Amendment of the Banking Regulation Act

By Himani Gandhi

The ordinance to amend Banking Regulation Act allows RBI to ask banks to sit down with loan defaulters and reach a settlement as part of the bad loans resolution package.

• The Ordinance amends the Banking Regulation Act, 1949 to insert provisions for recovery of outstanding loans.  Under these provisions, the central government may authorise the Reserve Bank of India to direct banks to initiate recovery proceedings against loan defaulters.  

• These recovery proceedings will be under the Insolvency and Bankruptcy Code, 2016.  The Code provides for a time-bound process to resolve defaults by either (i) restructuring a loan (such as changing the repayment schedule), or (ii) liquidating the defaulter’s assets.

• The RBI may from time to time issue directions to banks for resolving stressed assets.  Stressed assets are loans where the borrower has defaulted on repayment, or loans which have been restructured. 

• The RBI may specify authorities or committees to advise banks on resolving stressed assets.  Members on these committees will be appointed or approved by the RBI.

Before we get to the analysis of the amendment, we need to envision what is coming in the evolution of the bankruptcy process in India. We conjecture that in the early years, recovery rates will be poor, for four reasons:

• We must remember that the IBC is itself new. The institutional infrastructure for the IBC works poorly, as of yet. It will take time for IBC to work well.
• India is short of professional participants in the Insolvency Resolution Process of the IBC. For example, as yet foreign capital has been largely blocked. There will be fewer participants and the highest bid will be a bargain.
• The IBC is best applied at an early stage in the difficulties of a company, but most existing NPAs have been ripening for many years. For those cases, there is really nothing to be done but to pick at the bones of the corpse.
• Inexperienced creditors’ committees are likely to turn down offers that look bad, and later discover that the recoveries in liquidation are worse. It takes capability in a creditors’ committee to vote correctly. Even when human skills are present, decisions may often be adversely affected by policy and regulatory constraints. It will take time for those policy and regulatory constraints to be addressed.

New Vision Document for Jewellery Industry to reach $60 billion exports

By Manjeet Malik

The Gem & Jewellery Exports Promotion Council (GJEPC) has prepared a ‘Vision Document’ to achieve an exports target of $60 billion by 2022 as per a report. The ‘Vision Document’ suggests several measures to achieve the target.It suggests several infrastructural changes, some tax reforms and some procedural changes which has 20 to 30 measures.

For this year, the industry has a growth target of 10% and is on a track to achieve $47 billion exports this year.Meanwhile, to enable marginal and small industry players to contribute to exports, the government has identified 16 clusters to set up common facility centres where modern machines would be provided.

Acoording to Manoj Dwivedi, the jewellery industry needs to achieve higher scale to become globally competitive and provide an impetus to jewellery exports. The government is taking various policy initiatives to find ways to improve things. Plans are also afoot to jewellery parks on the lines of IT parks across India in prominent gems and jewellery clusters.

If this happens, It is obviously a great news for the Indian economy and every jewellery merchant would be looking forward to it.

Air France-KLM Culture Clash

By Priyanka Yadav

Strategic alliances can be effective ways to diffuse new technologies rapidly, to enter a new market, to bypass governmental restrictions expeditiously, and to learn quickly from the leading firms in a given field. However, strategic alliances are not simple or easy to create, develop, and maintain. Strategic alliances projects often fail because of tactical errors made by management.

The 13-year-old alliance between national carriers KLM and Air France is fraught with difficulty and some officials have doubts about whether it can continue, broadcaster NOS said, quoting a company document.

French staff in the Franco-Dutch company complain their colleagues from the Netherlands are money-grubbing, while the Dutch regard the Air France staff as aloof, according to the report. “The French have the impression that the Dutch think only of money and are always ready to fight for profit. They are not afraid of anything,” the researchers reported. “The Dutch think that the French are attached to a hierarchy and political interests which are not necessarily the same as the interests of the company … The extent to which employees are disillusioned is shocking. People are pessimistic, frustrated and burnt out because they feel that this is not listened to.”

A leaked internal report says the national cultural differences between the airline group's Dutch and French staff is so acute that it is uncertain 'whether the alliance can survive given the long-standing mutual incomprehension'.

“One questions whether the alliance can survive given the long-standing mutual incomprehension between the Dutch and French camps within the group,” one researcher was quoted as writing.

Air France-KLM said: “The conclusion of this study identifies cultural differences and different visions leading sometimes to difficulties but also a common interest and the desire to find solutions in the interest of Air France-KLM group and each airline.

It is clear that as a business grows, it may develop a diverse group of employees. While diversity often enriches the workplace, it can bring a host of complications as well. Various cultural differences can interfere with productivity or cause conflict among employees. Stereotypes and ignorance about different traditions and mannerisms can lead to disruptions and the inability of certain workers to work effectively as a team.

By using a well managed strategic alliances agreement, companies can gain in markets that would otherwise be uneconomical. Considerable time and energy must be put forth by all involved in order to create a successful alliance. It is essential that corporations enter into strategic alliances arrangements with a comprehensive plan outlining detailed expectations, requirements, and expected benefits.

Tomato Prices Likely to Decline

By Shruti Barar

Tomato prices which have skyrocketed up to Rs 100/kg are more likely to decline over the next fortnight. The prices of tomato are up for more than a month that too in most parts of the country. In Kolkata it touched Rs 95/kg , Rs 92/kg in Delhi ,Rs 90/kg in Bhopal, Rs 60/kg in Jaipur as per the data. Deputy Director General of ICAR, Mr. A.K. Singh commented that the prices are expected to come down in the next 15 days as supplies from Southern states and other growing areas are likely to improve. 

Due to the rains coming to an end, the supplies from Southern states like Andhra Pradesh, Telangana and even Maharashtra will improve and thus would ease pressure on prices. The heavy rains in Madhya Pradesh and Rajasthan caused some damage to the crop and also the transportation difficulty due to the same posed hindrance in the delivery of already harvested crop.Cost of transporting has gone up as trucks are taking more than the normal time due to rains and floods.

While the government has pegged the country's total tomato output to be higher by 15 percent to 187 lakh tonnes in the 2016-17 crop year, but the figures will be revised after the current damage.

Why Prevailing Oil Situation is a Boon for Inida?

By Shruti

The largest oil producers in the world, i.e., Russia, Saudi Arabia and the US are facing a problem of lack of demand. There is not enough immediate purchasers for the major oil producers who have not stopped their oil production since September 2014. So they are only stocking their production.

The recent Qatar episode has worsened the situation more because it is world’s largest LNG supplier, and lately, with the help of Iran it has increased production. The Ukraine episode was an accelerator for the whole scenario. Things started changing drastically after this. The United States could sense the vision and boldness of Russian President Vladimir Putin. Saudi Arabia was also very upset by the episode.

The United States, in a planned way with the help of the European countries, put too many economic sanctions on oil export. It has surpassed the production of Saudi Arabia, who used to be the largest producer of oil in the world, through fracking(the process of injecting liquid at high pressure into subterranean rocks, boreholes, etc. so as to force open existing fissures and extract oil or gas). Thus in order to resurrect its lost position, Saudi Arabia has refused to cut its production in spite of falling prices. Iran has also returned to the market with full capacity of production which is supposed to increase by 1 million per day. US has also lifted the sanction on Iran.

However, In a bid to push prices up, OPEC and key non-cartel members -- including Russia, but not the United States -- agreed coordinated output cuts in December to push up prices. The cuts were envisaged for six months and extended for another three. But so far, they have had hardly any effect -- with oil prices still hovering at 45 dollars a barrel. Renewable energy is also seeing unprecedented growth -- encouraged by some traditional oil majors like BP -- while companies are under pressure to reduce emissions in line with the Paris Agreement on climate change.

Thus all these factors combined are a positive indicator for Indian economy which is looking for a big leap as the oil prices does not seem to rise for at least three to four years now.

Green Bonds - the Greener Way of Financing

By Drishti

There is a surge in the new financial instrument called a Green bond. A green bond is a tax-exempt bond issued by federally qualified organizations or by municipalities for the development of brownfield sites. Green bonds are short for qualified green building and sustainable design project bonds. These bonds are created to encourage sustainability and the development of brownfield sites. More specifically, green bonds finance projects aimed at energy efficiency, pollution prevention, sustainable agriculture, fishery and forestry, the protection of aquatic and terrestrial ecosystems, clean transportation, sustainable water management, and the cultivation of environmentally friendly technologies.

Since 2016, the issuance of these bonds soared to a record high, accounting for $93.4 billion worth of investment worldwide, according to the latest report from ratings agency Moody’s. The issuance is expected to surge to more than $200 billion in this year.

The World Bank is a major issuer of green bonds. The institution has been very active through 2016, especially in the United States, where its issuances total over $500 million in U.S. dollars, and in India, where its issuances total over $2.7 billion Indian rupees. World Bank green bonds finance projects around the world, such as India's Rampur Hydropower Project, which aims to provide low-carbon hydroelectric power to northern India's electricity grid.

Indian firms like Indian Renewable Energy Development Agency Limited and Greenko have issued bonds that have been used for financing renewable energy without the tag of green bonds. Recently, Hyderabad-based Greenko Group which raised $500 million by selling green bonds to overseas investors, marking India's first high-yield issuance of its kind.  The clean energy firm, backed by Singapore's sovereign wealth fund GIC and one of the shortlisted contenders to buy SunEdison's Indian assets, plans to use the proceeds to refinance debt and meet transaction or operating expenses.  Greenko Investment Company, backed by parent guarantor Greenko Energy Holdings, issued these securities, which will be listed on the Singapore Stock Exchange. 

“Sustainable investing strategies will likely continue to grow as demand rises,” The common aim is to generate long-term competitive financial returns while simultaneously achieving a positive social impact.” 

The Adani Group, IL&FS Energy, NYSE-listed Azure Power and even Continuum Energy are in various stages of issuing bonds with an aim to cumulatively raise $2 billion this fiscal alone, said industry watchers. Global capital is also drawn to the ambitious commitment of the Narendra Modi government — a signatory to the Paris climate accord —to expand renewable power capacity, and one that is keen to invest close to $150 billion to meet the 2022 targets of 175 GW output from the current capacity of 57 GW.

So, it’s time now to taste the success launching what are “green bonds”, a relatively new way to finance renewable energy projects.

More entrepreneurs going for management courses

By Rahul Chugh

Entrepreneurship courses have boomed in the past few years, alongside the growing interest in starting up. The IITs, IIMs and a host of educational institutions today teach entrepreneurship either as full-fledged programmes or as electives.  

Also, student’s intent of taking these programmes has changed. "While earlier they would take the elective to know more about entrepreneurship, they now take it with the purpose of starting something on their own," says Prof S Subramanian of IIM-Kozhikode. He says of the batch of about 60, at least 10 would end up starting a venture immediately.

The beauty of this programme is that it helps you find what you want to do, besides providing all the infrastructure and networking help.

An MBA helps an Entrepreneur learn the basics of management. The institute is also a place where he can seek ideas for his start-up.Kumar K, chairperson of academic programmes at IIM Bangalore's entrepreneurship learning centre NSRCEL, thinks that institutes help entrepreneurs reflect on and organise their prior learnings for a better performance, apart from identifying their own strengths and limitations as business managers.

Being away from their business for some time helps the entrepreneurs to question many of their assumptions and develop a more reasoned perspective on their own aspirations regarding their business. So if you are an entrepreneur, getting into a business school is an option worth considering.

ONGC merger with HPCL

By Shruti Barar

With the motive of becoming a mega oil company in the country that could compete with the likes of Aramco of Saudi Arabia and Petro China and Sinopec, India's largest oil producing company Oil and Natural Gas Corporation (ONGC) decided to acquire India's third largest fuel retailer HPCL in a deal estimated to be around Rs 44000 crore. The talks went to the ministerial level, on which the director, Ved Prakash Mahawar commented that ministry wants this to happen because if integration takes place there will be value creation. It was estimated that HPCL will add 23.8 million tonnes of annual oil refining capacity to ONGC's portfolio making it the third largest refiner in the country after IOC and Reliance Industries.

On July 12 , there was a spike in  oil stocks due to the reports regarding ONGC and HPCL merger by the end of this fiscal year. Also, the oil minister, Dharmendra Pradhan confirmed that it would be completed by 2017-18. 

The stocks rose by almost 3 percent for both ONGC and HPCL. ONGC stock advanced 2.96 percent to Rs 164.75 on BSE. It opened at Rs 296 and touched an intraday high and low of Rs 296 and Rs 290.50 respectively. Shares of HPCL gained 2.65 percent to Rs 351. Other stocks like IOC and BPCL also gained.

It was reported that Cabinet is likely to consider this month sale of government's 51 percent stake in HPCL to ONGC for over Rs 26000 crore in the month of July.

According to the report , DIPAM in Ministry of finance was moving a note of consideration of the cabinet for divesting government's entire 51.11 percent shareholding in HPCL to ONGC.

Since the entities are getting stronger by merging so there was a spike in the stock of the oil companies,making the oil industry more dominant than their likes in the world.