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COVER
STORY
Asset
Reconstruction Companies: Asian Experiences
- - Katuri Nageswara Rao
Asset
Reconstruction Companies (ARCs) can help banks to quickly
clean up their balance sheets, so that ailing banks may stand
up on their feet. The experiences of ARCs have been mixed,
the world over. Their success rate ranges from unsatisfactory
to good. The major factors contributing to the successful
operation of an ARC, as observed by the Bank for International
Settlements (BIS), are strong political will, explicit government
financial support, supportive legal infrastructure, efficient
market environment, clear mandate for Asset Management Companies
(AMCs), a well-defined AMC life, adequate governance, good
transparency, realistic asset pricing and speedy resolution.
© 2005 IUP. All Rights Reserved
COVER
STORY
Assets
in Distress: Enter ARCIL
- - Pallavi Aluru
ARCIL
is the first asset reconstruction company in India. It is
based on the banking model, where a group of banks float an
Asset Reconstruction Company (ARC). It has so far acquired
bad loans aggregating to Rs. 15,000 cr and has paid various
sellers Rs. 3,572 cr by way of issuance of security receipts.
It has acquired assets principally in sectors like textiles,
pharma, consumer products and iron & steel.
© 2005 IUP. All Rights Reserved
M
& A
Bank
Mergers: The Need of the Hour
- - Justin Paul
It
is not the will of the Ministry of Finance to create four
or five big banks or to establish a monopoly of PSBs, but
it is the need of the hour if Indian banks are to compete
with global players. Strong banks can overcome vulnerabilities
more easily than small banks. Innovative technology and higher
expertise level in private sector banks are also some of the
factors forcing PSBs to merge, so as to face the competition.
Cultural similarities in PSBs will help the mergers to be
successful.
© 2005 Justin Paul. All Rights Reserved.
M
& A
IDBI
- IDBI Bank Merger Creating a Financial Behemoth
- - Tirthankar Roy
The
IDBI - IDBI Bank merger has created a bankIDBI Ltd. which
has assets worth Rs. 80,000 cr. The major benefit to IDBI
is that it can access low-cost funds besides the ready-made
availability of branch network, technology and ATMs across
72 cities. RBI has relaxed SLR norms for the new bank. The
transfer of the Rs. 9,000 cr NPAs of IDBI to a newly created
Stressed Assets Stabilization Fund (SASF) has helped the new
bank reduce its net NPA ratio to less than 1% and capital
adequacy ratio to just over 9%. The new bank has many opportunities
in the infrastructure area to increase its asset base in the
future.
© 2005 IUP. All Rights Reserved
RISK
MANAGEMENT
Operational
Risk and Indian Banks
- - S Bhaskaran and Doris Rajakumari John
Increasing
use of innovative technologies and cross-border transactions
in banks are forcing Indian Banks to concentrate more on operational
risk (OR) issues. Basel II norms also stress on operational
risk identification and management besides other risks. While
RBI has issued guidelines on operational risk management to
the banks, vigil through effective system control and competent
staff is more important in minimizing losses.
© 2005 IUP. All Rights Reserved
RISK
MANAGEMENT
Retail
Loan: A Risk Management Perspective
- - Shyam Ji Mehrotra
Retail
lending in India maybe at a level much lower than in developed
nations, but it is growing. NPA rates are also at lower levels
when compared to the average NPA of the total credit portfolio.
This is the right time for banks to put in place an appropriate
risk management strategy before the situation goes out of
hand. Concentration risk, high credit risk, rising frauds,
impending interest rates revision are some of the factors
which banks should consider carefully.
© 2005 IUP. All Rights Reserved
SCENARIO
Asia-Pacific
Basel II Survey
- - Phillip Straley and Eric Hansen
This
survey has been conducted by Ernst & Young and Asia Risk on
implementation issues and challenges faced by banks in the
Asia-Pacific on Basel II. 65% of the total respondents said
that they were in the early stages of implementation or had
not yet started. Around 35% said they were targeting a standardized
approach and 28% said they were implementing the IRB foundation
approach. About 40% of the banks believe that capital charges
will decrease after implementation and 50% believe that it
will increase.
© 2004 Incisive Media Investments Ltd. Reprinted with permission.
The article first appeared in Asia Risk, December 2004.
SCENARIO
Are
the Dollar's Days Really Over?
- - R Vishwanathan
The
US dollar will keep its position intact as long as other nations
are willing to invest their reserves in the dollar. The size
and sophistication, innovativeness and resilience and political
and military strengths of the US economy will also stand by
the USD. Correcting the current plight of the dollar is not
going to be painless. Economies like Japan, China and South
Korea will slowly learn to live with the adjusted value of
the dollar. Unless the US is too irresponsible, economically
and diplomatically, the USD will enjoy the major reserve currency
status for some more decades.
© 2005 IUP. All Rights Reserved
REGULATION
Reserve
Bank of India's New Initiatives
- - Yash Paul Pahuja
To
make the banking sector more robust and internationally competent,
RBI has come out with revised guidelines on dividends payable,
corporate debt restructuring and mergers and acquisitions
among banks in India. While banks have shown a positive response,
analysts are predicting that it will further the banking reforms.
© 2005 IUP. All Rights Reserved
BOOK
REVIEW
Dealing
with Financial Risk
- - David Shirreff
The
author in his book Dealing with Financial Risk discusses the
growth of modern financial markets and challenges faced by
market participants in handling financial risk. The book provides
a detailed account of various real and simulated examples.
It says that mathematics has limited value in calculating
the probability of the most bizarre and extreme events.
© The Economist Newspaper Ltd. All Rights Reserved. The IUP holds the copyright for the Book Review. |
