India

Prime Minister David Cameron faced a new economic and political challenge on Wednesday after the Indian owner of much of Britain’s steel industry said it could no longer swallow the large losses being generated by its plants and would try to sell them, the International New York Times reported. The owner of the plants, Tata Steel, has been squeezed by cheap imports of Chinese steel into Europe, and its announcement suggested that if no buyer could be found it would consider closing them, endangering at least 15,000 jobs.

India’s place as an emerging market bright spot is under threat from simmering troubles in a banking system weighed down by bad loans, the Financial Times reported. The signs of distress are clear. Last week, Reserve Bank of India governor Raghuram Rajan warned Indian lenders to brace for a year of “deep surgery” as a balance sheet clean-up began. Shares in state-backed banks, which control roughly three quarters of assets, have plunged. Financial results have been brutal too.

India’s central bank governor Raghuram Rajan has warned that the country must brace for more than a year of “deep surgery” to repair its damaged banking system, raising fears that tough action on bad loans could slow economic recovery, the Financial Times reported. On the surface, India appears to be a beacon of growth among struggling global emerging markets, posting an increase of 7.3 per cent in gross domestic product in the most recent quarter this week, underlining its position as the world’s fastest-growing big economy.

Lenders to digital education provider Educomp Solutions Ltd are mulling conversion of debt to a majority equity holding under the strategic debt restructuring (SDR) scheme, two bankers in the know confirmed. “Bankers will be conducting a meeting in the second week of January to take a final call on whether SDR needs to be invoked or not. The company is in a delicate state and decisions need to be made quickly,” said one of the two bankers cited above on conditions of anonymity as these discussions are confidential.

Loan growth at Indian banks slowed in the six months through September while bad loans rose, signaling increased risks to lenders, the Reserve Bank of India said in a report, Bloomberg News reported yesterday. "Risks to the banking sector increased due to deteriorating asset quality, lower soundness and sluggish profitability,” the RBI, which is also the industry’s regulator, said in a report yesterday. Credit growth slowed to 9.4 percent in the period from 9.7 percent at the end of March, the central bank said.

Indian lawmakers sent a proposed bankruptcy law for review today, closing off a raucous parliament session without transacting any major legislative business including a signature reform on state taxes, Reuters reported. The bankruptcy law is aimed at unifying and overhauling rules governing the liquidation or revival of ailing companies into a single code and for the first time imposing deadlines. Its passage was widely considered to be a done deal after the government introduced the legislation as a money bill which could not have been blocked in the opposition-dominated upper house.

The Indian government yesterday introduced a bill in parliament aimed at bringing sweeping changes to an outdated and overburdened bankruptcy system, setting deadlines for the first time for processing insolvency cases, Reuters reported. At present, Asia's third-largest economy has competing laws with unclear jurisdictions to deal with the liquidation or revival of companies. The bill, introduced by Finance Minister Arun Jaitley in the lower house, seeks to enact a single bankruptcy code.

If General Motors can continue selling its Chevrolet brand of cars even after filing for the biggest industrial bankruptcy in the world in 2008, why is that Kingfisher Airlines is not flying, nor are its bankers able to recover dues from it despite promoter Vijay Mallya's and group companies' loan guarantees? The difference may lie in how courts look at bankrupt companies, attitude of the borrowers and the lethargy of bankers, The Economic Times reported.

The Bankruptcy Law Reforms Committee (BLRC), while submitting its report to the government earlier this month, had recommended the need for a single code to resolve insolvency for all companies, limited liability partnerships, partnership firms and individuals, The Business Standard reported in a commentary. "In order to ensure legal clarity, the Committee recommends that provisions in all existing law that deals with insolvency of registered entities be removed and replaced by this Code," the committee said in its report.

Creditors of integrated steel producer Essar Steel Ltd may consider conversion of debt into equity under the strategic debt restructuring (SDR) route should the company not succeed in its attempt to monetize assets or bring on board a strategic investor, two people familiar with the matter said. The SDR scheme, introduced by the Reserve Bank of India in June, allows lenders to convert debt into majority equity holding and take over the management of a company. The bankers then have 18 months to find a suitable buyer.