Even as the NPA woes continue among the PSBs, the RBI has put a bar on fresh lending by Dena Bank. It may be recollected that Dena Bank was already under Prompt Correction Action (PCA) wherein the bank’s financials, recruitments of senior personnel and dividend payouts are very closely monitored by the RBI. The bar on fresh lending is a first time initiative by the RBI and is a logical conclusion when there is little improvement in the NPA position despite of the PCA. It could also mean that other PCA banks like Bank of Maharashtra, OBC, Allahabad Bank and UCO Bank could also be in line.
One of the new casualties of the new NPA provisioning framework implemented by the RBI on February 12th has been the classification of Reliance Naval as a banking NPA. Now, even a delay of payment by 1 day will lead to classification as an NPA. Vijaya Bank has taken the lead in classifying Reliance Naval as an NPA in its books. Reliance Naval (formerly Pipavav Defence) owes nearly Rs.9000 crore to banks with IDBI Bank being. In fact, many of the banking analysts have been openly critical about the way large private banks have continued to classify Reliance Naval as a performing asset.
Ironically, at a time when India is looking to expand the penetration of GST in a bigger, one of the pioneers of GST, Malaysia, is planning to exit GST entirely in the next 100 days. In fact, the recently elected Prime Minister, Mahathir Mohammed, has expressed his intent to do away with the unpopular GST. This decision is quite important because Malaysia was one of the original pioneers in GST implementation and is often cited as a case study for GST implementation. Mahathir, incidentally, was the prime minister of Malaysia for 22 years between 1981 and 2003.
The exit polls ahead of the actual counting in Karnataka Assembly polls have not given a very decisive picture. If the consensus forecast of all the exit polls are considered it appears to be veering towards a hung assembly in Karnataka. If the BJP and the Congress are involved in a close contest then it could be the JD(S) led by Deve Gowda which could play a pivotal role in the creation of the new government. The actual counting in Karnataka will begin on Tuesday morning and the first signs of an outcome will be known by mid-day. Karnataka is a prestige battle for the BJP and the Congress.
The government is keen to leave no stone unturned in the tax treatment of the Flipkart-Wal Mart deal and has already sought details of the share purchase pact from Flipkart. It may be recollected that last week Wal Mart had agreed to purchase a 77% stake in Flipkart for a consideration of $16 billion. Key investors including Softbank and Naspers were selling out to Flipkart while Tencent, Tiger Global and Accel Partners were to hold on to a small stake. Apart from ascertaining the tax liability, the government also wants to assess if the General Anti Avoidance Rules (GAAR) would be applicable in the Flipkart case. The government has already had a bad experience in the Vodafone and Cairn deals and would not want another similar case festering in the Indian courts over the interpretation of tax rules.
The OPEC is quite confident that the US sanctions on Iran will not overly impact the OPEC output and its 1.8 million bpd quota cuts that are currently in force. Currently, Iran is also contributing towards the quota deal and it is expected that post the imposition of sanctions, Iran’s relations with Saudi Arabia may sour to an extent where the continuance of OPEC quotas may not possible. To an extent, all the parties to the OPEC supply cuts are enjoying higher prices with Brent crude settling around $77/bbl. The oil prices have gone up by over 60% in the last 12 months boosting oil companies’ fortunes.
