Given the need for large chunks of equity capital to infuse new life into banks’ stressed assets, the government plans a new fund of “significant size” with this mandate, minister of state for finance Jayant Sinha said on Tuesday. A variety of other funds including the proposed National Infrastructure Investment Fund (NIIF) could help bolster the planned stressed assets fund, he added.
“We need an efficient resolution (of the issue of rising stressed assets) and recovery process for our banks,” Sinha said on the sidelines of a conference organised by rating agency Crisil on the deepening of corporate bond markets. He said a committee might be set up to take a look at what kind of haircuts would need to be taken by banks and what their sustainable levels of debt could be. While these could be commercial decisions taken by banks, the government would ensure the process is carried out with integrity, he emphasised.
Many state-owned lenders are facing a tough situation, having reported large losses owing to assets turning sour. Gross non-performing assets in the banking system at the end of March are estimated at Rs 5.7 lakh crore while the provisions set aside by banks in FY16 was Rs 1.43 lakh crore. Total losses of PSBs in FY16 was Rs 17,022 crore.
“We expect a variety of funds — distressed debt funds, special situations fund and NIIF — to participate in the equity investments in these stressed assets,” the minister said. The NIIF, intended to give a leg-up to the country’s efforts to find the elusive equity capital for its huge plans for infrastructure creation, is being set up with an initial corpus of Rs 40,000 crore, half of that from the government, which will remain a minority partner.
The NIIF, which will have several sector-specific sub-funds, is expected to catalyse financing of infrastructure projects by leveraging the corpus multiple times. Many global sovereign wealth funds including the Abu Dhabi Investment Authority, Singapore’s Temasek and Russian Direct Investment Fund have evinced interest in investing in the NIIF. The search for the CEO of the fund has reached the final stage, the minister indicated.
Sinha said: “There are also many other players who are looking to invest in the stressed assets of Indian banks. So we expect that there will be a vibrant market to be able to take these assets that are in need of equity capital right now.” On Tuesday, finance minister Arun Jaitley, on a visit to Japan, pitched for investments in the NIIF to Japanese investors.
While Sinha has indicated the NIIF’s participation in the proposed stressed assets fund, the former’s stated objective has been to maximise economic impact mainly through infrastructure development in commercially viable projects, both greenfield and brownfield, including stalled projects. It could also consider other nationally important projects if commercially viable.
The possibility of their investing, either directly in projects or through the National Investment and Infrastructure Fund (NIIF) that we have created, were both discussed,” he told reporters at the Indian High Commission in London.
Amid fears of the global economy edging close to recession, India and UK have agreed to open up trade and markets to support growth, carry out structural reforms and address issues related to cross-border tax evasion.
After talks between India’s Finance Minister Arun Jaitley and UK Chancellor of the Exchequer George Osborne, the two nation’s agreed to boost economic ties particularly in areas of infrastructure and financial services and renewed pledge for autonomical exchange of tax information from 2017.
“From the Indian point of view, we were extremely interested in having the British investors look at infrastructure investments in India for which various possibilities were discussed,” Jaitley said after the talks.
India, he said, is “extremely keen that large British companies, particularly involved in infrastructure financing, start investing in Indian infrastructure”.
The two nations will work together for developing an India-UK partnership fund under the umbrella of National Investment and Infrastructure Fund (NIIF) recently created in India.
“This fund will seek to increase flows of private sector capital and expertise alongside multilateral support into Indian infrastructure,” a joint statement issued after talks said.
The world’s fifth largest economy will work on development of smart cities in India. New Delhi is also looking at London for issuance of rupee-denominated bonds to get UK investors to fund its infrastructure projects.
“The possibility of their investing, either directly in projects or through the National Investment and Infrastructure Fund (NIIF) that we have created, were both discussed,” Jaitely told reporters at the Indian High Commission here.
With the IMF warning of global economy being close to recession with 3.4 per cent growth this year, the two sides said they “remain concerned that global growth is falling short of expectations and that the risks to the global outlook have increased”.
“In this regard we stand ready to take the necessary steps to open up trade and markets to support growth and jobs, and agree on the importance of structural reforms and pursuing credible fiscal policies,” the joint statement said.
The joint statement talked about advancement of cooperation in a range of sectors including infrastructure financing, addressing issues of cross-border tax evasion/ avoidance besides opening up of the Indian legal sector to foreign lawyers.
“The UK and India share a common commitment to address cross-border tax evasion and avoidance. Both sides have committed to the Common Reporting Standards (CRS) on Automatic Exchange of Tax Information and will begin exchange in 2017,” the statement said.
“We call on other countries to meet the commitments they have made and to implement the new standard on time,” it said.
During the talks, which included senior representatives from Finance Ministries, Central Banks and key regulators of both countries, the two leaders discussed ways to strengthen the Indo-UK existing economic partnership in order to further boost trade and investment, and to build on the success of Prime Minister, Narendra Modi’s recent summit with his British counterpart David Cameron in the UK.
“Given the fact that even in a somewhat difficult global scenario, India is managing a reasonable growth rate, this is one of the better options that investors have and that kind of a sentiment gets really echoed in the meetings with the investors that we had. Of course, the investors are also keenly watching which way our reform process in India goes,” Jaitley said.
The two nations agreed to work together on building commercial and regualtor-to-regulator links that can underpin further fintech growth in both countries.
“The UK and India agreed to renew the existing mandate of the India-UK Financial Partnership, and building on the re-establishment of the CEO Forum,” the statement said, adding that potential areas of interest for the India-UK Financial Partnership could be reinsurance, international use of the rupee, role of financial technology, financial inclusion, investor protection and green finance.
“The global economy is facing serious challenges and therefore the estimates of global growth also have been repeatedly lowered. Compared to how various countries across the world have been doing, India’s growth rate despite these challenges is probably the highest in the world among major economies,” Jaitley said, in reference to his meetings with investors at Goldman Sachs and London Stock Exchange.
As a follow up on Prime Minister Modi’s announcement during his UK visit last November on the listing of Rupee bonds in London, the minister said, “the UK is very keen for these to be listed in London and broadly the economic and financial dialogue was carried further”.
During the dialogue, the two sides recognised that as the leading financial centre in the world and in the view of successful issuance of Masala bonds issued by the International Finance Cooperation last year, London will be an attractive location for issuance of rupee-denominated bonds.
“The bonds, which were first announced during the visit of Prime Minister Modi to the UK in November, illustrate the crucial role that the UK’s capital markets can play in an enhanced economic relations relationship with India, with UK investors providing financing for the transformation of India’s infrastructure and continued rapid economic growth,” the statement said.
India and the UK also agreed that the development of deeper markets in rupee-linked products, and the increasingly sophisticated relationship between the Indian and UK financial sectors, are important underlying factors in fostering an enduring economic and financial partnership.
Both sides agreed to continue working closely on the development of smart cities in India.
“We will continue to build on and further embed the existing Technical Assistance Partnerships that were announced during Prime Minister Modi’s recent visit to the UK, and to continue working together on research collaboration and other measures to support India’s 100 Smart Cities programme,” the statement said.
While noting the strength of the economic outlook for both countries, the two sides expressed concern that global growth is falling short of expectations and that the risks to the global outlook have increased.
“In this regard we stand ready to take the necessary steps to open up trade and markets to support growth and jobs, and agree on the importance of structural reforms and pursuing credible fiscal policies in order to raise living standards,” it said.
India and the UK also agreed to work together with the aim of developing an Indo-UK partnership fund under the umbrella of the NIIF. The fund will seek to increase flows of private sector capital and expertise alongside multilateral support into Indian infrastructure.
The working group to be established will report back within the course of 2016 on a proposed fund strategy and delivery approach, the statement said.
“As part of this, India and the UK also both recognise the importance of identifying the sector or sectors where there is greatest potential for developing sustainable project pipelines, and of developing a supportive institutional environment for investment and delivery,” it said.
It is part of the $ 75 bn announced during Prime Minister’s August trip to the Gulf nation that marked a paradigm shift in bilateral strategic and economic partnership.
Oil-rich United Arab Emirates (UAE) has identified key sectors including railways, housing, ports, roads and renewable energy (mainly solar) for investments in India as part of the $75 billion announced during Prime Minister’s August trip to the Gulf nation that marked a paradigm shift in bilateral strategic and economic partnership.
UAE had announced to investment $75 billion for various sectors in India when Narendra Modi made a two-day trip to Abu Dhabi and Dubai last August — first by an Indian PM to the Gulf nation in three decades. Earlier this month, Finance Minister Arun Jaitley was in UAE to discuss this investment proposal among other issues and met senior officials of the Abu Dhabi Investment Authority (ADIA), one of the largest sovereign funds in the Gulf nation, officials from Abu Dhabi said.
ADIA would contribute to the $75-billion fund allotted for investments in India in sectors including railways, roads, housing, ports and renewable energy (solar initiatives) where the Modi government is seeking foreign direct investment to boost economy, officials from the Gulf state indicated. The Indian PM is likely to announce a solar mission at the Paris climate change summit.
However, UAE is pushing to begin the process of investments in near future by various ministries in keeping with Modi’s promise. “India is now a strategic partner for UAE and Abu Dhabi wants to invest in India’s growth and seeking expedition of the process on the ground,” a person familiar with the developments told ET.
With this goal in mind Jaitley met Sheikh Hamdan Bin Rashid Al Makhtoum, Minister of Finance, UAE, to discuss issues of mutual cooperation in the field of economic and trade development during his trip there. His visit follows that of UAE’s Foreign Minister to India within weeks of Modi’s trip to Abu Dhabi and this shows the seriousness of both nations which have now expanded their counter terror cooperation amid growing threat from IS and other terror groups in South Asia. Strengthening counter-terror cooperation also figured during Jaitley’s deliberations with UAE leadership.
The finance minister also invited large participation and investment in recently constituted National Investment and Infrastructure Fund (NIIF) by the Sovereign Wealth Funds and Pensions Funds of the UAE. He said the investment in NIIF will ensure good returns on investment as the government will invest these funds in infrastructure projects.
Giving the much needed reforms impetus to the economy, Prime Minister Narendra Modi-led NDA government on Tuesday announced Foreign Direct Investment (FDI) reforms in as many as 15 sectors.
According to the government’s release, “The crux of these reforms is to further ease, rationalise and simplify the process of foreign investments in the country and to put more and more FDI proposals on automatic route instead of government route where time and energy of the investors is wasted.”
These FDI reforms are set to benefit sectors such as agriculture and animal husbandry, plantation, defence, broadcasting, civil aviation and manufacturing. “Further refining of foreign investments in key sectors like construction where 50 million houses for poor are to be built. Opening up the manufacturing Sector for wholesale, retail and e-Commerce so that the industries are motivated to Make In India and sell it to the customers here instead of importing from other countries,” the release added..
The proposed reforms also enhance the limit of Foreign Investment Promotion Board (FIPB) from current Rs 3,000 crore to Rs 5,000 crore. The proposal also contains many other long pending corrections including those being felt by the limited liability partnerships as well as NRI owned companies who seem motivated to invest in India. Few other proposals seek to enhance the sectoral caps so that foreign investors don’t have to face fragmented ownership issues and get motivated to deploy resources and technology with full force.
India got FDI of $19.39 billion in the April-June period, according to government data, up 29.5% over the year earlier. The Modi government has been pushing hard to drum up overseas investment, easing FDI regulations in various sectors including the railways, medical devices, insurance, pension, construction and defence.
Last week, ET had reported that the government plans to launch a series of policy reforms, signalling its intent to get moving again on economic changes and putting the Opposition on notice before Parliament convenes for the winter session.
Key to the Narendra Modi government’s renewed development push will be power, labour and infrastructure, three senior government officials had told ET. Among the highlights are a revival package for power distribution companies, freeing up labour rules and a possible push for the railways, ET had said in its report.
The road map for the phasing out of corporate tax exemptions and reduction in the tax rate to 25% is being drawn up. Besides this, the Startup India, Standup India plan and the rollout of the National Investment and Infrastructure Fund (NIIF) are also being worked on.
A simpler foreign direct investment (FDI) policy, further easing of the external commercial borrowing (ECB) regime and changes in the public-private partnership (PPP) framework to attract more private investment could also announced.
Given the need for large chunks of equity capital to infuse new life into banks’ stressed assets, the government plans a new fund of “significant size” with this mandate, minister of state for finance Jayant Sinha said on Tuesday. A variety of other funds including the proposed National Infrastructure Investment Fund (NIIF) could help bolster the planned stressed assets fund, he added.
