No LoIs signed by cos in Jan-May: RBI
Letters of intent (LoIs) from companies to invest in industrial projects in the country dropped to zero between January and May 2009.
Letters of intent (LoIs) from companies to invest in industrial projects in the country dropped to zero between January and May 2009 as companies struggled to pick themselves up after the severe downturn which started in September 2008.
An LoI is (usually) a non-binding document detailing an agreement between two or more companies (usually) regarding new business activities.
The Reserve Bank of India’s (RBI) annual report on banking, released on Thursday, showed that though companies submitted memoranda detailing their intentions for proposed investments of Rs 404,380 crore between January and May 2009, there were no LoIs in the period.
“The investment climate in 2008 had remained upbeat before the intensification of the global crisis by mid-September 2008, evident from an 84% rise in industrial entrepreneurs memoranda (IEM) submitted to the government of India” the report noted.
“However, the proposed investment in terms of letter of intents in 2008, subsequent to IEMs failed to pick up,” the RBI said.
2008 received the highest IEMs worth Rs 1,522,566 crore however, letters of intent were received only for a minuscule Rs 38 crore worth of projects, RBI data showed.
Until May 2009, Rs 404,380 crore IEMs have been received, none of which have been converted into letter of intents, the RBI said.
The RBI has also raised the red flag on the increase in the number of frauds by bank borrowers especially in new areas like housing loans, credit cards, internet banking and outsourcing business.
Frauds involving large amounts of Rs 1 crore and above have consistently increased since 2004-05, RBI data showed.
In 2004-05, as many as 96 frauds amounting to Rs 461 crores were detected which has increased to 212 frauds amounting to Rs 1,404 crore in 2008-09, a five-year high.
“During 2008-09, 102 caution advises were issued to banks in respect of unscrupulous borrowers who perpetrated frauds exceeding Rs 25 lakh. It was decided that banks could inform the IBA (Indian Banks Association) about names of such entities so that IBA could prepare a caution list for circulation among banks,” the RBI said.
The RBI has also pointed to the increase in gross non performing assets (GNPAs) of private and foreign banks in 2008-09.
Though aggregate NPAs of all scheduled commercial banks taken together have remained unchanged at 2.4% from in the last two financial years, NPAs of both private and foreign banks have increased.
“There has been a significant rise in percentage of gross NPAs for foreign banks and new private sector banks particularly after September 2008, reflecting the deterioration in the asset quality of these banks groups following the global financial meltdown,” the RBI said.
NPAs of foreign banks have increased the most in 2008-09 compared to 2007-08. From just 1.9% in 2007-08, foreign bank gross NPAs have increased to 4.2% in 2008-09, while net NPAs have increased from 0.8% to 1.7%.
Net NPAs of both old and new private sector banks have also increased over the last two financial years.
From 0.7% to 0.9% for old private sector banks and from 1.4% to 1.6% for new private sector banks, RBI data said.
“Since both gross and net NPAs increased (for these banks) despite extension of certain relaxations permitted to banks to restructure certain advances, banks need to exercise better risk management and vigil to avoid future slippage in asset quality,” the RBI said.
An LoI is (usually) a non-binding document detailing an agreement between two or more companies (usually) regarding new business activities.
The Reserve Bank of India’s (RBI) annual report on banking, released on Thursday, showed that though companies submitted memoranda detailing their intentions for proposed investments of Rs 404,380 crore between January and May 2009, there were no LoIs in the period.
“The investment climate in 2008 had remained upbeat before the intensification of the global crisis by mid-September 2008, evident from an 84% rise in industrial entrepreneurs memoranda (IEM) submitted to the government of India” the report noted.
“However, the proposed investment in terms of letter of intents in 2008, subsequent to IEMs failed to pick up,” the RBI said.
2008 received the highest IEMs worth Rs 1,522,566 crore however, letters of intent were received only for a minuscule Rs 38 crore worth of projects, RBI data showed.
Until May 2009, Rs 404,380 crore IEMs have been received, none of which have been converted into letter of intents, the RBI said.
The RBI has also raised the red flag on the increase in the number of frauds by bank borrowers especially in new areas like housing loans, credit cards, internet banking and outsourcing business.
Frauds involving large amounts of Rs 1 crore and above have consistently increased since 2004-05, RBI data showed.
In 2004-05, as many as 96 frauds amounting to Rs 461 crores were detected which has increased to 212 frauds amounting to Rs 1,404 crore in 2008-09, a five-year high.
“During 2008-09, 102 caution advises were issued to banks in respect of unscrupulous borrowers who perpetrated frauds exceeding Rs 25 lakh. It was decided that banks could inform the IBA (Indian Banks Association) about names of such entities so that IBA could prepare a caution list for circulation among banks,” the RBI said.
The RBI has also pointed to the increase in gross non performing assets (GNPAs) of private and foreign banks in 2008-09.
Though aggregate NPAs of all scheduled commercial banks taken together have remained unchanged at 2.4% from in the last two financial years, NPAs of both private and foreign banks have increased.
“There has been a significant rise in percentage of gross NPAs for foreign banks and new private sector banks particularly after September 2008, reflecting the deterioration in the asset quality of these banks groups following the global financial meltdown,” the RBI said.
NPAs of foreign banks have increased the most in 2008-09 compared to 2007-08. From just 1.9% in 2007-08, foreign bank gross NPAs have increased to 4.2% in 2008-09, while net NPAs have increased from 0.8% to 1.7%.
Net NPAs of both old and new private sector banks have also increased over the last two financial years.
From 0.7% to 0.9% for old private sector banks and from 1.4% to 1.6% for new private sector banks, RBI data said.
“Since both gross and net NPAs increased (for these banks) despite extension of certain relaxations permitted to banks to restructure certain advances, banks need to exercise better risk management and vigil to avoid future slippage in asset quality,” the RBI said.