Insurers set fresh terms for liability insurance for bank boards’ directors
Insurance companies that sell liability insurance have begun to reprice the costs of cover they offer to directors on bank boards. Market leaders in this line of business — New India Assurance and Tata AIG — have begun to reassess the premium on risk exposure of their portfolio in the director’s and officer’s (D&O) liability business. “The rules are simple. If there is a claim, our policies are locked in for payout for years, so it is better to renegotiate now,” said a top source in the non-life insurance sector.
RBI ban on Letters of Undertaking: Switch to local credit may squeeze liquidity
Following the Reserve Bank of India’s (RBI) ban on issuance of letters of undertaking (LoU), at least $5 billion (approximately Rs 35,000 crore) of non-fund credit will need to be converted into domestic loans. The total non-fund based exposure is estimated at $20 billion (Rs 1.4 lakh crore). The migration of customers to the home market could soak up a lot of domestic liquidity in the next few months, say bankers who are apprehensive yields might spike up. “We will need to watch liquidity though the higher FPI investment limits will help,” said a banker. Analysts point out the LoU exposure is hard to quantify as it is a subset of the overall trade credit portfolio.
Income Tax dept seizes Rs 4.4-bn dividend income of Cairn Energy
The Income Tax Department (ITD) has seized a further Rs 4.4 billion of dividend income due to Cairn Energy Plc to recover a part of the Rs 102.47 billion tax demand it had raised on the British firm using a retrospective tax legislation. The ITD had previously seized Rs 6.66 billion of dividends due to Cairn from its 4.95 per cent residual holding in Vedanta Ltd. It has also refused to pay tax refund of Rs 15.94 billion due to Cairn as a result of overpayment of capital gains tax to recover the dues.
RBI may loosen NPA norms to let banks breathe easy
The Reserve Bank of India (RBI) may relax some of the stringent norms for treatment of bad loans that it announced in February without diluting their spirit, said two officials aware of the development. The finance ministry has made a case for providing some relief, especially for small and medium enterprises, given that the tighter rules could force defaulters into rapid bankruptcy, which could dent jobs generation, they said. The one-day, non-performing asset (NPA) classification norm may be extended to 30 days and the requirement that a resolution plan has to be approved by all lenders could be lowered to 75%, they said.
Auditor BDO flags rule violations in Educomp deals
Auditor BDO has flagged certain “preferential” dealings between Educomp Solutions and its counter parties, during an audit of the company that is currently facing bankruptcy proceedings. Last month, Educomp lenders had unanimously cleared a proposal for its sale to Nasdaq-listed Ebix Inc at close to a 90% discount to the value of loans due to them. The National Company Law Tribunal (NCLT) has yet to approve the sale. The auditor cited transactions in its report that it said were in contravention of Insolvency and Bankruptcy Code (IBC).
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