No tax relief for large companies in Budget 2019. G20 agrees to push ahead with digital tax. UK signs free trade deal with South Korea, marking first post-Brexit deal secured in Asia. Small banks hit by RBI’s new framework for resolution of NPAs. RBI’s new prudential framework for stressed asset resolution “credit positive”, as per Moody’s. Finance Minister might retain fiscal deficit target at 3.4% of GDP. Microsoft to launch its next-generation console before the end of 2020. Google shares more details on Stadia. Finance Minister Nirmala Sitharaman pitches for 'significant economic presence' concept to tax global digital companies. Boris Johnson emerges as front-runner for Prime Minister of UK, threatens to withhold payment from the EU unless terms improve.
Small banks hit by RBI’s new framework for resolution of NPAs. RBI’s new prudential framework for stressed asset resolution “credit positive”, as per Moody’s.
The What: The Reserve Bank of India (RBI) on Friday issued a new prudential framework for the resolution of stressed assets, replacing the February 12, 2018 circular that was recently struck down by the Supreme Court. The new framework will give lenders 30 days to review a borrower account before labelling it as a non-performing asset (NPA) in case of default.
Catch-22: This new framework is likely to hit smaller banks.
As per the new framework, 75% of creditors’ vote is enough to pass a resolution plan. While this would mean quicker resolutions as banks with less exposure can’t stall deals any longer, it also instructs that dissenting lenders must sell at liquidation value, greatly lowering the bargaining power of smaller banks that have less exposure in specific deals.
Any Comments?: Moody’s Investors Service on Monday said that the framework is ‘credit positive’.
However, the credit rating agency identified slower-than-expected progress under the Insolvency and Bankruptcy Code (IBC) as the key hurdle to the timely resolution of stressed assets. The cleanup of the bank’s balance sheets could therefore still take another two to three years, it said.
No tax relief for large companies in Budget 2019. Finance Minister might retain fiscal deficit target at 3.4% of GDP.