Reserve Bank widens market for sale of stressed assets

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In a bid to improve the sale of bad loans by lenders, the Reserve Bank of India has allowed banks to sell these assets to other banks, non-banking financial companies (NBFCs) or financial institutions. It has also made banks’ boards more accountable for stress resolution.

“Prospective buyers need not be restricted to SCs/RCs (securitisation companies/reconstruction companies). Banks may also offer the assets to other banks/NBFCs/FIs, etc, who have the necessary capital and expertise in resolving stressed assets,” said RBI.

The RBI believes this will lead to better price discovery, and to attract more buyers lenders have been asked to follow the e-auction process. Prospective buyers should also be given a minimum of two weeks for due-diligence and in case the exposure is above Rs 50 crore, then banks need to get at least two external valuation reports.

The head of banking and finance practice with an international advisory firm said while the intent was good, it was more an effort to regularise the process by specifying rules for asset sale. But, instead of leaving it to bank boards to decide on the valuation framework, the regulator could specify the standard policy for asset sale.

To expedite the process, RBI has nudged banks to use the “Swiss challenge method” to sell non-performing loans of recent vintage. Under this method, an entity (bank or lender) that receives an unsolicited bid for an asset or project has to publish the bid and invite third parties to match or exceed it. The entity that submits the unsolicited bid will be allowed to match or better the ensuing best bid.

RBI has decided to restrict banks’ investment in security receipts (SRs) backed by their own stressed assets. This is being done to ensure that there is “true sale of assets,” said RBI.  The central bank has said from April 1, 2017, when SRs’ value is above 50 per cent of the amount of assets sold, banks need to make higher provisioning that should either be the net asset value declared by the SCs/RCs or provisioning as if it was a direct loan. However, from April 1, 2018, the threshold will be reduced to 10 per cent.

These ARCs or SCs will also have the first right of refusal in case they have already acquired a significant share, 25-30 per cent, of the asset.

Lenders have been asked to set up a board for early recognition and sale of assets, which must conduct periodic review at least once a year, and the board needs to be involved in the entire sale process, RBI said.

According to the norms, banks need to adopt a “top-down” process, which means their head offices will be involved in identification of the assets. This is in line with several steps taken by RBI to tackle rising stressed loans, which at the end of the quarter ended June stood at 12 per cent of the total advances.

Source: http://www.business-standard.com/article/finance/reserve-bank-widens-market-for-sale-of-stressed-assets-116090101033_1.html

IDS: CBDT issues circular endorsing validity of e-declarations

by | posted in: Corporate Updates, Economy, Business Updates, Corporate Affairs, Income Tax,e-Filing- Individuals, Firms, Companies | 0

The CBDT has issued an order endorsing the legal validity of the e-declarations made under the ongoing domestic black money window, known as the Income Declaration Scheme (IDS).

With only a month left for the IDS to close on September 30, the Central Board of Direct Taxes (CBDT) said for those entities who make declarations of their domestic untaxed assets in the online mode, the Commissioner rank officer of its Central Processing Centre (CPC) in Bengaluru will be “deemed” as the authority for receiving such declarations under the relevant sections of the I-T Act.

“In continuation to Circular No 19 of 2016, dated 25th May, 2016, the Commissioner of Income-tax, Centralised Processing Centre, headquartered at Bengaluru shall exercise the concurrent powers and functions in respect of the declaration referred to in section 183 of the Finance Act, 2016 which has been furnished electronically under digital signature and shall also be deemed to be the Principal Commissioner or the Commissioner for the purposes of section 186 of the Finance Act, 2016 in respect of such declaration,” the CBDT said.

The CPC based in Bengaluru is the nodal wing of the tax department to receive online filings and Income Tax Returns.

There are two options to file black money declarations under the one-time IDS, one by filling up physical form before a Principal Commissioner of Income Tax in any part of the country and the other by the official e-filing portal of the I-T department.

“The circular has been brought out to endorse the legal validity of IDS declarations made by the e-filing website. It was issued keeping in mind the legal requirement,” a senior official said.

The CBDT, till now, has issued five sets of clarifications or frequently asked questions (FAQs) containing answers to various questions on the implementation of the IDS.

The government, sometime back, had extended the deadline for payment of tax and penalty under IDS and allowed declarants to pay the amount in three instalments by September 30 next year.

The first instalment of 25 per cent under the IDS 2016 will have to be paid by November 2016, followed by another 25 per cent by March 31, 2017.

The remaining amount will have to be paid to the exchequer by September 30, 2017.

Earlier the tax, surcharge and penalty under the black money disclosure window were required to be paid by November 30.

The scheme was announced by the government with an aim to bring out black money from the domestic economy.

The government had come out with a similar scheme for Indians holding undisclosed income abroad.

The scheme will apply to undisclosed income whether in the form of investment in assets or otherwise, pertaining to financial year 2015-16 or earlier.

Source: http://www.thehindu.com/business/Economy/ids-cbdt-issues-circular-endorsing-validity-of-edeclarations/article9056076.ece

Tax resolution scheme: CBDT to write to 2.59 lakh taxpayers

by | posted in: Corporate Updates, Economy, Business Updates, Corporate Affairs, Income Tax,e-Filing- Individuals, Firms, Companies | 0

Keen to bring down the number of tax litigations, the Income Tax Department will soon write to over 2.59 lakh taxpayers asking them to avail the one-time dispute resolution scheme to settle their cases.

And to cut down on communication time, the Central Board of Direct Taxes (CBDT) will use email to communicate with the appellants.

“We have estimated that each Commissioner of I-T (appeal) would have about 300-400 litigations pending before them. We will send these assessees emails informing about the benefits of the dispute resolution scheme,” an official told PTI.

The direct tax dispute resolution scheme, introduced from 1 June, seeks to address the issue of pending litigation before commissioner of I-T (appeal). The scheme is open till 31 December.

As per I-T department data, there were 73,402 appeals with tax effect above Rs.10 lakh and 1,85,858 appeals with tax effect below Rs.10 lakh which are pending before commissioner of I-T (appeal) as on 29 February.

Thus, 2,59,260 appellants are eligible for the benefit of this scheme. “The publicity drive will not be as massive as the IDS. Since we know who our target assessees are, we will send them pamphlets and also emails. Also we will paste some pamphlets outside the CIT (appeals) office,” the official added.

Armed with a Rs.100 crore budget for advertisement of income disclosure scheme (IDS) and disputes resolution scheme, the tax department will now launch a publicity drive for entities which are locked in a litigation. Besides, the CBDT will soon come out with over two dozen FAQs based on the queries it has received from various stakeholders, including chartered accountants and industry chambers.

As per the scheme, a taxpayer who has an appeal pending before the CIT (appeals) can settle his/her case by paying the disputed tax and interest up to the date of assessment. No penalty in respect of cases with disputed tax up to Rs.10 lakh will be levied. For cases exceeding Rs.10 lakh, 25% of penalty would be levied and any pending appeal against a penalty order can also be settled by paying 25% of the minimum of the imposable penalty.

“Litigation is a scourge for a tax-friendly regime and creates an environment of distrust in addition to increasing the compliance cost of the taxpayers and administrative cost for the government,” finance minister Arun Jaitley had said in his budget speech.

In a first-of-its-kind nationwide publicity drive, the I-T department had tied up with seven airlines including Air India and Vistara to publicise one-time black money compliance window by printing the scheme’s details on the back of boarding passes.

Source: http://www.livemint.com/Politics/s28nm7vx4fQrNG3ldoqm0L/Tax-resolution-scheme-CBDT-to-write-to-259-lakh-taxpayers.html

Livspace raises Rs100 crore from existing investors

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Design and furniture start-up Livspace, owned by Home Interior Designs E-commerce Pvt. Ltd, has raised Rs.100 crore from existing investors Bessemer Venture Partners, Hellion Venture partners and Jungle Ventures, said three people aware of the development on condition of anonymity.

The firm, loosely based on US-based home design firm Houzz, was founded by Anuj Srivastava and Ramakant Sharma, former senior executives at Google Inc. and Myntra Designs Pvt. Ltd respectively, along with Shagufta Anurag, founder of architectural design consultancy Space Matrix.

The firm has already raised about $12.6 million in two rounds between December 2015 and August 2016 from Helion Venture Partners, Bessemer Venture Partners and Jungle Ventures.

Livspace co-founder Anuj Srivastava confirmed the development.

Livspace not only offers home interior design solutions and fulfils the order, it also sells furniture across categories such as living, dining and bedrooms. The company also runs a modular kitchen and wardrobe business.

The company has also acquired two start-ups in quick succession to fuel growth. The company acquired YoFloor, a mobile platform that offers a virtual trial room for home design in September 2015. In May last year, Livspace acquired Dwll, a curated online network of online designers. In March 2015, the company acquired DezignUP, an online community and marketplace for designers and consumers.

Livspace launched a home design automation platform, which will connect the designers on board with customers in real time and speed up the process of overall delivery, two months ago.

It essentially competes with the likes of Sequoia Capital-backed Homelane (Homevista Décor and Furnishing Pvt. Ltd), other than Urban Ladder Home Décor Solutions Pvt. Ltd, another Sequoia Capital portfolio and Pepperfry (Trendsutra Platform Services Pvt. Ltd), backed by Goldman Sachs Group Inc.

Urban Ladder, which has so far raised about $77 million from venture capital firms, and Pepperfry, the most well-capitalised online furniture store with about $128 million in its, initially started out by selling furniture. Both firms have, however, launched home interior solutions, modular furniture and kitchen in the last 12-15 months to compete with younger rivals such as Homelane and Livspace.

The investment in Livspace comes at a time when venture capital investment in India plummeted 58% in the June quarter over the previous three-month period, according to a report by KPMG and CB Insights, mirroring increasing investor caution towards funding start-ups.

VC firms ploughed $583 million into India in April-June, down from $1.4 billion in January-March, said the report. VC investments in India have been on a decline since October-December. Investments in the December quarter halved to $1.5 billion from $2.9 billion in July-September.

The online furniture segment has barely seen any big ticket investment in the last 12 months.

Among the bigger start-ups, Pepperfry last raised $100 million in July 2015, while Urban Ladder mopped up $50 million in April Last year. Urban Ladder raised debt capital of $3 million from Trifecta Capital, Mint reported on 24 August.

Source: http://www.livemint.com/Companies/1hDRCEVatp1asPhIuZXtuO/Livspace-raises-Rs100-crore-from-existing-investors.html

Tamil Nadu hits top slot in solar power capacity addition as south surges ahead

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Tamil Nadu has now reached Number One position in solar power capacity addition.

India’s total installed solar capacity has grown by over 80 per cent in the last 12 months to reach 8,100 MW.

“Out of the 3,600 MW capacity added during this period, 2,700 MW has come from four southern States – with Tamil Nadu alone adding over 1,200 MW on the back of a generous feed-in-tariff of ₹7.01/kWh. Tamil Nadu now ranks number one for commissioned capacity in both wind and solar,” according to Bridge to India, a global solar energy consulting firm.

The State now ranks No.1 for commissioned capacity in both wind and solar.

As of date, Tamil Nadu leads the solar capacity addition table with an installed capacity of 1,368 MW, followed by Rajasthan (1,307 MW), Gujarat (1,112 MW), Andhra Pradesh (961 MW), Telangana (923 MW) and Madhya Pradesh (756 MW).

Presently, those six States account for 80 per cent of the solar capacity added in India. The remaining 23 States including some of the largest power consuming states like Maharashtra, Karnataka and Uttar Pradesh, account for just 20 per cent of the installed capacity.

In the initial phase of solar sector development in India, until 2014, bulk of solar capacity addition came up in Rajasthan, Gujarat and Madhya Pradesh (about 57 per cent). But, the Southern states have taken a decisive lead in the last year, driven primarily by their growing power needs.

According to estimates based on the completed tenders totalling over 14,000 MW, the present trend is likely to continue over the next two years, with the southern States accounting for 60 per cent of this pipeline.

Tamil Nadu has proposed to increase the solar power further to 5,000 MW in a phased manner in the next five years. It plans to add about 1,200 MW of solar units in this fiscal alone, according to a document of state energy department.

The State’s total renewable power capacity is close to 10,000 MW with wind accounting for about 79 per cent of it.

Source: http://www.thehindubusinessline.com/news/national/tamil-nadu-hits-top-slot-in-solar-power-capacity-addition-as-south-surges-ahead/article9018228.ece

Pace of new bad loan formation has decelerated: RBI

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RBI Deputy Governor S S Mundra today said the pace of formation of new non-performing assets (NPAs) or bad loans has decelerated although some banks have posted losses for the first quarter of the current financial year due to higher provisioning.

He also said most of the banks are adequately capitalised and the government has promised additional capital if they require.

In a bid to shore up cash-strapped public sector banks, the government last month announced infusion of Rs 22,915 crore capital in 13 lenders including SBI and Indian Overseas Bank to revive loan growth that has hit a two-decade low.

As far as bad loans are concerned, he said, they are showing a mixed trend.

“When I look at individual results, there are number of banks for whom it appears that the worst is over but then there are other banks…still they are in middle of it and they would need to do some work before they get out of it,” he said.

“It would be naive to believe that there won’t be any NPA formation but the pace of new NPA formation has clearly decelerated, that is what the major trend is,” he added.

Gross NPAs of the public sector banks had surged from 5.43 per cent (Rs 2.67 lakh crore) of advances in 2014-15 to 9.32 per cent (Rs 4.76 lakh crore) in 2015-16.

As per the latest Financial Stability Report by RBI, the Gross NPA ratio for public sector banks may go up to 10.1 per cent by March 2017 under the baseline scenario.

Many banks including Bank of India, Dena Bank, and Central Bank of India, reported losses for the quarter ended June 30, due to a sharp jump in provisions for NPAs on account of an asset quality review mandated by the RBI in December.

Talking about the recapitalisation, Mundra said the Finance Minister has indicated that if there is a need the government would be ready to provide additional capital.

“So, as far as the present situation is concerned I think most of the banks are adequately capitalised to take care of minimum regulatory requirements. We will keep a watch. As we move into the year we will see how things pan out,” he said.

On controversial virtual currency bitcoin, Mundra said: “This entire area fintech as we mentioned…you should not be stifling the innovation. Be mindful and what they call as regulator sand marks means you allow some of the experiments to happen under the control conditions so that the positive or the negative fallouts can be well understood and calibrated.”

Source: http://economictimes.indiatimes.com/articleshow/53825048.cms