At a time when Rana Kapoor, former MD and CEO of Yes Bank and his family are under investigation on charges of alleged money laundering and grant of suspicious loans extended by the Bank to various groups in the country, data sourced from top sources in the financial industry show that at least 44 companies, belonging to 10 large Indian business groups, accounted for bad loans of over Rs 34,000 crore of Yes Bank.
Given the dramatic rise in the number of resignations by independent directors, from 767 in 2018 to 1,393 in 2019, perhaps because of increasing risk of prosecution following corporate fraud and mis-governance, it is not surprising that the government should want to take some steps to check this. After all, if there aren't enough people willing to take up this job, how will corporate India find enough independent directors that are now required as part of the law? The corporate affairs ministry has ordered that no criminal or civil proceedings should be initiated against independent directors and non-executive directors of a company unless there is proof of complicity in an act of fraud/default; in any case, it has said that no prosecution can be initiated without the explicit approval of the government. There is, however, a flip side to this. The idea behind having independent directors on a company's board was to get another check on management and promoters- that is why the independent director was not to be related to the management/promoters, nor have a business relationship with them. But, if the independent director is to be completely shielded, and continue to get fat salaries/ commissions from firms, what is to even ensures/he will function as well?
Being steered by a government-appointed and eminent banker Uday Kotak-led board on its path to recovery, crisis-hit IL&FS has sought extension of bid validity for five road projects that are faced with debts totaling over Rs 10,000 crore. Infrastructure Leasing & Financial Services (IL&FS) had received time-bound binding bids for these five road projects, but the validity of those bids expired on February 29.
On Thursday, The Employees' Provident Fund Organisation (EPFO) decided to lower the interest rate on provident fund savings to a seven year low of 8.5 per cent for 2019-20, down 15 basis points from 8.65 per cent in the previous year. The decision was ostensibly shaped by two factors: First, lower return on government securities, and second, the desire to withhold a higher surplus because of economic uncertainties. Being one of the largest social security organisations in the world - it has over 60 million active users - any reduction in interest rates is unlikely to be popular with its contributors. However, this is a welcome move. With interest rates falling across the economy - yields on both central and state government debt have been falling over the past year with the monetary policy committee cutting the benchmark repo rate by 135 basis points over the past year - paying a rate that is out of line with that in the broader economy will end up being unsustainable.
Each time there is a failure, whether Satyam or IL&FS, we find regulators failed, as did auditors, boards of firms, etc The collapse of Yes Bank is yet another black mark for India Inc. As the news unravels, one wonders what there is to applaud about the country's entrepreneurship skills given the large number of businesses-big and small-that have come undone in the past few years. Without doubt, there have been some tremendous success stories, and several world beaters have been built. But, for every Infosys, Wipro, HDFC Bank, or a Kotak Mahindra Bank there is a Satyam Computer, Bhushan Steel, or an Essar Steel.
India's shadow banking sector seems to be coming out of its blues and banks have opened their credit tap. However, the bond markets continue to be suspicious as some non-banking finance companies (NBFCs) continue to default or are struggling to get buyers in resolution processes. NBFCs are certainly not as flush with liquidity as they were in the pre-IL&FS period, but Reserve Bank of India (RBI) Governor Shaktikanta Das said on Tuesday that the stress had been contained to three-four large firms, from 10-12 a few months ago.
THE NATIONAL Company Law Appellate Tribunal (NCLAT) on Wednesday dismissed a plea moved by audit firms Deloitte Haskins & Sells and KPMG arm BSR & Associates, as well as their independent directors, against impleadment in an ongoing investigation in their role in the alleged fraud at the debt-laden Infrastructure Leasing & Financial Services Limited (IL&FS). In its ruling, the NCLAT said that the judgment of the National Company Law Tribunal (NCLT) could not be termed as illegal and that the tribunal was empowered to pass order to implead the auditors as well as independent directors if "it forms opinion that the affairs of the company have been conducted in a manner prejudicial to the public interest".
The Hongkong and Shanghai Banking Corp. (HSBC) Ltd has moved a winding-up petition against a subsidiary of IL&FS Transportation Services Ltd (ITNL) in a Singapore court to recover dues of Rs l,060 crore, information from the Singapore government gazette showed. HSBC is seeking to recover its investment in ITNL Offshore Pte. Ltd's bonds maturing in 2021, this is the first such case against the firm filed by an overseas lender. The case will be heard on 20 March.
Lenders to bankrupt infrastructure financier IL&FS have cleared the sale of three road projects that would fetch them nearly Rs 6,250 crore. The committee of creditors approved the sale of Chenani-Nashri Tunnel to Cube Highways with a vote of over 90 % . While the sale of Pune Sholapur Road to Italy-headquartered Autostrade was cleared with a vote of 84 % and Jorabat Shillong Expressway will be sold to Edelweiss-backed Sekura Roads with a 100 % vote. IL&FS confirmed that it had received lenders' approval for sale of these projects.
Mumbai-based Business Conglomerate Shapoorji Palonji Group and two other companies have evinced interest for construction of Gujarat's first tech park to be developed at Gujarat International Finance-Tech (GIFT) city situated on the outskirts of state capital Gandhinagar. "State owned Gujarat Industrial Development Corporation (GIDC) is promoting the Rs 300 crore tech park project. Apart from Shapoorji Palonji Group, two other Gujarat based companies PSP projects and Cube Construction are in the race for the construction of nearly 6 lakh sq ft space in GIFT City;" said a senior official with the state government.