U.K. and generated great interest from regulators and innovators around the world. At the beginning of 2018, there were more than 20 jurisdictions actively implementing or exploring the concept. 
The Reserve Bank of India (RBI) set up an inter-regulatory Working Group (WG) in July 2016 to look into and report on the granular aspects of FinTech and its implications so as to review the regulatory framework and respond to the dynamics of the rapidly evolving FinTech scenario. FinTech stands for financial technology and describes technologically enabled financial innovations. 
The WG included representatives from RBI, SEBI, IRDA, PFRDA, NPCI, IDRBT, select banks and rating agencies.The report of the WG was released on February 08, 2018 for public comments. 

One of the key recommendations of the WG was to introduce an appropriate framework for a regulatory sandbox (RS) within a well-defined space and duration where the financial sector regulator will provide the requisite regulatory guidance, so as to increase efficiency, manage risks and create new opportunities for consumers.
The Reserve Bank of India released on 18th April 2019, the draft ‘Enabling Framework for Regulatory Sandbox’. Comments on the draft guidelines are invited from stakeholders by May 08, 2019. 
The Regulatory Sandbox: Principles and Objectives
The Regulatory Sandbox
A regulatory sandbox (RS) usually refers to live testing of new products or services in a controlled/test regulatory environment for which regulators may (or may not) permit certain regulatory relaxations for the limited purpose of the testing. The RS allows the regulator, the innovators, the financial service providers (as potential deployers of the technology) and the customers (as final users) to conduct field tests to collect evidence on the benefits and risks of new financial innovations, while carefully monitoring and containing their risks. It can provide a structured avenue for the regulator to engage with the ecosystem and to develop innovation-enabling or innovation-responsive regulations that facilitate delivery of relevant, low-cost financial products. The RS is potentially an important tool which enables more dynamic, evidence-based regulatory environments which learn from, and evolve with, emerging technologies.
Objectives
The RS provides an environment to innovative technology-led entities for limited-scale testing of a new product or service that may or may not involve some relaxation in a regulatory requirement before a wider-scale launch.
The RS is, at its core, a formal regulatory programme for market participants to test new products, services or business models with customers in a live environment, subject to certain safeguards and oversight.
The proposed financial service to be launched under the RS should include new or emerging technology, or use of existing technology in an innovative way and should address a problem, or bring benefits to consumers.
Regulatory Sandbox: Benefits
The setting up of an RS can bring several benefits, some of which are significant and are delineated below:
  1. The RS fosters ‘learning by doing’ on all sides. Regulators obtain first-hand empirical evidence on the benefits and risks of emerging technologies and their implications, enabling them to take a considered view on the regulatory changes or new regulations that may be needed to support useful innovation, while containing the attendant risks. Incumbent financial service providers, including banks, also improve their understanding of how new financial technologies might work, which helps them to appropriately integrate such new technologies with their business plans. Innovators and FinTech companies can improve their understanding of regulations that govern their offerings and shape their products accordingly. Finally, feedback from customers, as end users, educates both the regulator and the innovator as to what costs and benefits might accrue to customers from these innovations.
  2. Users of an RS can test the product’s viability without the need for a larger and more expensive roll-out. If the product appears to have the potential to be successful, the product might then be authorized and brought to the broader market more quickly. If any concerns arise, during the sandbox period, appropriate modifications can be made before the product is launched in the broader market.
  3. FinTechs provide solutions that can further financial inclusion in a significant way. The RS can go a long way in not only improving the pace of innovation and technology absorption but also in financial inclusion and in improving financial reach. Areas that can potentially get a thrust from the RS include microfinance, innovative small savings and micro-insurance products, remittances, mobile banking and other digital payments.
  4. By providing a structured and institutionalized environment for evidence-based regulatory decision-making, the dependence of the regulator on industry/stakeholder consultations only is correspondingly reduced.
  5. The RS could lead to better outcomes for consumers through an increased range of products and services, reduced costs and improved access to financial services.
Regulatory Sandbox: Risks and Limitations
1 Innovators may lose some flexibility and time in going through the RS process (but running the sandbox program in a time-bound manner at each of its stages can mitigate this risk).
2 Case-by-case bespoke authorizations and regulatory relaxations can involve time and discretional judgements (this risk may be addressed by handling applications in a transparent manner and following well-defined principles in decision-making).
3 The RBI or its RS cannot provide any legal waivers.
4 Post-sandbox testing, a successful experimenter may still require regulatory approvals before the product/services/technology can be permitted for wider application.
5 Regulators can potentially face some legal issues, such as those relating to consumer losses in case of failed experimentation or from competitors who are outside the RS, especially those whose applications have been/may be rejected. These, however, may not have much legal ground if the RS framework and processes are transparent and have clear entry and exit criteria. Upfront clarity that liability for customer or business risks shall devolve on the entity entering the RS will be important in this context.
Regulatory Sandbox: Eligibility Criteria for Participating in the Sandbox
The target applicants for entry to the RS are FinTech firms which meet the eligibility conditions prescribed for start-ups by the government.
The focus of the RS will be to encourage innovations where
  1. there is absence of governing regulations;
  2. there is a need to temporarily ease regulations for enabling the proposed innovation;
  3. the proposed innovation shows promise of easing/effecting delivery of financial services in a significant way.
Design Aspects of the Regulatory Sandbox
The RBI shall consider the following key design features for the RS:
Sandbox Cohorts and Product/Services/Technology
The RS may run a few cohorts (end-to-end sandbox process), with a limited number of entities in each cohort testing their products during a stipulated period. The RS shall be based on thematic cohorts focussing on financial inclusion, payments and lending, digital KYC, etc. The cohorts may run for varying time periods but should ordinarily be completed within six months.
An indicative list of innovative products/services/technology which could be considered for testing under RS are as follows.
1 Innovative Products/Services
  • Retail payments
  • Money transfer services
  • Marketplace lending
  • Digital KYC
  • Financial advisory services
  • Wealth management services
  • Digital identification services
  • Smart contracts
  • Financial inclusion products
  • Cyber security products
2 Innovative Technology
  • Mobile technology applications (payments, digital identity, etc.)
  • Data Analytics
  • Application Program Interface (APIs) services
  • Applications under block chain technologies
  • Artificial Intelligence and Machine Learning applications
2 Regulatory Requirements/Relaxations for Sandbox Applicant
The RBI may consider relaxing, if warranted, some of the regulatory requirements for sandbox applicants for the duration of the RS on a case-to-case basis. However, regulatory requirements that shall mandatorily have to be maintained by the applicants are as follows:
  • Customer privacy and data protection
  • Secure storage of and access to payment data of stakeholders
  • Security of transactions
  • KYC/AML/CFT requirements
  • Statutory restrictions
3 Exclusion from Sandbox Testing
The entities may not be suitable for RS if the proposed financial service is similar to those that are already being offered in India unless the applicants can show that either a different technology is being gainfully applied or the same technology is being applied in a more efficient and effective manner.
An indicative negative list of products/services/technology which may not be accepted for testing is as follows:
  • Credit registry
  • Credit information
  • Crypto currency/Crypto assets services
  • Trading/investing/settling in crypto assets
  • Initial Coin Offerings, etc.
  • Chain marketing services
  • Any product/services which have been banned by the regulators/Government of India

Number of FinTech Entities to be Part of a Cohort
The focus of the RS should be narrow in terms of areas of innovation, and limited in terms of intake. The RS shall begin the testing process with 10-12 selected entities through a comprehensive selection process as detailed in the framework under ‘Fit and Proper criteria for selection of participants in RS’.
Fit and Proper Criteria for Selection of Participants in RS
1 The entities should satisfy the following conditions:
  1. The entity should be a company incorporated and registered in India and shall meet the criteria of a start-up as per Govt. of India, DIPP Notification No. G.S.R. 364(E) dated April 11, 20181.
  2. The entity shall have a minimum net worth of Rs.50 lakh as per its latest audited balance sheet.
  3. The promoter(s)/director(s) of the entity are fit and proper as per the criteria enumerated in Annex I. A declaration and undertaking shall be obtained to this effect as per Annex II.
  4. The conduct of the bank accounts of the entity as well its promoters/directors should be satisfactory.
  5. A satisfactory CIBIL or equivalent credit score of the promoter(s)/director(s)/ entity is required.
  6. Applicants should demonstrate that their products/services are technologically ready for deployment in the broader market.
  7. The entity must demonstrate arrangements to ensure compliance with the existing regulations/laws on consumer data protection and privacy.
  8. There should be adequate safeguards built in its IT systems to ensure that it is protected against unauthorized access, alteration, destruction, disclosure or dissemination of records and data.
  9. The entity should have robust IT infrastructure and managerial resources. The IT systems used for end-to-end sandbox processing will be checked by the RBI to ensure end-to-end integrity of information processing by the entities concerned.
2 The proposed FinTech solution should highlight an existing gap in the financial ecosystem and the proposal should demonstrate how it would address the problem, or bring benefits to consumers or the industry or perform the same work more efficiently.
3 The applicants should demonstrate that there is a relevant regulatory barrier that prevents deployment of the product/service at scale, or a genuinely innovative and significantly important product/service/solution is proposed for which relevant regulation is necessary but absent.
4 The test scenarios and expected outcomes of the sandbox experimentation should be clearly defined, and the sandbox entity should report to the RBI on the test progress, based on an agreed schedule.
5 The appropriate boundary conditions (refer to section 6.7) should be clearly defined for the RS to be meaningfully executed while sufficiently protecting consumers’ privacy.
6 An acceptable exit and transition strategy should be clearly defined in the event that the proposed FinTech-driven financial service has to be discontinued, or can proceed to be deployed on a broader scale after exiting the RS.
7 The applicants shall be required to share the results of Proof of Concept (PoC)/testing of use cases including any relevant prior experiences before getting admission into RS for testing, wherever applicable.
8 Significant risks arising from the proposed FinTech solution or financial service should be assessed and mitigated.
Extending or Exiting the Sandbox
At the end of the sandbox period, the regulatory relaxations provided to the entities will expire and the sandbox entity must exit the RS. In the event that the sandbox entity requires an extension of the sandbox period, it should apply to the RBI at least one month before the expiration of the sandbox period and with valid reasons to support the application for extension. The decision of the RBI on the application will be final.
The sandbox testing will be discontinued any time at the discretion of the RBI if the entity does not achieve its intended purpose, based on the latest test scenarios, expected outcomes and schedule mutually agreed by the sandbox entity with the RBI. Further, the RS may also be discontinued if the entity is unable to fully comply with the relevant regulatory requirements and other conditions specified at any stage during the sandbox process. The sandbox entity may also exit from the RS at its own discretion by informing the RBI one week in advance. The sandbox entity should ensure that any existing obligation to its customers of the financial service under experimentation is fully addressed before exiting the RS or discontinuing the RS.
Boundary Conditions
When a sandbox operates in the production environment, it must have a well-defined space and duration for the proposed financial service to be launched, within which the consequences of failure can be contained. The appropriate boundary conditions should be clearly defined for the RS to be meaningfully executed while sufficiently protecting the interests of consumers. The boundary conditions for the RS may include the following:
  • Start and end date of the RS
  • Target customer type
  • Limit on the number of customers involved
  • Transaction ceilings or cash holding limits
  • Cap on customer losses
Ensure Transparency
Outreach with stakeholders and clear and adequate information to the participants in the RS is important. The RBI will communicate the entire RS process including its launch, theme of the cohort, and entry and exit criteria through its official website.
Consumer Protection
The sandbox participant will be required to ensure that any existing obligations to the customers of the financial service under experimentation is fulfilled or addressed before exiting or discontinuing the RS. It may be noted that entering the RS does not limit the entity’s liability towards its customers. The entities entering the RS must be upfront and, in a transparent way, notify test customers of potential risks and the available compensation and obtain their explicit consent in this regard.
The Sandbox Process and its Stages in a Regulatory Sandbox
End-to-End Sandbox Process
A detailed end-to-end sandbox process, including the testing of the products/innovations by FinTech entities, shall be overseen by the FinTech Unit (FTU) at the RBI.
The Sandbox Process: Stages and Timelines
Each cohort of the RS shall have the following five stages and timeline:
1 Preliminary Screening (4 weeks)
The FTU shall ensure that the applicant clearly understands the objective and principles of the sandbox and conforms to it. This phase shall last for 4 weeks from the launch of the sandbox, where the applications shall be received by the FTU and evaluated to shortlist applicants meeting the eligibility criteria.
2 Test Design (3 weeks)
This phase may last for 3 weeks. The FTU shall finalize the test design through an iterative engagement with the applicants and identify outcome metrics for evaluating evidence of benefits and risks.
3 Application Assessment (3 weeks)
This phase may last for 3 weeks. The FTU shall vet the test design and propose regulatory modifications, if any.
4 Testing (12 weeks)
This phase may last for a maximum of 12 weeks. The FTU shall generate empirical evidence to assess the tests by close monitoring.
5 Evaluation (4 weeks)
This phase may last for 4 weeks. The final outcome of the testing of products/services/technology as per the expected parameters including viability/acceptability under the RS shall be confirmed by the RBI. The FTU shall assess the outcome reports on the test and decide on whether the product/service is viable and acceptable under the RS.
Statutory and Legal Issues
  • Upon approval, the applicant becomes the entity responsible for operating in the RS. The RBI will provide the appropriate regulatory support by relaxing specific regulatory requirements (which the sandbox entity will otherwise be subject to), where necessary, for the duration of the RS. The RBI shall bear no liability arising from RS process and any liability arising from the experiment will be borne by the applicant as a sandbox entity.
  • Upon successful experimentation and on exiting the RS, the sandbox entity must fully comply with the relevant regulatory requirements. The applicant should clearly understand the objective and principles of the RS. It must be emphasized that the RS is not intended and cannot be used as a means to circumvent legal and regulatory requirements.
  • At the end of the sandbox period, the entity must exit the RS.


Disclosure
The RBI shall reserve the right to publish any relevant information about the RS applicants on its website, including for the purpose of knowledge transfer and collaboration with other international regulatory agencies.

RBI said that innovation and technologies around credit registry and information, cryptocurrency and assets, trading, ICO and chain marketing services may not be accepted as a part of the sandbox.

The RBI further added that the focus of the sandbox will be at innovations, which have an absence of governing regulations; a need to temporarily ease regulations for enabling the proposed innovation; or is expected to effect the delivery of financial services in a significant way.



Source: rbi.org.in, https://rbi.org.in/Scripts/BS_SpeechesView.aspx?Id=1071United Nations Secretary-General’sSpecial Advocate for Inclusive Finance for Development(UNSGSA), yourstory.com, &
https://www.pwc.in/consulting/financial-services/fintech/fintech-insights/the-sandbox-approach.html
 

Wednesday, July 25, 2018

Project Sashakt: 5 prong strategy on stressed asset resolution

What is Project Sashakt and how it will work

Finance Minister Piyush Goyal unveiled 'Project Sashakt', a five-prong strategy to deal with non-performing assets. Sashakt aims to strengthen the credit capacity, credit culture and credit portfolio of public sector banks.

The Centre accepted Project Sashakt in the first week of July 2018,which is a five-pronged strategy to resolve bad loans, with the larger ones going to an asset management company (AMC) or an Alternative investment fund (AIF)

What is Project Sashakt?

Project Sashakt was proposed by a panel led by PNB chairman Sunil Mehta.  The Five-Prong Approach is as under:-
1. Outlining SME Resolution approach for Bad loans of up to ₹50 crore - which will be managed at the bank level, with a deadline of 90 days.
2. Bank-led Resolution Approach for bad loans between ₹50-500 crore - Under this approach banks will enter an inter-creditor agreement@, authorizing the lead bank to implement a resolution plan in 180 days, or refer the asset to NCLT. 
3. AMC_AIF Resolution Approach for loans above ₹500 crore - The panel recom­mended an independent AMC, supported by institutional funding through the AIF. The idea is to help consolidate stressed assets.
4. NCLT / IBC Resolution Approach &
5. Asset-Trading Platform Approach.

How will the national AMC work?
According to the committee, banks will have to set up an AMC under which there will be multiple sector-specific AIFs. These funds will invest in the stressed assets bought by existing ARCs, such as ARCIL. The ARCs will use the funds to redeem security receipts issued to banks against the bad loans. Other AMC-AIFs and ARCs will be allowed to bid for these assets, and match the pricing offered by ARCIL or the national AMC. The AMC will be responsible for the operational turnaround of the asset.
Who will own the stressed asset?
The ARC after buying the asset from lenders will transfer ownership to the AIF. The new owner, the AMC-AIF, will hold a stake of at least 76%.
What do investors think about the plan?
While investors are optimistic about the AMC-AIF structure, they believe that pricing will be key to complete the transaction. The Mehta panel suggested that the bidding process follow a market-led approach, inviting bids from AMCs, ARCs and AIFs. Existing players, such as ARCIL and the national AMC, will be allowed to set the floor price for the bad assets, while other players will be asked to either match the price or better it.
What is the money involved?
The total quantum of bad loans worth ₹500 crore or more is estimated at ₹3 trillion. According to SBI chairman Rajnish Kumar, the AMC will require funds of ₹1.2 trillion, assuming a 40% loan recovery. Of this, 60-70% is expected to come from domestic institutions and banks, including SBI, and the remaining 30-35% from foreign investors. The AMC will require funding for six to 24 months, said Kumar.


@ Inter-Creditor Agreement:- Banks and financial institutions, including SBI, PNB and LIC entered on 23rd July 2018, into an overarching inter-creditor agreement (ICA) to fast-track resolution of stressed assets of Rs 50 crore or more which are under consortium lending. The ICA is being signed by 22 public sector banks (including India Post Payments Bank), 19 private sector banks and 32 foreign banks. Besides, 12 major financial intermediaries, like LIC, HUDCO, PFC and REC are also signatories to the pact, according to the agreement. 
As many as two dozen lenders signed the inter-creditor agreement (ICA) on Monday the 23rd July 2018, to tackle bad loans between Rs 50-500 crore, adding up to Rs 3.1 lakh crore. Under the agreement, a borrower will be given an opportunity to ‘cure’ the default and a reference for resolution will be made within 30 days of the default, if not repaid.
The agreement, part of the government’s measure to deal with bad loans under Project Sashakt, will be effective by the end of this month. Under the pact each resolution plan will be submitted by the lead lender to an Overseeing Committee. “The lead lender that is the lender with the highest exposure shall be authorized to formulate the resolution plan, which shall be presented to the lenders for their approval." 
Under the ICA framework, the decision making will be by way of approval of ‘majority lenders’, those with 66 per cent share in the aggregate exposure. Once a resolution plan is approved by the majority lenders, it will be binding on all the lenders that are a party to the ICA. Each resolution plan that is formulated in terms of the ICA shall be in compliance with the RBI circular and all other applicable laws and guidelines.

While the agreement will primarily focus on the Rs 50-500 crore category, it can also be used for assets within the Rs 500-2,000 crore range. According to the agreement, the lead bank will be paid a fee for its services. 

एनपीए की समस्या से निपटने हेतु ‘सशक्त’ योजना की घोषणा
सरकार बैंकों के फंसे हुए कर्ज (NPA) की समस्या से निपटने के लिए प्रोजेक्ट सशक्त का ऐलान किया है. इसके तहत पांच सूत्रीय फॉर्मूला पेश किया गया है. सरकार इसे एनपीए से निपटने के लिए लांग ट्रम स्ट्रेटजी बता रही है. सरकार एनपीए की समस्या से निपटने के लिए बैड बैंक नहीं बनाने जा रही है लेकिन वह इसके लिए असेट मैनेजमेंट कंपनियों और स्टीयरिंग कमेटियों का गठन करेगी.
देश के सरकारी बैंकों के एनपीए अर्थात् नॉन परफॉरमिंग एसेट्स की समस्या को दूर करने के लिए एक समग्र नीति लागू किये जाने की घोषणा की गई है. यह समग्र नीति ‘प्रोजेक्ट सशक्त’ के नाम से लागू होगी जिसे सुनील मेहता की अध्यक्षता में गठित समिति की रिपोर्ट के आधार पर तैयार किया गया है.

'सशक्त' योजना के तहत पांच सूत्री फॉर्मूला लागू किया जाएगा. वित्त मंत्री पीयूष गोयल ने कहा कि देश में करोड़ रुपये से ज्यादा राशि के 200 बैंक खाते हैं. इनमें तकरीबन तीन लाख करोड़ रुपये के कर्ज फंसे हैं.

प्रोजेक्ट योजना सम्बंधित प्रमुख तथ्य

•    पचास करोड़ रुपये तक के फंसे कर्ज खातों के निपटारे के लिए हर बैंक में एक संचालन समिति का गठन किया जाएगा. इसका फायदा छोटी व मझोली कंपनियों को सबसे ज्यादा होगा कि उन पर ही 50 करोड़ रुपये तक का एनपीए है.

•    समिति 90 दिनों के भीतर इन सभी खातों के बारे में फैसला करेगी कि इन्हें और ज्यादा कर्ज देने की जरुरत है या इनके खाते को बंद करने की जरुरत है.

•    50 से 500 करोड़ रुपये तक के एनपीए खाता के लिए यह फैसला किया गया है कि उनके बारे में लीड बैंक की अगुवाई में फंसे कर्जे के निपटारे का फैसला किया जाएगा.

•    इस श्रेणी के खाताधारकों को एक से अधिक बैंक कर्ज देते हैं इसलिए एक कर्ज देने वाले बैंकों के बीच एक समझौता किया जायेगा.

•    500 करोड़ रुपये से ज्यादा राशि के अन्य एनपीए खाते जिनका निपटारा एएमसी के जरिए भी नहीं हो सकेगा उन्हें दिवालिया कानून के तहत ही सुलझाया जाएगा.

•    इसे लागू करने के लिए इन बैंकों की एक स्क्रीनिंग समिति भी गठित होगी जो यह देखेगी कि तय नियमों का पालन पारदर्शी तरीके से किया जा रहा है या नहीं.
सुनील मेहता समिति का गठन
जून 2018 में वित्त मंत्री पीयूष गोयल ने पंजाब नेशनल बैंक की अगुवाई में समिति का गठन किया गया जिसकी अध्यक्षता सुनील मेहता को सौंपी गई. इस समिति को बैड बैंकजैसी संरचना की व्यावहारिकता परखने एवं दो सप्ताह में संपत्ति पुनर्निर्माण कम्पनी के गठन के लिए सिफारिश देने के लिए कहा गया.
इस समिति में स्टेट बैंक ऑफ़ इंडिया के चेयरमैन रजनीश कुमार, बैंक ऑफ़ बड़ोदा के प्रबंध निदेशक एवं मुख्य कार्यकारी अधिकारी पी एस जयकुमार तथा एसबीआई के उप प्रबंध निदेशक सी वेंकट नागेश्वर शामिल थे.
लाभ

इस योजना का लाभ यह होगा कि इन ग्राहकों से ऋण वसूलने का झंझट बैंकों पर नहीं रहेगा. गोयल ने बताया कि एएमसी पूरी तरह से बाजार आधारित होंगे और देश में एक से ज्यादा एएमसी का गठन हो सकता है. इसमें देसी-विदेशी कंपनियां भी शामिल हो सकती हैं. यह प्रावधान किया जा रहा है कि एएमसी 60 दिनों के भीतर एनपीए का निपटारा करेंगे.

स्ट्रेस्ड एसेट से निपटने के लिए करीब दो दर्जन कर्ज देने वाली संस्‍थाओं ने एक समझौता किया है। इस समझौते में शामिल ज्‍यादातर सरकारी बैंक हैं। इन सभी के बीच में इंटर क्रेडिटर्स एग्रीमेंट (ICA) पर हस्‍ताक्षर हुए। इस समझौते के बाद 500 करोड़ रुपए तक के स्ट्रेस्ड एसेट का जल्‍द निपटान किया जा सकेगा।


सशक्‍त प्रोजेक्‍ट का हिस्‍सा है यह समझौता
यह समझौता सशक्‍त प्रोजेक्‍ट का हिस्‍सा है। पीएनबी के पूर्व चेयरमैन सुनील मेहता की अध्‍यक्षता में एक कमेटी बनी थी, जिसकी सिफारिशों के आधार पर यह योजना बनाई गई थी। इस कमेटी ने जुलाई की शुरुआत में अपनी रिपोर्ट सौंपी थी। इस कमेटी में अन्‍य दो सदस्‍यों में SBI के प्रमुख रजनीश कुमार और बैंक ऑफ बड़ौदा के प्रमुख पीएस जयाकुमार शामिल थे।

-इस समझौते के बाद बैंक और अन्‍य वित्‍तीय संस्‍थानों के बीच एक प्‍लेटफार्म तैयार हो जाएगा जो NPA में फंसे पैसों की वसूली में मदद करेगा। इस वक्‍त बैंक और वित्‍तीय संस्‍थानों का करीब 12 फीसदी पैसा बैड लोन के रूप में है। इस समझौते की मदद से बैंक अपने 50 से 500 करोड़ रुपए तक के फंसे हुए लोन की वसूली तेजी से कर सकेंगे।

ज्‍यादा बैंक ले चुके हैं बोर्ड से अनुमति
मेहता के अनुसार इंटर क्रेडिटर्स एग्रीमेंट हो चुका है। ज्‍यादातर बैंकों ने अपने बोर्ड से इसकी अनुमति ले ली है और जो बाकी हैं वह यह प्रोसेस तेजी से पूरा कर रहे हैं। इस कदम का उद्देश्‍य फंसे हुए कर्ज की वसूली तेज करना है। उनके अनुसार आज यह ए्ग्रीमेंट 18 सरकारी बैंकों, तीन निजी क्षेत्र के बैंक सहित एग्जिम बैंक ने इस पर साइन किया है। उनके अनुसार अभी कई बैंक और वित्‍तीय संस्‍थान इस समझौते पर साइन करेंगे। यह संस्‍थान अपने बोर्ड से इस सबंध में अप्रूवल लेने की तैयारी में है।

जुलाई के अंत तक इस पर शुरू हो जाएगा काम
उन्‍होंने कहा कि जुलाई के अंत यह समझौता आपरेशनल हो जाएगा। उन्‍होंने आशा जताई कि जल्‍द ही सभी बैंक इसका हिस्‍सा बन जाएंगे। मेहता के अनुसार इस समझौते पर विदेशी बैंकों ने अभी साइन नहीं किया है। इसके लिए उन्‍हें अपने बोर्ड से अप्रूवल लेना होगा।

बैंकों का फंसा है काफी पैसा
मार्च 2018 तक बैंकों का 50 से लेकर 500 करोड़ रुपए का बैड लोन करीब 3.10 लाख करोड़ रुपए का है। वहीं 50 करोड़ रुपए से कम के लोन में बैंकों का करीब 2.10 लाख करोड़ रुपए फंसा हुआ है।

 Dainik Bhaskar dt. 24th July 2018

Source: Financial Express, Business Standard, Live Mint & Economic Times, Jagran Josh, Nai Dunia Jagran, Dainik Bhaskar