US type bankruptcy law for India?

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As bad debt bites, Indian banks call for US-type bankruptcy law.
By Atmadip Ray, ET Bureau | 1 Apr, 2015, 10.31AM IST

KOLKATA: India may not have the US type bankruptcy law yet but the behaviour of banks will be akin to having it, thanks to RBI's provisioning laws that kick in on Tuesday and the government's non-interference in bank operations.

As all new restructured loans have to be classified as bad loans and provided for, banks will no more have the incentive to sweep defaulters under the carpet.Banks may recall the loan and take recovery action at the earliest or sale of nonperforming assets (NPAs) to asset restructuring companies or ARCs. "The new rule means banks cannot go for restructuring each and every proposal that comes their way. They may sell more bad loans to ARCs, which in turn work out restructuring plans for ailing companies. So, the new asset classification rule would, in some sense, lead to a situation like what happens under the US-type bankruptcy law," said M R. Umarji, legal advisor to Indian Banks' Association.

The new rule may encourage Indian promoters to approach lenders with their revival plans at a much earlier stage of stress and discourage abusing the system. "The intent of new norms is to put more skin in the game by promoters and discourage wilful defaulters. However, banks are also now pro-actively identifying stressed assets through the joint lenders forum mechanism which should aid prompt redressal for companies under duress," India Ratings & Research Associate Director Abhishek Bhattacharya said. The Indian government too has begun work to bring in a comprehensive bankruptcy code to create an easy passage for exiting business and improve the ranking in World Bank's 'ease of doing business'. A bankruptcy law reform committee is working towards this.

The US laws permit a company to preempt insolvency and file for bankruptcy before the situation gets worse. Under Chapter 11 of US Bankruptcy Code, a debtor firm can propose a reorganisation plan much before it turns sick to keep business going and pay creditors over time. From April 1, all the restructured loans necessarily need to be classified as NPAs and the relative provisioning at banks would be 15% of the loan outstanding. This provisioning is an increase by 10% from the existing 5% on `restructured standard asset' as applicable earlier. However, banks may not feel the pressure immediately as they may slow down doing restructuring of loans since the incremental stress on asset quality may not be much due to improvement in the economy. Number of restructuring proposals had also come down over a period.

"No immediate impact," said State Bank of India chairman Arundhati Bhattacharya in a texted message. "Since only future restructuring will be classified as NPA."

The total stock of restructured loans would be about 6% of gross advances or Rs 820000 crore by March 2015 as per India Ratings estimates. This includes those under corporate debt restructuring cell and the loans under Discom financial restructuring plan. The gross NPA ratio is likely to be 4.5% or Rs 3,50,000 crore which would put the estimate of impaired loans as 10.5% or Rs 76,00,000 crore.If one includes ARC receipts and Discom bonds which reflect in the bank's investment book the total estimate of stressed assets would be 12.5% by March 2015.

"While classification of incremental restructuring as sub-standard assets (or NPLs) would add to the GNPL ratio for the system, we expect moderation in pace of fresh NPL formation premised on economic recovery to limit the increase. Our estimate of GNPL ratio by Mar'16 is closer to 5%," said Bhattacharya from India Ratings & Research. "From April, banks may decide to recall the bad loans and take early recovery action if the value of securities is good," said Umarji.

The proposed National Companies Law Tribunal could also help the fight against failed and errant promoters as the definition of sick companies is set to be changed. Under the tribunal, a company is declared sick if it defaults in payment of a secured loan for more than 30 days. Earlier, rules allowed sick companies that operated for at least five years to approach the Board for Industrial and Financial Reconstruction if accumulated losses equaled or exceeded their networth.

NSE to directly link trades to investors’ PAN

NSE to directly link trades to investors’ PAN to curb self-trading, fake deals

By Nishanth Vasudevan & Sugata Ghosh, ET Bureau | 12 Mar, 2015, 07.50AM IST

MUMBAI: Stock market operators will soon find it tough to rig share prices without coming under the regulatory radar. India's largest bourse, National Stock Exchange (NSE), will soon alert brokers that all trades will be directly linked to investors' Permanent Account Number (PAN) over and above the existing system of a unique client code.ET SPECIAL:

What's buzzing hot on Budget 2015? Check out our in-depth coverage

The move is aimed at clamping down on dubious trades that result in misleading volumes and help individuals convert illegitimate cash into legal money and even lower taxable income with fake losses.

Currently, trades are executed on the basis of the client code, assigned by a brokerage to every member. But, since investors can open trading accounts at multiple brokerages, they can have that many client codes. Though capital market regulator Sebi has cracked down on several trades on stock exchanges that were used to convert black money into white, the surveillance departments of the regulator and the stock exchanges have found it tough to monitor questionable trades on a live basis.

With the introduction of PAN as a monitoring feature, instances of self-trading may be minimised as every investor has only one PAN. "It will help watch trades almost on a live basis and can be a good tool to prevent such suspicious trading," said the managing director of a listed brokerage.

When contacted, an NSE spokesman said, "Yes, we have monitored self-trade monitoring mechanism. In future, we can even improve upon this PAN-based system on the advice of the regulator."

The exchange will introduce the PAN-linked trades in all segments — stocks, currency futures, equity F&O, interest rate futures (IRF).

NSE has implemented a periodic alert mechanism to alert members doing selftrades beyond predefined threshold levels in each stock or contract. Such alerts are made three times a day. For trades done between 9.30 am and 11 am, the alert is issued at 11 am. The next alert is at 1.30 pm for transactions done between 11 am and 1.30 pm.

The final one is during the market close for trades between 1.30 pm and 3.30 pm. If the member does not take action to restrict or eliminate self-trade, the exchange would take graded regulatory actions like issuing warning letter, summoning and finally leading to temporary suspension.

The move to use PAN comes after instances of unusual activity in deep out-of-themoney options in one of the exchanges. It was felt that exchanges should actually move beyond the conventional approach of only looking at 'trading member-client code' combination.

Sebi has been investigating several small companies listed on stock exchanges and has banned a few for their alleged role in enabling conversion of unaccounted cash into legitimate money.

Many of these companies had no businesses or had little revenues but their share prices had jumped multiple times. Sebi found that many of these shell companies had generated fictitious long term capital gains for individuals.

http://economictimes.indiatimes.com/markets/stocks/news/nse-to-directly-link-trades-to-investors-pan-to-curb-self-trading-fake-deals/articleshow/46535383.cms

Countries offering visa on arrival for Indians

50 Countries offering visa on arrival for Indians

You've got a destination in mind and you're just about ready to book your tickets. Possibly the most stressful part in your dream vacation planning is obtaining a visa. You'll be surprised to know that there are more than 50 countries where you can just land up and get a visa stamped on arrival. Read on...

ASIA
For Indians, the easiest and most convenient destinations lie in Asia. From the shopping paradise of Thailand to the little-known-wonder Laos, visa on arrival is also offered in Cambodia, Hong Kong, Indonesia, Jordan, Nepal, Maldives, Macau, Sri Lanka and Timor Leste.

AFRICA
Africa's natural history alone would make a dozen visits here worthwhile! Fall asleep to the sounds of birds and be a part of the spectacular scenery that Ethiopia and Madagascar offer. The other African countries that offer visa on arrival are the Kenya, Djibouti, Guinea-Bissau,Mauritius, Tanzania, Uganda, Burundi, Cape Verde, Comoros and Togo. ​In Mozambique, Indians can obtain a visa on arrival for a maximum stay of 30 days at Beira, Nampula, Maputo, Pemba and Tete, provided they are holding a return/onward ticket. Visitors are also required to hold proof of sufficient funds to cover their stay and documents required for their next destination. In Seychelles, visitors can obtain a "Visitor's Permit" on arrival for a maximum period of 3 months, if holding a return ticket (if not, then a return ticket must be purchased on arrival); sufficient funds (minimum of USD 150 or equivalent per day); and proof of accommodation during stay.

NORTH AMERICA
Music, beaches and towering forests are things to look forward to in North America. Visa-on-arrival is offered to Indians in Jamaica, Saint Vincent and the Grenadines, Trinidad and Tobago, El Salvador, Saint Kitts and Nevis and St Lucia.

SOUTH AMERICA
Head to South America and you'd be greeted with colonial towns and white sandy beaches. Only Bolivia and Guyana offer a visa on arrival for Indians.

OCEANIA COUNTRIES
Oceania is the region centered on the islands of the tropical Pacific Ocean. Currently four island nations offer Indians a visa on arrival. These are Fiji, Samoa, Nauru and Tuvalu.

Besides the countries mentioned above, Indians can also obtain visa-on arrival in the following countries subject to them being pre-cleared before arrival in the country. Pre-trip formalities vary from country to country: please check the relevant embassy website for details. These countries are Cameroon, Congo DR, Eritrea, Gabon, Ghana, Iran, Israel, Kazakhstan, Kyrgyzstan,Lebanon, Liberia, Mongolia, Myanmar, Sierra Leone, Suriname, Turkmenistan and Vietnam.

VISA CHECKLIST: 
For obtaining a visa on arrival, visitors would typically need to furnish return flight tickets, proof of hotel reservations, evidence of sufficient funds to cover their stay, passport sized photographs, a passport with adequate empty pages and the money for fee if required by the country.

Why Warren Buffett is worth $72 billion and you're not

New York Times Mar 3, 2015, 12.46PM IST

By Neil Irwin

Consider these two truthful sentences:

Academics who study corporate finance overwhelmingly believe that conglomerates - giant companies that operate in a wide range of industries, often built through acquisitions - are an awfully inefficient way to organize businesses.

And one of the most successful US companies of the past 50 years is a conglomerate called Berkshire Hathaway, run by the renowned investor Warren Buffett, which is the fourth-most valuable firm in the United States, behind only Apple, Google and Exxon Mobil. It employs 340,000 people, roughly the population of Honolulu.

Buffett gave his best go at explaining this seeming contradiction in his latest letter to shareholders released this past weekend, in effect a guide to why he has been able to build such a vast corporate empire and a $72 billion personal net worth. It lays out two theories of why Berkshire has been so successful. But those two theories have radically different implications for how the company will fare after the 84-year-old chairman's retirement or death.

It helps to understand why finance economists don't much like the idea of conglomerates in the first place. Back in the 1960s, a popular strategy was to buy up random industrial companies and use accounting tricks to create the illusion of growth even when the underlying performance of the acquired companies was no better, and often worse, than it had been when they were run separately.

It's easy to look at Berkshire Hathaway over the past couple of generations and see a version of the same thing. Buffett has bought enough seemingly random companies over the years that the combined entity defies any simple description (In short: A giant insurance company plus a giant railroad plus a giant electric utility plus a giant stock portfolio along with various and sundry investments, including in private jet travel, mobile homes, men's and women's underwear, and dairy-based desserts. Oh, and half of Heinz ketchup).

Finance theory would say that there is no real reason for all those unrelated businesses to be underneath the same corporate umbrella. The company is an extreme example of decentralization, with Berkshire Hathaway's corporate headquarters in Omaha, Nebraska, employing only 25 people to oversee this vast empire. All meaningful operational responsibility remains with executives who run all those portfolio companies.

Why shouldn't they each exist on their own, or as part of a larger company with a narrower focus? Here's Buffett's explanation:

"One of the heralded virtues of capitalism is that it efficiently allocates funds," he writes. "Nevertheless, there are often obstacles to the rational movement of capital," for example the reluctance of a CEO in a declining business to shut down factories and return capital to shareholders to be reinvested elsewhere, or the tax and transaction costs for investors who wish to shift money from one sector to another.

"At Berkshire, we can - without incurring taxes or much in the way of other costs - move huge sums from businesses that have limited opportunities for incremental investment to other sectors with greater promise. Moreover, we are free of historical biases created by lifelong association with a given industry and are not subject to pressures from colleagues having a vested interest in maintaining the status quo. That's important: If horses had controlled investment decisions, there would have been no auto industry."

In effect, Buffett is arguing that he and the vice chairman, Charlie Munger, and their 25-person team in Omaha are better at deciding the appropriate allocation of capital among different potential investments than the entire infrastructure of the modern financial system - banks, stock and bond markets, buyout funds and so on - that are supposed to do just that.

The key advantages that Berkshire may have, in other words, are that the company decides how to allocate capital with neither the self-interested decision-making of many operating executives (most people don't want to dismantle the company they lead, after all, even if its business prospects have collapsed), nor the high fees and short-term perspective of private equity and other buyout artists.

If you believe Buffett, Berkshire is able to achieve the analytical rigor of the latter mixed with the long-term perspective of the former.

But there's a bit more to his success than just being really good at capital allocation. There are surely thousands of people who can match Buffett's talent for evaluating the prospects of a business and deciding which should get more investment and which less. But most of them won't end up with a $72 billion net worth and 340,000 employees.

Buffett acknowledges a second reason for his company's success: "We are now the home of choice for the owners and managers of many outstanding businesses." In other words, if you are a family looking to cash out of a business but want to leave the company intact and keep longtime employees in place to run it, selling to Berkshire Hathaway looks mighty attractive. But there's a good chance you're going to have to accept less money than a private equity firm or a strategic acquirer would offer.

The unique art of Buffett and Berkshire, as Matt Levine writes at Bloomberg View, is in the ability to "be rigorous while seeming sentimental, to drive a hard bargain by looking like a teddy bear." In effect, he is able to get favorable deals on his acquisition because of a reputation built over a lifetime for buying good companies and more or less leaving them alone.

That's the giant question for the future of this enormous company. To the degree that this new-style conglomerate has succeeded because it has found a better way to allocate capital than the one the rest of the world uses, it should have a long and bright future under its next chief executive, thought to be either Ajit Jain or Greg Abel.

However, if you want to chalk up Berkshire's success to its ability to persuade sellers of businesses to accept less than a market value for some of the Buffett Mystique, the new leadership, whenever it takes charge, will face a steep challenge in building the same sort of reputation.That's the giant question for the future of this enormous company. To the degree that this new-style conglomerate has succeeded because it has found a better way to allocate capital than the one the rest of the world uses, it should have a long and bright future under its next chief executive, thought to be either Ajit Jain or Greg Abel.

However, if you want to chalk up Berkshire's success to its ability to persuade sellers of businesses to accept less than a market value for some of the Buffett Mystique, the new leadership, whenever it takes charge, will face a steep challenge in building the same sort of reputation.

Business » Budget

Published: February 28, 2015 15:03 IST | Updated: March 1, 2015 09:00 IST

How to claim tax benefits for up to Rs. 4,44,200

Internet Desk

AP

Individual tax payer can claim exemption for up to Rs. 4,44,200 from his income.

During his Budget speech, Finance Minister Arun Jaitley said an individual tax payer can claim tax benefits for up to Rs. 4,44,200 in addition to the tax exemption.

Here is how you get there:

Deductions under 80C	Rs. 1,50,000
Deductions under 80CCD for contribution to NPS	Rs. 50,000
Interest on house property loan	Rs. 2,00,000
Exemption with new transportation allowance of Rs. 1,600 per month	Rs. 19,200
New deductible health insurance premium	Rs. 25,000
Total	Rs. 4,44,200

BUDGET 2015

Here are sector-wise highlights

 Taxation

1	Abolition of Wealth Tax.
2	Additional 2% surcharge for the super rich with income of over Rs. 1 crore.
3	Rate of corporate tax to be reduced to 25% over next four years.
4	Total exemption of up to Rs. 4,44,200 can be achieved.
5	100% exemption for contribution to Swachch Bharat, apart from CSR.
6	Service tax increased to14 per cent.

 Infrastructure

1	Rs. 70,000 crores to Infrastructure sector.
2	Tax-free bonds for projects in rail road and irrigation
3	PPP model for infrastructure development to be revitalised and govt. to bear majority of the risk.
4	Atal Innovation Mission to be established to draw on expertise of entrepreneurs, and researchers to foster scientific innovations; allocation of Rs. 150 crore.
5	Govt. proposes to set up 5 ultra mega power projects, each of 4000MW.

 Education

1	AIIMS in Jammu and Kashmir, Punjab, Tamil Nadu, Himachal Pradesh, Bihar and Assam.
2	IIT in Karnataka; Indian Institute of Mines in Dhanbad to be upgraded to IIT.
3	PG institute of Horticulture in Armtisar.
4	Kerala to have University of Disability Studies
5	Centre of film production, animation and gaming to come up in Arunachal Pradesh.
6	IIM for Jammu and Kashmir and Andhra Pradesh.

 Welfare schemes

1	GST and JAM trinity (Jan Dhan Yojana, Aadhaar and Mobile) to improve quality of life and to pass benefits to common man.
2	Six crore toilets across the country under the Swachh Bharat Abhiyan.
3	MUDRA bank will refinance micro finance orgs. to encourage first generation SC/ST entrepreneurs.
4	Housing for all by 2020.
5	Upgradation 80,000 secondary schools.
6	DBT will be further be expanded from 1 crore to 10.3 crore.
7	For the Atal Pension Yojna, govt. will contribute 50% of the premium limited to Rs. 1000 a year.
8	New scheme for physical aids and assisted living devices for people aged over 80 .
9	Govt to use Rs. 9000 crore unclaimed funds in PPF/EPF for Senior Citizens Fund.
10	Rs. 5,000 crore additional allocation for MGNREGA.
11	Govt. to create universal social security system for all Indians.

 Agriculture

Rs. 25,000 c Rural Infrastructure Development Bank

Rs. 5,300 cr Micro Irrigation Programme

Rs. 8.5 lakh cr Targeted for farmer credit

 Defence

Rs. 2,46,726 cr allocated for defence (an increase of 9.87 per cent over last year)

Focus on Make in India for quick manufacturing of Defence equipment.

 Renewable energy

Rs. 75 cr electric cars production

2022: 100K MW Solar power

60K MW Wind power

10K MW Bio Mass

5K MW Small Hydro

 Tourism

Develpoment schemes for churches and convents in old Goa; Hampi, Elephanta caves, Forests of Rajasthan, Leh palace, Varanasi , Jallianwala Bagh, Qutb Shahi tombs at Hyderabad to be under the new toursim scheme.

Visa on Arrival for 150 countries

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