Abu Dhabi banks in talks to form largest West Asia lender

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National Bank of Abu Dhabi (NBAD) PJSC and First Gulf Bank (FGB) PJSC said they’re in talks to merge in a deal that would create the largest lender by assets in West Asia.

A working group of senior executives from each bank is reviewing the commercial, structural and legal aspects of a potential transaction, according to a filing to the Abu Dhabi stock exchange on Sunday. Bloomberg News was first to report the two banks were considering a potential merger on June 16.

A deal would create a lender with assets of about $170 billion and mark the first major banking merger in the United Arab Emirates’ since National Bank of Dubai and Emirates Bank International combined to create Emirates NBD PJSC in 2007. The country’s fragmented banking industry is ready for further consolidation and a deal could prompt further mergers among lenders, according to investment bank EFG-Hermes Holding SAE.

“There’s no doubt it will lead to synergies and would give them a competitive edge, considering there are more than 40 banks in the UAE,” Chiradeep Ghosh, a banks’ analyst at Securities & Investment Co in Bahrain, said by phone on Sunday. “The combined entity will have a bigger equity book. That will help them to lend to larger entities and take up a greater share of the syndicated loan book.”

First Gulf Bank could pay a premium of as much as 14 per cent to buy National Bank of Abu Dhabi, Arqaam Capital Ltd said in a note to investors on Thursday. NBAD shares surged 15 per cent on Sunday, the maximum allowed in a day, to 9.2 dirhams as of 10:52 am local time. First Gulf Bank also soared, rising 7.8 per cent to 12.7 dirhams. NBAD is the UAE’s second-biggest bank by assets, while FGB is third-ranked.

A combination would help them overtake Emirates NBD as the country’s largest lender and represent nearly a quarter of the system’s loans and deposits, according to EFG-Hermes.

The UAE is home to about 9 million people and has about 50 banks, including the local units of Citigroup Inc, HSBC Holdings Plc and Standard Chartered Plc. Both NBAD and FGB have pushed to expand in other countries to beat the limitations of a small home market and build investment banking businesses to compete with bigger foreign rivals.

NBAD was the fifth-biggest arranger of syndicated loans in the six-nation Gulf Cooperation Council last year, while FGB ranked seventh, according to data compiled by Bloomberg. NBAD was also the second-largest arranger of bonds and sukuk sales last year.

The league tables are dominated by foreign lenders including HSBC Holdings Plc, Citigroup Inc and Sumitomo Mitsui.

NBAD, with a market value of about $11.3 billion at the end of Thursday, is 69 per cent owned by sovereign wealth fund Abu Dhabi Investment Council. State-owned investment fund Mubadala Development is the biggest shareholder in FGB, whose market capitalization is $14.4 billion, according to data compiled by Bloomberg.

The news “was a surprise considering, they have a very contrasting style of management and business strategy,” Ghosh at SICO said. “One is a public-sector focused bank, while FGB is an aggressive private sector bank, with reasonable focus in consumer lending. FGB primarily operates within the UAE, while NBAD is looking to expand outside the UAE.”

RBI simplifies registration process for new NBFCs

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In order to make the registration process of new non-banking finance companies smoother and hassle-free, the Reserve Bank of India has revised the application form for registration of these companies and the checklist of documents to be submitted.

The number of documents to be submitted by NBFC applicants has been reduced from the existing set of 45 documents to seven to eight in the revised process, the central bank said in a statement.

The RBI said henceforth there would be two different types of applications for non-deposit taking NBFCs (NBFC-ND) based on sources of funds and customer interface.

The first type (Type-I) will be a NBFC-ND not accepting public funds/ not intending to accept public funds in the future and not having customer interface/ not intending to have customer interface in the future.

“Public funds” include funds raised either directly or indirectly through public deposits, commercial paper, debentures, inter-corporate deposits and bank finance but excludes funds raised through issue of instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue.

“Customer interface” means interaction between the NBFC and its customers while carrying on its business.

The second type (Type-II) will be NBFC-ND accepting public funds/ intending to accept public funds in the future and/or having customer interface/intending to have customer interface in the future

Fast track mode

The RBI said processing of cases for Type-I of NBFC-ND applicants would be on fast track mode. As these companies will not have access to public funds and will not have customer interface, they will be subjected to less intensive scrutiny/ due diligence.

However, the certificate of registration issued to Type I – NBFC-ND companies will be conditional. These companies will be prohibited from accessing public funds and having customer interface, the RBI said.

In case Type-I companies intend to avail public funds or intend to have customer interface in the future, they are required to take approval from the Reserve Bank of India, Department of Non-Banking Regulation.

Source: http://www.thehindubusinessline.com/todays-paper/tp-money-banking/rbi-simplifies-registration-process-for-new-nbfcs/article8742967.ece

Amazon India sees 250% annual growth in sellers

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US-based Amazon on Friday said it had witnessed a 250 per cent year-on-year growth in bringing new sellers on board, as it looks to tap into the booming e-commerce market in India.

The company, which is making multi-billion dollar investments in India, has about 85,000 sellers on board.

“We started with 100 sellers three years ago and now we have about 85,000 sellers growing at 250 per cent year-on-year and adding nearly 90,000 products a day,” an Amazon India spokesperson stated.

Amazon, which competes with the likes of Flipkart and Snapdeal, has cut its commissions by 25-30 per cent across categories such as mobile phones, PCs, electronic devices and personal care appliances.

“We think these revised rates can significantly help sellers to perform even better and succeed in their business. In addition, we continue to innovate and offer best in class services such as Fulfilment by Amazon, Easy Ship, Seller Flex, etc, to help them with fulfilment/logistics, so that they can focus on their business,” the Amazon spokesperson said.

Flipkart, on the contrary, had recently increased its commissions across key segments and asked sellers to bear the costs of logistics in case of returns.

Recently, Amazon Chief Executive Officer Jeff Bezos had said the company will invest $3 billion in India. This is in addition to the American e-commerce giant’s $2-billion infusion in 2014, taking its total investments here to over $5 billion.

The funds will be channelled towards enhancing customer and seller experience, Amazon India managing director Amit Agarwal had told PTI.

“India is a key market for Amazon and we will work towards continuing to reduce operating costs for sellers backed by good logistics and fulfilment capabilities,” he had added.

 

Source: http://www.business-standard.com/article/companies/amazon-india-sees-250-annual-growth-in-sellers-116061700852_1.html

China’s debt more than double its GDP

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China’s Debt more than GDP

China’s total borrowings were more than double its gross domestic product (GDP) last year, a government economist said, warning that debt linkages between the state and industry could be “fatal” for the world’s second largest economy.

The country’s debt has ballooned as Beijing has made getting credit cheap and easy in an effort to stimulate slowing growth, unleashing a massive debt-fuelled spending binge.

 

While the stimulus may help the country post better growth numbers in the near term, analysts say the rebound might be short-lived.

China’s borrowings hit 168.48 trillion yuan ($25.6 trillion) at the end of last year, equivalent to 249 per cent of the economy’s GDP, Li Yang, a senior researcher with a top government think tank, the China Academy of Social Sciences (CASS), told reporters yesterday.

The number, while enormous, is still lower than some outside estimates.

Consulting firm the McKinsey Group has said that the country’s total debt was likely as high as $28 trillion by mid-2014.

CASS, in a report last year, said China’s debt amounted to 150.03 trillion yuan at the end of 2014, according to previous Chinese media reports.

The most worrying risks lie in the non-financial corporate sector, where the debt-to-GDP ratio was estimated at 156 per cent, including liabilities of local government financing vehicles, Li said.

Many of the companies in question are state-owned firms that borrowed heavily from government-backed banks and so problems with the sector could ultimately trigger “systemic risks” in the economy, he said.

DRAGON IN TROUBLE
  • China’s borrowings hit ¥168 trn ($25.6 trn) at the end of last year, equivalent to 249% of the economy’s GDP
  • McKinsey Group said country’s total debt as high as $28 trn by mid-2014
  • Most worrying risks lie in the non-financial corporate sector, where the debt-to-GDP ratio was estimated at 156%
  • Problem will also affect state coffers because Chinese banks are “closely linked to the government”
  • The People’s Bank of China has announced that new loans extended by banks jumped to ¥985.5 bn last month, up from ¥555.6 bn in April

 

“The gravity of China’s non-financial corporate (debt) is that if problems occur with it, China’s financial system will have problems immediately,” Li said. He added that the problem will also affect state coffers because Chinese banks are “closely linked to the government”.

“It’s a fatal issue in China. Because of such a link, it is probably more urgent for China than other countries to resolve the debt problem,” he said.

Speaking earlier this week, David Lipton, first deputy managing director with the International Monetary Fund, also singled out China’s corporate borrowing as a major concern, warning that addressing the issue is “imperative to avoid serious problems down the road”.

Despite the concerns, China is having difficulty kicking its credit addiction. On Wednesday, the People’s Bank of China announced that new loans extended by banks jumped to 985.5 billion yuan last month, up from 555.6 billion yuan in April.

 

Source: http://www.business-standard.com/article/international/china-s-debt-more-than-double-its-gdp-116061600556_1.html

Cash crunch: How customers came to owe banks more than what they were loaned

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More than a thousand borrowers have outstandings that are substantially larger than the amounts sanctioned to them by banks, data sourced from Reserve Bank of India (RBI) shows. The total outstandings of 1,131 borrowers, at Rs 1,09,909 crore, were 150% more than the amount sanctioned, as on March 2016, data accessed by FE reveal. At the end of December 2015, the outstandings were Rs 90,235 crore.

Bankers and ex-bankers that FE reached out to attributed the pile-up in outstandings to short-term requirements of borrowers that were met by banks to help them tide over a cash crunch. Overdue interest, they said, could be another cause for the high outstandings. One senior banker observed that there were occasions when the capacity of the borrower to repay the additional amount was not assessed properly. “At times, limits get exceeded without a proper assessment of the customer’s ability to service the loan,” he said.

A former executive director of a public sector bank said one reason for the actual outstanding exceeding the permitted limits was that lenders tended to sanction ad hoc non-funded letters of credit (LC) even before the limits were okayed by the consortium. “Sometimes ad hoc LCs are opened for amounts which are bigger than those agreed to by the consortium. Since consortiums take anywhere between six months and a year to sanction limits, the money is disbursed since business cannot wait,” he explained, adding that such loans serve as working capital.

A former chairman of a state-owned bank said if the customer was unable to service the loan, the interest piled up pushing up the outstanding amount. “If the interest hasn’t been paid for three or four years, the amounts can become large,” he pointed out.

An RBI document on the Central Repository of Information on Large Credits notes that if outstanding loans exceed 150% of the limit, a “warning message should be displayed to the user on generation of the instance document”.

Ashvin Parekh, managing partner, Ashvin Parekh Advisory Services, observed the main reason for the outstandings surpassing the sanctions was “temporary accommodation and loans against receivables”.

Parekh explained that at times borrowers approached banks for funds to be able to take delivery of imports. “The customer promises to pay back the amount from receivables so bankers do accommodate such requests,” he said.
Total non-performing assets (NPAs) of the banking system stood at Rs 5.8 lakh crore at the end of March 2016 and total provisions were Rs 1.43 lakh crore.

The central bank has been trying to help banks tackle bad loans by allowing them to convert debt into equity and more recently into convertible redeemable preference shares. However, banks have not been able to find buyers for any of the assets under strategic debt restructuring scheme.

FE had earlier reported that bank loans that aren’t NPAs just yet but could turn toxic amount to over Rs 6 lakh crore or close to 9% of total advances, citing RBI data. The total troubled loans of Rs 6,24,119 crore at the end of December 2015 were 9% higher than the Rs 5, 73,381 crore at the end of June 2015.

While Rs 3,06,180 crore worth of loans were classified in the SMA-1 category where repayments are overdue between 30 and 60 days, another Rs 3,17,939 crore was in the SMA-2 category where repayments are overdue between 60 and 90 days. These Special Mention Accounts follow a fiat from the RBI in 2014 asking banks to put in place a mechanism to red-flag troubled loan accounts early in the day so that these could be dealt with speedily. If the loan is not serviced after 90 days it must be classified as an NPA.

 

Source: http://www.financialexpress.com/article/industry/banking-finance/cash-crunch-how-customers-came-to-owe-banks-more-than-what-they-were-loaned/285239/

SEBI begins proceedings to recover Rs 55,000 crore from defaulters

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The Securities and Exchange Board of India (Sebi) has initiated recovery proceedings against defaulters to collect more than Rs 55,000 crore, largely on account of its clampdown on illicit money-pooling schemes.

Ever since it was given powers in October 2013 to recover penalties and investors’ money collected fraudulently, Sebi has initiated nearly 900 recovery proceedings, of which more than 200 have been fully completed.

The amount involved in these proceedings stands at Rs 55,015 crore, including Rs 52,959 crore in the last financial year. This include a total of Rs 52,912 crore in cases related to collective investment scheme (CIS) and deemed public issues and another Rs 47 crore to recover penalties.

More than 2,500 attachment notices have been issued during the period under review, including over 600 in 2015-16.

Interestingly, an amount of Rs 250 crore has been recovered in 207 cases. Promising high returns to the investors, several firms have raked in unauthorised funds through various mechanisms. The capital was raised through realty schemes and ‘buffalo purchase’, among others. Also, funds have been garnered by issuing securities to investors without complying with public issue norms.

To recover pending dues, Sebi has attached properties, bank and demat accounts of the defaulters. Besides, the regulator has sold shares attached in recovery proceedings in various defaulters in 744 trading sessions and realised an amount of over Rs 11 crore.

Through amendments in the Securities Laws Act, the government had enhanced powers of Sebi to take action against illegal money-pooling activities. It has been empowered to recover penalties imposed by the Adjudicating Officer, amount directed to be disgorged and money ordered to be refunded to the regulator.

The recovery powers include attachment of bank as well as demat accounts, sale of assets of the defaulters and arrest and detention of the defaulter.

The Act also provides for setting up of a special court to expedite the cases filed by Sebi. The government in consultation with the high courts have set up special courts in Mumbai, Kolkata and Chennai.

Besides, constitution of a special court in Delhi is in progress. However, a designated court is already dealing with Sebi cases.

 

Source: http://www.business-standard.com/article/markets/sebi-begins-proceedings-to-recover-rs-55-000-crore-from-defaulters-116061400476_1.html

FIPB clears FDI proposals worth Rs 710 crore

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The proposals approved included Advanced Enzyme Technologies’ foreign investment worth Rs 480 crore, a Finance Ministry official said.

Foreign Investment Promotion Board (FIPB) today approved four FDI proposals entailing overseas investment of about Rs 710 crore.

The proposals approved included Advanced Enzyme Technologies’ foreign investment worth Rs 480 crore, a Finance Ministry official said.

The Board also cleared proposals of Corona Remedies, Macmillan Publishers International and Ordain Health Care Global.

The FIPB, headed by Economic Affairs Secretary Shaktikanta Das, today considered 14 investment proposals.

Three proposals, which were rejected included that of Flag Telecom Singapore Pte Ltd and Star Den Media Services Pvt Ltd.

Also, eight proposals, including that of IBM India Ltd, were deferred.

FIPB can clear FDI proposals envisaging investment of up to Rs 5,000 crore and those involving higher investment are approved by the Cabinet Committee on Economic Affairs (CCEA).

FDI in most sectors are allowed through an automatic route but in certain sectors proposals have to go through the FIPB.

Source: http://economictimes.indiatimes.com/articleshow/52690601.cms