Bondholders of Yes Bank propose conversion of ?8,500cr ($1,148m) AT1 bonds into ?1,700cr ($229m) equity as part of new rescue plan. Provisioning by banks may top ?25,000-30,000cr ($3.37-4bn). SBI lowers fixed deposit, lending rates in 10th cut this fiscal year. Bank of England slashes interest rates to record low. Number of confirmed cases in Italy crosses 10,000. IRDAI asks insurers to settle coronavirus-related claims quickly.
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Light at the End of the Tunnel?
Bondholders of Yes Bank have come up with a settlement offer involving a partial writedown of bonds as well as shares.
The new rescue plan proposes the conversion of ?8,500cr ($1,148m) Additional Tier 1 (AT1) bonds into ?1,700cr ($229m) equity. It will also see several mutual funds holding bonds participating in the infusion of equity capital to revive Yes Bank. [ET Markets]
The RBI had earlier said that it would work on a revival plan, as part of which AT1 bonds will be written down "permanently, in full". Equity holdings, though heavily diluted, were not to be written down according to the plan. However, this announcement did not bode well with the investor community and the industry at large, considering that the move will raise borrowing costs for banks and make capital raising tougher in the near future.
Some bondholders of Yes Bank filed a court petition against the plan on Monday.
Finance Minister Nirmala Sitharaman will hold a meeting with Chief Executives of banks set to merge beginning April 1st. Earlier this month, the Union Cabinet had approved the consolidation of 10 state-owned banks into four.
The meeting will review the readiness of anchor banks to minimise disruption to customers, ensuring credit flow to productive sectors of the economy. It will also review preparedness of delivery of banking services and products to customers after the mergers. [Moneycontrol]
Bring It On
WhatsApp Pay’s entry into India’s growing digital payments market is imminent – and its competitors are already bracing themselves. Google Pay and PhonePe are tying up with hundreds of businesses in the country, enabling them to open mini digital storefronts within the payment apps where users can browse for products and services. [ET Tech]
Setting Aside for a Rainy Day
Banks will have to reportedly face provisioning pressure of at least ?25,000-30,000cr ($3.37-4bn) in the March quarter. Most of the cases where inter-creditor agreements (ICA) were signed remain unresolved. Moreover, banks will have to continue providing in cases like Dewan Housing Finance Corporation (DHFL). Since most of the cases remain unresolved, banks will have to make additional 20% provisioning as no resolution could be reached in 210 days period after signing ICAs, as per the RBI’s provisioning norms. [Financial Express]
It’s Simply Never Simple
Brent futures recently dropped to $36 per barrel, falling nearly 30% in a single session. And as it happens every time oil prices experience significant shifts, some countries stand to lose while others stand to gain.
This time around, though, it might not be as simple as that. While record low oil prices – provided they sustain – could decrease oil exporting nations’ profits and make winners of oil-importing nations, a host of international factors have complicated the outlook.
For starters, the past few years have been tumultuous for globalisation and trade, thanks to the brutal trade wars, especially the one between the US and China. Secondly, China, the world’s second-largest economy, has been seeing its growth decelerate. Similar slowdowns have plagued other emerging economies like India. Thirdly, and probably most crucially, the coronavirus outbreak, which originated in central China, has spread across the world, decimated demand and slashed growth forecasts.
Due to these reasons, lower oil prices might not signify rosy prospects for importing nations, which may see gains offset by impact from the COVID-19 fallout. [ToI]
Recently, the Supreme Court overturned the RBI’s 2018 circular wherein crypto traders and exchanges were de facto banned. The RBI’s actions, the apex court said, were “disproportionate” to the risks it sought to address. How did we get here and how can we ensure more transparency in law-making for businesses to plan and be future-ready?
Down, Down, Down
The SBI has reduced its fixed deposit (FD) rates for certain tenors and marginal cost of funds-based lending rates (MCLR) across various tenors.
Its second reduction in a month, the country’s largest lender said retail term deposits would be slashed by 10 to 50 basis points for a few tenors. FDs maturing between 7 days to 45 days will offer an interest rate of 4.50% as against 4% earlier.
Meanwhile, the one-year MCLR has been reduced by 10 basis points to 7.75% from 7.85% earlier. This is the SBI’s 10th consecutive cut in MCLR in the current fiscal. [BS]
Hope for the Best, Prepare for the Worst
Following the example of the US Federal Reserve, the Bank of England has now announced an emergency rate cut. In a bid to shore up the already-stagnating economy amid the coronavirus outbreak, the Bank reduced rates from 0.75% to 0.25%, taking borrowing costs down to the lowest level in history.
"The Bank of England's role is to help UK businesses and households manage through an economic shock that could prove large and sharp, but should be temporary," Governor Mark Carney said.
The Bank’s last emergency rate cut was in October 2008, during the Great Recession. [BBC]
Desperate Times, Desperate Measures
Italy’s unprecedented national lockdown is expected to see tougher measures being imposed as the number of confirmed coronavirus cases crosses 10,000. The country is the second-worst affected in the world after China.
Italy has now 10,149 confirmed cases of the virus, according to Johns Hopkins University and Italy’s Civil Protection agency, and 631 deaths from the virus, up 168 from Monday.
The lockdown has restricted the movement of the country’s 60m citizens and is expected to remain in place until April 3rd. [CNBC]
The Insurance Regulatory and Development Authority of India (IRDAI) has asked insurers to settle all coronavirus-related claims expeditiously under existing health policies that provide for treatment of hospitalisation expenses.
"For the purpose of meeting health insurance requirements of various sections, insurers are advised to design products covering the costs of treatment for coronavirus," the regulator said in a circular.
As of today, there have been at least 58 confirmed cases of coronavirus infections in India. [Livemint]
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