Motilal Oswal Financial Services on NARCL: The minister of finance on September 16, 2021 said the Union Cabinet has cleared the formation of a National Asset Reconstruction Company (NARCL), or bad bank. along side NARCL, it also approved the fixing of an Indian Debt Resolution Company. so as to encourage banks and promote the bad asset resolution process, it approved a Central Government Guarantee of up to Rs 30,600 crore to back the safety Receipts (SR) which will be issued by the NARCL. This guarantee is provided for up to 5 years.
We view this as a positive development because the focus remains on faster resolution of stressed assets. this may improve the record of banks, and therefore the upfront cash payment would also aid in providing incremental cash flows. it’ll enable banks to focus more on their core operations. PSU and personal banks like ICICI Bank, Axis Bank, and YES Bank are likely to be the key beneficiaries.
Stock Market Live Updates: Among the sectors, only Nifty Metal and PSU bank indices are within the red. On the opposite hand, Nifty Private Bank, bank, auto, financial services, FMCG and durables indices rose up to a percent Market Live Updates: Sensex, Nifty trade at record highs; mid, smallcaps underperform
These stocks are witnessing a rise in open interest along side a rise in price Sebi mulls carving out separate AIF category to shop for distressed loans from banks
Motilal Oswal Financial Services on NARCL: The minister of finance on September 16, 2021 said the Union Cabinet has cleared the formation of a National Asset Reconstruction Company (NARCL), or bad bank. along side NARCL, it also approved the fixing of an Indian Debt Resolution Company. so as to encourage banks and promote the bad asset resolution process, it approved a Central Government Guarantee of up to Rs 30,600 crore to back the safety Receipts (SR) which will be issued by the NARCL. This guarantee is provided for up to 5 years.
We view this as a positive development because the focus remains on faster resolution of stressed assets. this may improve the record of banks, and therefore the upfront cash payment would also aid in providing incremental cash flows. it’ll enable banks to focus more on their core operations. PSU and personal banks like ICICI Bank, Axis Bank, and YES Bank are likely to be the key beneficiaries.
Indian Rupee Inches 6 Paise Higher To 73.46 Against US Dollar In Early Trade
Forex traders said the broad weakness of the American currency within the overseas market and sustained foreign fund inflows supported the local unit, while firm petroleum prices restricted the gains.
Credit Suisse On NARCL
The government announced the acquisition of the primary tranche of Rs 90,000 crore NPAs from banks to NARCL. NPAs being transferred within the first phase are mostly already fully provided assets.
Rs 2,400 crore cash recovery translates only to 2-15 percent of FY21 PBT. Eventual recovery, including security receipts (SRs), equates to 2-7 percent of net worth and 1-5 percent of m-cap for PSBs. the ground rate of recovery at a mean of over 18 percent is medium-term positive We still like SBI amongst PSBs and like large private banks like Axis Bank, ICICI Bank and HDFC Bank.
Kotak Securities on NARCL
The government has announced a guarantee scheme on the investment receipts issued by the National Asset Reconstruction Company (NARCL), which may make the safety receipts a transferrable instrument We are quite closer to the formation of the bad bank. The NPLs (written-off or otherwise) exchanged for security receipts are fully provided but we don’t expect banks to reverse provisions Faster resolutions of a number of the bad loans and senior management bandwidth release to unravel these bad loans are probably the simplest possible outcomes of the formation of NARCL.
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