India, Pakistan banks may open cross-border brancheshes: Anand Sharma

Source :PTI | Sep 29, 2011, 10.00PM IST


NEW DELHI: India is considering to allow in its territory Pakistani banks and the neighbouring country is set to reciprocate for strengthening bilateral trade.

A common view was expressed by commerce ministers of the two countries at a FICCI meeting here on Thursday.

"The Reserve Bank of India and State Bank of Pakistan have already discussed this matter and will take the next step," commerce and industry minister Anand Sharma said.

Sharma, who held official level talks withPakistan commerce minister Makhdoom Amin Fahim on Wednesday, said "When we are going to encourage trade and investment, not only customs check posts but banks are also essential."

Making a similar comment, Fahim said,"Both countries are now poised to open bank branches and land routes."

He said the "atmosphere of fear and apprehension has reduced considerably" and the businessmen in both the countries have started to "believe their governments".

Later at an Assocham meeting, Fahim said the two nations owe it to the future generations to iron out differences and move forward. Happy over the response he received in India in the last four days, Fahim said,"if we are taking one step, your people are taking two steps".

Assocham president Dilip Modi announced that the chamber would be sending a high-level business delegation to Pakistan in November. It will comprise honchos like K P Singh of DLF, Sajjan Jindal of JSW Steel and Analjit Singh of Max group.

Earlier, Sharma said the two governments would try and resolve visa related problems of businessmen. Bilateral trade is set to rise to USD 6 bn in 3 years from USD 2.7 bn.

Fahim informed Sharma that Pakistan recognises that grant of the Most Favoured Nation (MFN) status to India would be key in expanding bilateral ties. 

Kingfisher got Vijay Mallya's guarantee for Rs 6,176 cr in 2010-11

Source : PTI | Sep 30, 2011, 11.15AM IST

 Working hard to lower its debt and interest costs, Kingfisher Airlines got guarantees worth over Rs 6,100 crore from Chairman and key promoter Vijay Mallya last fiscal toward loan and other liabilities. 

For providing the additional level of collateral for its funding needs, the company paid a little over Rs 50 crore to Mallya as 'guarantee and security commission' during the year ended March 31, 2011, Kingfisher has told its shareholders. 

Mallya had also furnished guarantees totalling Rs 2,799.56 crore in the previous fiscal (2009-10) on behalf of the company for loans and other liabilities, but did not get any commission that year. 

The airline disclosed the guarantees worth Rs 6,175.63 crore provided by Vijay Mallya and the commission totalling Rs 50.87 crore paid to him in its Annual Report for the year 2010-11, which was made available to shareholders ahead of its AGM on Wednesday in Bangalore. 

The company did not reply to detailed queries regarding the need for collateral from Mallya and the exact details of the loans and other liabilities for which he had to furnish his personal guarantee. 

However, Vijay Mallya told shareholders during his address at the AGM that he "personally stepped in to provide a third level of comfort to the lenders who have been extremely supportive of Kingfisher." 

Kingfisher, which claims to be the country's single largest airline with a market share of about 20 per cent, is taking various steps to improve its operating performance and as part of these efforts, has decided to phase out its low-cost service, Kingfisher Red, in about four months. 

Mallya said the company has implemented a debt-recast programme to lower its debt liabilities and Kingfisher was continuing to work with the consortium of banks with a view to further reduce interest costs. 

In an investor presentation in June this year, the company said that its total debt before the recast stood at Rs 7,651.12 crore and came down to Rs 6,007.30 crore after the recast. 

"The banks have not only given relief to Kingfisher in the form of a moratorium on repayment, extended tenor of loans and reduced interest rates but also converted 30 per cent of their outstanding loans into preference and equity capital," Mallya said. 

"By the same measure, I, too, have given my personal comfort to the lenders over-and-above the securities provided by the company and the additional collateral of UBHL guarantees," he added.

Govt to provide capital to PSU banks

Source :Sidhartha, TNN | Sep 30, 2011, 01.26AM IST


NEW DELHI: With the government ruling out stake dilution below 51%, the finance ministry is assessing the capital requirement of state-run lenders over the next decade, raising the possibility of using innovative fund raising tools such as differential voting right shares (DVRS) and golden shares, besides dusting out old files on the holding company structure.

Bankers and government officials told TOI that the department of financial services has set up a committee under joint secretary Alok Nigam and bank chiefs, which has been tasked to look into the issue. The panel is learnt to have met for the second time on Tuesday and its recommendations are expected to be finalized over the next few months.

Banks were also asked to submit their capital requirements to fund their growth plans, which they have done. Sources said one of the key areas that the committee would look at is ensuring sufficient availability of capital without putting extra strain on the government balance sheet in view of the rising fiscal deficit levels.

As a result, the proposals on golden shares and DVRS are back on the table. A golden share will give the government power to exercise veto power even if it holds one share. Similarly, a public sector bank can issue shares where the voting right is capped at, say, 10%, something that has already been tried by large conglomerates such as the Tatas and the AV Birla group. In case of companies, which are already allowed to issue these shares, the Companies Act stipulates that DVR shares should not exceed 25% of the share capital. These shares are also entitled to receive dividends and bonus.

In 2007, State Bank of India had for the first time proposed issuing DVRS but the move did not materialize as the government did not take a view. Another proposal which did the rounds earlier - the one for setting up a holding company - too is being discussed in banking circles. Under this model, a new company would be set up, which will hold stake on behalf of the government in public sector banks. The move will help the government rein in its spending as the holding company will do the fund-raising.

While the government has already provided over Rs 30,000 crore to public sector banks over the last three years, faster economic growth is putting pressure on banks to provide more loans to companies and individuals. With the law barring government from lowering its stake below 51%, the lenders find it tough to raise funds through issue of fresh shares as it would result in dilution of the Centre's shareholding. Over the last few years, new tools such as issue of preference shares, perpetual equity and rights issue have been used to provide equity to public sector banks.