OPINION, P8 COMPANIES, P6 EDITORIAL Use PNB to tell MPs only privatisation can save exchequer INTERNATIONAL, P16 MADAN SABNAVIS DEBT RESOLUTION PROCESS EXTREMISM & INTOLERANCE CDR, SDR, etc, used to hide bad loans, RBI did well to remove them, to push for resolution Narendran-led Tata Steel likely to win both Bhushan assets Merck CEO Frazier speaks out against US President Trump NEW DELHI, TUESDAY, FEBRUARY 20, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM VOLUME XLIII NO. 302, 24 PAGES, `5.00 (PATNA `6.00, RAIPUR `7.00) P U B L I S H E D F R O M : A H M E D A B A D , B E N G A L U R U , C H A N D I G A R H , C H E N N A I , H Y D E R A B A D , K O C H I , K O L K ATA , L U C K N O W, M U M B A I , N E W D E L H I , P U N E READ TO LEAD SENSEX: 33,774.66 ▼ 236.10 NIFTY: 10,378.40 ▼ 73.90 NIKKEI 225: 22,149.21 ▲ 428.96 HANG SENG: 31,115.43 ▲ 599.83 `/$: 64.22 ▼ 0.30 `/€: 80.19 ▼ 0.41 BRENT: $65.15 ▲ $0.31 GOLD: `30,635 ▼ `58 PUNJAB NATIONAL BANK CASE Govt seeks answers from RBI on bank oversight IN THE NEWS UP readies to host PM, ministers at Investors Summit FE BUREAU New Delhi, February 19 AMIDAPPREHENSIONSTHAT the `11,400-crore fraud at Punjab National Bank (PNB) is just the tip of iceberg,the government is learnt to havewritten to the Reserve Bank of India (RBI),asking some tough questions on whether there were any supervisory or regulatory lapses in the scam. PM NARENDRA MODI will deliver the inaugural address at the two-day Uttar Pradesh Investors Summit 2018, beginning February 21, reports Deepa Jainani in Lucknow.As many as 16 Union ministers, inclusing Arun Jaitley, Nirmala Sitharaman, Nitin Gadkari, Piyush Goyal, Suresh Prabhu, would be chairing sessions on various sectors, in which almost 1,000 MoUs worth more than `1 lakh crore are expected to be signed. ers.The agencyhas so farseized diamonds, gold jewellery and other precious stones worth `5,716 crore in the case and summoned Modi and Choksi, thepromoterofGitanjaliGems, to appear before it on February 23 at its Mumbai zonal office. Continued on Page 2 Continued on Page 2 CVC met senior PNB and finance ministry officials, asked bank to submit report in 10 days on why and how fraud took place ED has seized assets worth `5,716 cr of Modi and Choksi so far Govt feels RBI's framework to prevent frauds is inadequate or it is unable to ensure effective implementation from the regulator. Financial services secretary Rajeev Kumar didn’t respond to text messages on the government’s letter to the central bank. An RBI spokesperson told FE, Monday being a holi- day, that he could confirm or comment on the veracity of these reports only byTuesday. Continued on Page 2 Related reports on Pages 5, 10 & 11 ED raids Modi home, seizes `5,716 cr of assets PRESS TRUST OF INDIA New Delhi/Mumbai, February 19 THE ENFORCEMENT DIRECTORATE (ED) on Monday searched the Mumbai residence of diamond merchant Nirav Modi and seized assets worth `5,716 crore as raids Special Features Wealth-building strategies during volatile times Market volatility is not always bad. In fact, you can add certain new stocks in your portfolio as they may be available at a cheaper or reasonable price during such volatility ■ Personal Finance, P15 Artificial, yet Intelligent! Brands in India are now open to the possibilities of using artificial ntelligence, creating customised solutions for their audiences. But is AI driving actionable results? QuickPicks HC restrains former Ranbaxy promoters from selling assets THE DELHI HC restrained former Ranbaxy promoters Malvinder and Shivinder Singh from alienating any of the assets held by them, movable or unmovable, so as to enforce a `3,500-crore international arbitration award against them in India, reports fe Bureau in New Delhi. It asked the promoters to “maintain status quo” till February 26, the next date of hearing. However, third parties including banks, to whom these assets have been pledged, can recover loans by selling these assets. PAGE 6 Axis Bank raises MCLR for 1 year by 10 bps to 8.4% AXIS BANK raised its marginal cost of funds-based lending rate (MCLR) by 10 basis points (bps) for some tenures, reports fe Bureau in Mumbai. The one-year MCLR now stands at 8.4%, up from 8.3% earlier. This is the second time the bank has raised lending rates in as many months. On January 18, it had raised the oneyear MCLR by 5 bps to 8.3%, becoming the first large lender to raise its MCLRs ever since the pricing mechanism came into effect on April 1, 2016. Earlier this month, HDFC Bank raised its one-year MCLR by 10 bps to 8.2%. PAGE 10 Dr Reddy’s chairman and COO added as defendants in US suit DR REDDY’S Laboratories said its chairman Satish Reddy, COO Abhijit Mukherjee and US subsidiary have been included as defendants in the class action lawsuit filed against it by investors, reports fe Bureau in Hyderabad. Sources said this was an ongoing case and there was no merit in the allegations. “DRL believes that the asserted claims are without merit and intends to defend itself against the allegations,’’ a source said. PAGE 7 continued for the fifth day in connection with the agency’s moneylaunderingprobeinthe alleged `11,400-crore Punjab National Bank fraud. Official sources said ED sleuths searched Modi’s flat in theSamudraMahalapartments in Worli. The central probe agencyalsoconductedsearches at 38 other locations in several cities,includingMumbai,Pune, Aurangabad, Thane, Kolkata, Delhi, Jammu, Lucknow, Bengaluru and Surat.It seized fresh assets worth `22 crore that include precious stones, cash and gold from the premises of Modi, his relative and business partner Mehul Choksi and oth- PRESS TRUST OF INDIA New Delhi, February 19 THE CENTRAL BUREAU of Investigation is questioning VipulAmbani,the chief financial officer (CFO) of diamantaire Nirav Modi’s company Fire Star diamond, and carrying out a search operation at the Brady Road branch of the Punjab National Bank (PNB) in Mumbai, officials said. TheysaidAmbani had been holding the position for over three years and is believed to have been aware of the financial transactions carried out by the company of the jewellerbusinessman, who fled the country before PNB reported the `11,384-crore fraud. Ambani is understood to be a relative of the late industrialist Dhirubhai Ambani. The CBI had intensified its searches last evening at the branch where the alleged fraudulent transactions took place. A CBI spokesperson said here today the branch was briefly sealed early this morning to prevent any “possible tampering”. He said the seal and the notice were removed during the day. WIDER FALLOUT The government has expressed doubts overthe central bank’s“efficacyof supervision to detect and check systemic failure”, some media reports suggested. It has also sought details of the fraud CBI, ED probe `3,695-crore Rotomac scam CBI quizzes Nirav Modi firm CFO PRESS TRUST OF INDIA New Delhi, February 19 ROTOMAC PEN PROMOTER Vikram Kothari faced the heat of central agencies after the Central Bureau of Investigation (CBI) as well as the Enforcement Directorate (ED) registered separate cases against him and his company for allegedly swindling of `3,695 crore from seven banks from 2008. The CBI registered a case after receiving a complaint from Bank of Baroda against Kanpur-basedRotomacGlobal, its directorVikram Kothari,his wife Sadhana Kothari and son Rahul Kothari, and unidentified bank officials. Initially, the alleged scam was estimated to be of `800 crore but after the CBI started probing the accounts of the company,itwas found that the company had allegedly taken loans from Bank of India,Bank of Maharashtra, Indian OverseasBank,UnionBankofIndia, Allahabad Bank and Oriental Bank of Commerce. The CBI alleged that the accused had cheated a consor- DOUBLE WHAMMY PSBs call it quits for now on QIPs New NPA norms and the PNB scam pour cold water on fundraising plans amid hammered shares SUNDAR SETHURAMAN Mumbai, February 19 BANKS LOOKING TO raise funds from the equity market to shore up their capital bases are suddenly facing the prospect of a delay in their fundraisingplans.Threebanks — Andhra Bank, Indian Bank and Canara Bank — that were planning to float their qualified institutional placement (QIP) issues in the near future are likely to be the most affected by the imposition of new provisioning norms for non-performing assets (NPA) by the Reserve Bank of India, and the outbreak of the Punjab National Bank bank guarantee scam of over `11,300 crore. The two developments have muddied the waters for prospective issuers and cast a shadow on their prospective earnings and intrinsic value.A source in the know of the development said it does not make business sense to come outwith a QIPwhen the stocks of these companies are getting Continued on Page 2 FE BUREAU Mumbai, February 19 ■ PNB scam triggers sell-off in bank stocks or thereabouts. However,thedepartmentis stillveryfirm on the electronic way(e-way)bill,whichisnecessaryto track cargo movements as it believes that this could add `10,000 crore every month to the government's kitty,atacostafractionofthat. SINGAPORE EXCHANGE (SGX) on Monday said in a statementthatitwouldlaunch products that will succeed the SGX Nifty family of products before August 2018, when its existingcontractwithNational Stock Exchange (NSE) expires. “This will provide market participants with the same ability to invest and maintain their risk exposure to the Indiancapitalmarkets.Market participantswillbeabletotransitionseamlesslytotheseproducts before the expiry of SGX’s licence agreement with the National Stock Exchange of India,” the bourse said in a statement.SGX added that the SGX Nifty family of products will continue to trade uninterrupted until August 2018. “As a market operator, we haveanobligationtoourinternational clients to provide themwithsolutionstomanage theirrisks.Oursuccessorproducts will provide certainty and continuityforourclients.Atthe sametime,wecontinuetowork with NSE to create a largerpool of liquidity comprising internationalandhomemarketparticipants,” said Michael Syn, head of derivatives,SGX. Continued on Page 2 Continued on Page 2 ■ New NPA norms to impact financials Double whammy to hurt valuations, investor appetite ■ ■ Sebi pricing formula makes QIPs unviable Andhra Bank, Canara Bank and Indian Bank had planned QIPs ■ Continued on Page 2 tium of seven bank by siphoning off bank loans to the tune `2,919 crore. The total outstanding amount along with interest and liabilities for the company was pegged at `3,695 crore,the CBI alleged. Immediatelyafterregisteringthecase,theCBIcarriedout searches at three locations in Kanpur which included Kothari's residence and office premises. CBI spokesperson Abhishek Dayal said Kothari, his wife and son were being examined by the CBI. New Nifty products by Aug: SGX BANK QIPs HIT battered.“QIP has a floor price formulabySebi(Securitiesand ExchangeBoardofIndia).Ifthe price is falling, the floor price arrived at by the formula will be more than the current market price. So, there is no point in coming out with the issue. Why will people buy when the current market price is less than floor price?” said one of the sources. Bank stocks have seen a dip in value ever since the announcement of the newprovisioning norms and then the PNB scam.The PSU Bank Index hasdeclinedby10.4%fromthe session before the RBI announcedthenewNPAnorms. Rotomac Global director Vikram Kothari ● EXISTING CONTRACT EXPIRES Meet and greet HDFC Chairman Deepak Parekh (left) and CMD of Raymond Group Gautam Singhania at the Magnetic Maharashtra Convergence 2018 in Mumbai on Monday ● GST Govt reworking anti-evasion systems SUMIT JHA New Delhi, February 19 THE GOVERNMENT COULD turn less ambitious on the invoice-matching mechanism, one of the crucial antievasion measures in the goods and services tax (GST) regime, as it now reckons that cost of complying with then system to taxpayers and the tax department far outweighed the potential gains by way of plugging revenue leakages. According to an official estimate,invoice-matching could help plug tax evasion of about `3,000 crore on a monthly basis, while cost of the mechanism could turn out to be much higher at `8,000 crore LOOMING DEADLINE KYC mandate to shave off big chunk of mobile wallets by March FE BUREAU Mumbai, February 19 LESS THAN HALF of wallet users have opted for the know your customer (KYC) process, as defined under the master direction on issuance and operation of prepaid payment instruments (PPIs) issued by the Reserve Bank of India (RBI) on October 11,2017,industry players told FE. This means that issuers of mobile wallets may lose over half their customer base once the February 28 deadline for completing KYC for all wallet users expires. The payments industry has sent a request to the RBI to ease the KYC norms for small-value payments. VinayKalantri,founderand managing director at The Mobile Wallet,which operates under the brand name tmw, said it would be unrealistic to expect all his wallet users to turnKYC-compliantbytheend ofthismonth.“Wehavearound 30-40% of our wallet customers who are full-KYC. It’s ILLUSTRATIOON: ROHNIT PHORE Poses tough questions on whether there were any supervisory or regulatory lapses NEW FRAUD ON THE BLOCK impossible that the whole set will migrate,”he said. Mostwalletusersareunlikely tooptforfullKYC,asthatwould takeawaytheconvenienceassociated with wallet payments.It wouldbringtheprocessofsigning up for a wallet as cumbersome as that of opening a bank account.“Onwalletplayers,there will definitely be an impact.So far, the number of customers that have opted for KYC is not verylarge.It is not averysignificantpercentage(ofcustomers),” said an executive with a fintech companywhich offers a wallet, among other digital products andservices. Gaurav Chopra, executive director at lobby group Payments Council of India, said the cost of carrying out KYC — at around `70-100 per user — is also prohibitive forissuers of wallets.“In addition,there will be the cost of devices (for KYC authentication), which would be over `3,000 for each device,”he added. Continued on Page 2
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