Of bad loans and insolvency

7.2%

 

What is it? The projected growth rate of the Indian economy in current financial year 2017-18, according to International Monetary Fund (IMF).

Why is it important? This represents reversal in growth slowdown following demonetisation introduced in November- December last year. World’s sixth largest economy grew at 8% in 2015-16, before slowing down to 7.1% in 2016-17. IMF has attributed growth revival to revision in national income accounting and government spending.

Tell me more: Global economy is expected to grow at 3.5% this year, as compared to 3.2% in 2016.

 

 

1.24%

 

What is it? The gross non-performing assets of HDFC Bank, India’s largest private sector bank in market capitalisation, for the three months ended June 2017.

Why is it important? This is the highest in seven years, and bad loans increased by 23% in one quarter. And 60% of the increase was from farm loans portfolio. Slew of farm loan waivers announced by state governments like Uttar Pradesh and Maharashtra is likely to impact farm loan repayment, and increase bad loans for banks.

Tell me more: Banks have disclosed weakening of microfinance asset quality following demonetisation during January- March 2017. HDFC Bank says microfinance loans have not deteriorated further.

 

 

56

 

What is it? The number of applications filed by debtors to declare insolvency.

Why is it important? This is more than a third of cases approved by the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016 in the last one year. It also shows companies are seeing insolvency proceedings as a chance to reset their business in a time bound manner.

Tell me more: Under the new bankruptcy code, cases have to be resolved within 6 months, with an extension for another 3 months. Alternatively, NCLT appoints an interim administrator who will try to sell the assets of the company to a new owner within 18 months.

 

 

770 mm

 

What is it? Rainfall received at Mount Abu, a hill station in Rajasthan, in 24 hours.

Why is it important? This is the highest ever rainfall received by Mount Abu ever since rainfall data was collected. Extreme rainfall events like these in a desert state is attributed to increase in temperature and its impact on monsoon.

Tell me more: Mumbai received 944 mm of rainfall in July 26, 2005 that killed 1,094 people. In 2015, Chennai and two adjoining districts received 1,049 mm of rainfall.

 

 

24

 

What is it? The number of protected monuments that have disappeared due to encroachment.

Why is it important? Shows laxity in protecting the historical monuments. Archaeological Survey of India is empowered to issue show cause notice to encroachers, and can also direct district authorities to remove encroachments.

Tell me more: 11 out of 24 lost monuments were from Uttar Pradesh. Government has spent Rs 301.7 crore in protecting monuments in 2016-17.

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GST payers activated

500

What is it? The number of Employees’ Provident Fund trusts that are likely to be taken over by the Employees’ Provident Fund Organisation (EPFO), if a proposed change by the Labour Ministry is implemented. Private provident fund trusts with less than 20 members and managing corpus of upto Rs 1 crore is being proposed to be taken over by EPFO.

Why is it important? This will more than triple the cost for employees coming under these private PF trusts. At present, private trusts charge 0.18% of basic wages as administrative charges, as compared to EPFO’s charge of 0.65%. However, with digitalisation of EPFO records, employees will benefit from faster withdrawal and transfer of accounts between employers.

Tell me more: There are 1,500 private trusts managing 8.3 million subscribers. Out of them, only trusts that have more than 500 employees and manages a corpus of Rs 100 crore will be allowed to run privately.

 

 

153

What is it? The number of people dead after an oil tanker burst into flames in Ahmedpur East, a city in Pakistan. Explosion happenned after villagers gathered to collect fuel from the overturned truck.

Why is it important? The death toll is likely to increase as 40 out of nearly 100 people injured are in critical condition. Initial reports suggest oil tanker’s tyre burst that led to the accident.

Tell me more: Two years back, more than 50 people died in Pakistan when an oil tanker and a bus collided, and burst into flames. Oil tanker was reportedly speeding and travelling in the wrong side of the road.

 

 

80%

What is it? The percentage of indirect taxpayers who have activated their account with the Goods and Services Tax Network (GSTN), the IT backbone for the proposed GST from July 1 this year.

Why is it important? Registration of all transacting parties is vital to capture the flow of taxes from suppliers to producers, and then to end consumers. Unlike existing system, where a consolidated return of all transactions are filed, the 8 million indirect taxpayers have to disclose invoice-level details to tax authorities under GST.

Tell me more: GSTN is expected to track more than 320 crore invoices each month, and this would vital information on how business is transacted. Potentially it could widen tax base, if GST data is married with Income Tax data.

 

 

50%

What is it? The percentage of provision banks have to set aside for all accounts referred to the insolvency process under the Insolvency and Bankruptcy Code.

Why is it important? Banks, mostly state-run, are expected to provide Rs 50,000 crore more because of this latest communication from the central bank. 12 accounts, which owe Rs 250,000 crore to banks (or 25% of total bad loans), are referred to the National Company Law Tribunal (NCLT) under the bankruptcy code.

Tell me more: When a company is referred under the bankruptcy code, NCLT appoints an interim administrator who will try to sell the assets of the company to a new owner within 18 months.

 

 

$ 5.8 billion

What is it? Amount spent by the Italian government to bail out two failed banks – Banca Popolare di Vicenza and Venta Banca – in the Venice region.

Why is it important? The bailout contravenes the European Commission’s rules that forbid using state money to deal with failing banks. The employees and branches of these two banks will be transferred to Intesa Sanpaolo banking group from today at a nominal value of one euro. In addition, government will also offer guarantee up to 12 billion euros to cover losses from bad loans.

Tell me more: Italian banks carry 350bn euros of bad loans – a third of Eurozone’s total debt.

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