Discrimination faced by Mumbaikars...

If the housing societies in Mumbai (Bombay) are only meant for families (married couples), then the government of Maharashtra should make marriage compulsory in the state/city.
Or else the government should tell its citizens where will Unmarried, Divorcees, Bachelors, Spinsters live in the city of skyscrapers or is Bombay only for those who have families.
This is one of the greatest mental blocks of Mumbaikars, who otherwise want to bask in the FALSE HALO of Cosmopolitanism.
This disease (of not giving apartments to Bachelors, Muslims, etc on rent) is specially prevalent in housing societies where the Gujaratis, Marathis and North Indians (to some extent) abound; while the rest of the population is more or less okay with the concept.
The government of Maharashtra should take this matter seriously and devise laws to eradicate this malice ASAP, so that BOMBAY (and its suburbs) becomes free of discrimination based on Marital Status, Religion, etc. Or else the Honourable Supreme Court of India should step in, and give directions to the state or central governments -- so that the fundamental rights of its citizens enshrined in the constitution of India is not violated.

Tuesday, June 21, 2016

Scheme for Sustainable Structuring of Stressed Assets
Photo: Buzz
Very Recently, the RBI has allowed lenders to carve out the "unsustainable" portion of their loans to troubled corporates and convert them into equity. The new restructuring scheme will help public sector banks in cleaning up large chunks of their bad loans, which amount to Rs 4.76 lakh crore. The extent of loans which cannot be supported by cash flows are termed unsustainable. This move will also aid the companies, which are reeling with large debts. 

What separates this scheme from earlier steps is that instead of leaving it to banks, an overseeing committee of eminent persons will be constituted by the Indian Banks Association in consultation with the RBI to identify loans eligible for restructuring. Banks will be able to upgrade bad loans through this exercise. But they may have to take a haircut as the market value of the stressed company may be less than the value of debt that is converted.
Photo: Live Mint
Once the unsustainable debt is converted to equity, banks can sell this stake to a new owner who will have the advantage of getting to run the business with a more manageable debt. Also, there has been talk of the government helping to set up a fund to pick up equity in stressed companies. It is not clear whether there are any plans for the equity created following the conversion to be sold to such a fund.

Thus, the RBI adopted international best practices in distinguishing between maleficent promoters and a business that has gone bad and can be brought back on track. The biggest beneficiaries of these would be banks which can now clean up their books quickly and move forward.

"Resolution of large accounts facing financial difficulties may require coordinated restructuring which often involves a substantial write-down of debt or large provisions. Often, such high write-downs act as a disincentive to lenders," the RBI said in a statement.

"After due consultation with lenders, RBI has formulated the 'Scheme for Sustainable Structuring of Stressed Assets' (S4A) as an optional framework for the resolution of large stressed accounts. The S4A envisages determination of the sustainable debt level for a stressed borrower, and bifurcation of the outstanding debt into sustainable debt and equity/quasi-equity instruments which are expected to provide upside to the lenders when the borrower turns around," said RBI.

The Reserve Bank of India (RBI) allowing banks to conduct deep restructuring of large accounts to revive projects that can be saved, effectively has thrown a lifeline to promoters who risked losing their companies.

This very tactical move by the RBI came at a time when Banks are struggling to dispose of many stressed assets they have already acquired and have no clue what to do next. 

According to this scheme, titled 'Scheme for Sustainable Structuring of Stressed Assets', accounts that are worth Rs.500 crore or more and have already started commercial operations will be eligible for the new recast scheme. Only those promoters who have shown no malfeasance in their actions while running the show can ask for the permission to continue with the management, even if they get reduced to minority shareholders in the process.

Some of the completed projects in these sectors were hit by external factors. Deep restructuring is done to ensure long-term sustenance. The strategic debt restructuring (SDR) scheme was of limited use in such cases. Under it, banks could convert debt into equity and take control of a company and sell off the assets. However, if they were not able to dispose of the assets within 18 months, the lenders had to incur heavy provisions.

In about a dozen companies where banks invoked SDR, they have not found a single buyer, defeating the entire purpose of loan recovery and at the cost of running down the company, which often times could be just victims of economic downturn.

Stating the 18-month timeframe of SDR was not enough for making full provisions on large loans, banks had asked for more time, necessitating the new scheme, RBI said. The new scheme gives a second chance to the existing promoters, and helps banks restructure loans at a faster pace to protect the value of the assets.

Under the new scheme proposed by the regulator, lenders will first segregate the existing debt of a company into "sustainable" (the share which can be serviced by the company even if cash flow remains the same as now) and "unsustainable".

The restructuring exercise involves the unsustainable portion of the debt, which at the time of such recast should not be more than 50 per cent of the total debt.

As part of the resolution mechanism of the new plan, the unsustainable portion of the debt should be converted into equity/redeemable cumulative optionally convertible preference shares. Banks should not grant any fresh moratorium on interest or principal repayment, or reduction of interest rate for servicing of the sustainable debt portion.

Both the promoters and the banks will have to take equal haircut in the process.

If there is no change in the existing management, the banks can also convert a portion of the unsustainable debt into coupon yielding debt instrument.

Equity shares thus acquired should be marked to market on a daily, or at least on a weekly basis for listed firms. In case the company is not listed, banks should take the lowest value after working out a prescribed rule the central bank outlined.

The upside for the banks would be primarily their equity holdings if the restructured entity turns around.

This scheme, will help the debt ridden companies not only to improve their cash flows, but it will also give them a cushion against, distress selling of assets. 

Just imagine what will happen, if a company instead of selling an asset at a distress price, goes for churning money out of, albeit with the aid of the banks (or the lenders). Will it not be a GAME - CHANGER for those debt laden companies? It is precisely one of the main reasons, due to which the stocks of debt-ridden companies are moving-up, since the last few days; apart from other factors. 

Therefore, the companies like Lanco Infratech Ltd (Rs.4.80), Gammon Infrastructure Ltd (Rs.6), Jaiprakash Associates Ltd (Rs.7.60), Reliance Communications Ltd (Rs.49), etc, will. be one of the biggest beneficiaries.

Source: Edited excerpts from The Times of India and Business Standard
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