Tag Archives: Raghuram Rajan

RBI releases Discussion Paper on Framework for Revitalising Distressed Assets in the Economy

                The success of any business depends on its ability to keep NPA’ (Non-performing Assets), at the lowest level.

NPAs’ in a business can be either due to cyclical business conditions or willful defaulters. Each category of NPAs’ has to be handled separately to minimize the impact to the business.

Indian Banking has its share of NPAs’.  There is a need to ensure that the banking system recognises financial distress early, takes prompt steps to resolve it, and ensures fair recovery for lenders and investors. ‘Improving the system’s ability to deal with corporate distress and financial institution distress by strengthening real and financial restructuring as well as debt recovery’ has been indicated by the Governor, RBI as one of the five pillars on which Reserve Bank’s developmental measures will be built for improving the financial system over the next few quarters.

The Discussion Paper released today is a step in that direction.

The main proposals in the Discussion Paper are summarised below:

  • Early formation of a lenders’ committee with timelines to agree to a plan for resolution.
  • Incentives for lenders to agree collectively and quickly to a plan – better regulatory treatment of stressed assets if a resolution plan is underway, accelerated provisioning if no agreement can be reached.
  • Improvement in current restructuring process: Independent evaluation of large value restructurings mandated, with a focus on viable plans and a fair sharing of losses (and future possible upside) between promoters and creditors.
  • More expensive future borrowing for borrowers who do not co-operate with lenders in resolution.
  • More liberal regulatory treatment of asset sales
  • Lender can spread loss on sale over two years provided loss is fully disclosed.
  • Takeout financing/refinancing possible over a longer period and will not be construed as restructuring.
  • Leveraged buyouts will be allowed for specialised entities for acquisition of ‘stressed companies’.
  • Steps to enable better functioning of Asset Reconstruction Companies mooted.
  • Sector-specific Companies/Private equity firms encouraged to play active role in stressed assets market.



RBIQ 2013 – Winners Sighted

The final round of RBIQ RBI’s Financial Literacy Quiz is over and winners have been sighted. The National Finals of the RBIQ 2013 were held in Mumbai in October, 2013.

The Guwahati Team wins in National Finals; @ Photographs. DD to telecast Semi Finals and Finals between November 9 and December 7, 2013

Master Akshya Seal and Master Dipankar Sarma of Maharishi Vidyamandir Public School of Guwahati emerged as winners in the national finals of RBIQ 2013.

Master Surya Girish and Master Siddharth M. Joy of Chinmaya Vidyalaya HSS, Thiruvananthapuram, who were the defending champions, were the runners up.

RBIQ is the annual all-India Inter-School Quiz launched by the Reserve Bank of India in 2012. It is one more effort of the Reserve Bank towards spreading awareness about financial matters, especially among children. This year’s edition is the 2nd edition. RBIQ kicked-off in 2012.

RBIQ 2013 was held at 42 different locations across India for students in Classes 9th, 10th, 11th and 12th. More than 4000 schools participated in the RBIQ. Shri Gautam Bose was the quizmaster.

Dr. Raghuram Rajan, Governor, Reserve Bank of India presided over the event and gave away the prizes to the winners of RBIQ 2013. While giving away the prizes to the winners, Dr. Rajan said that he was “humbled at the amazing range of information and knowledge that the participants displayed in answering the questions related to banking, finance and India.” He added that “I am delighted to see the excitement and enthusiasm that the RBIQ generated all over the country and hope that in the years to come this initiative of the Reserve Bank would play a major role in the central bank’s efforts in disseminating financial literacy across the country.”

Students from all over India can watch Zonal Finals and National Finals on Doordarshan National Network beginning November 9, 2013. The one-hour episode will be telecast every Saturday from 8.30 am to 9.30 am. The finals will be telecast on December 7, 2013.


The next Big War in Indian Banking


Dr. Raghuram G. Rajan, RBI Governor, in the Second Quarter Review of Monetary Policy 2013-14, unveiled a very bank customer friendly initiative.

Commercial Banks have been given the option to pay interest on savings deposits and term deposits at intervals shorter than quarterly intervals.

Till today, banks were required to pay interest on savings deposits and term deposits at quarterly or longer intervals.

The chief guiding for such a customer friendly initiative is the fact that all commercial banks are on CBS (Core Banking Solution), which makes interest calculation an automated activity.

The Banks CBS should be able to carry out the modified interest calculation activity without much tweaking.

The challenge would be for Banks to decide the periodicity of payment of interest, and to convey to customers, that their option is the best in the market.

Look out for innovative banking products in the near future.

Personally, I prefer to receive interest at longer intervals, rather than shorter intervals. What is your opinion?

Closing of Old Outstanding Bills : Export-Follow-up–XOS Statements

The exporter is legally bound to realize and repatriate full value of goods or software to India within a stipulated period, depending on the category to which he/she belongs too.

Like all business transactions, there could be cases wherein the payments are not received or received but not repatriated.  To understand the nature of O/s Export Bills, as per A. P. (DIR Series) Circular No. 12 dated September 9, 2000, AD Category – I banks are required to furnish to the Regional Office concerned of the Reserve Bank, a consolidated statement in Form XOS giving details of all export bills outstanding beyond six months from the date of export on a half yearly basis as at the end of June and December every year.

Reserve Bank of India, vide Notification No RBI/2013-14/325,A.P. (DIR Series) Circular No. 62 dt.October 14, 2013, has  decided that an old export bill may be closed by AD banks as a onetime measure, provided

  • With ceiling of USD 1, 00,000 and outstanding beyond 15 years as on December 31,2012
  • With ceiling of USD 50,000 and outstanding for more than 5 years as on December 31, 2012, where customers not traceable subject to proof of non traceability from competent authority and under bank’s internal boards approved policy.


Report of such closed cases should be submitted to concerned Regional Offices of Reserve Bank of India by AD banks and after closing of cases, there will be no further follow up by Ads. Hence, these outstanding bills need not be reported in future Export Outstanding Statements (XOS).