Stressed Assets Current Affairs

Cabinet approves two relief measures for stressed telecom sector

The Union Cabinet has approved two key measures in telecom sector to facilitate investments, consolidation in the sector and enhancing ease of doing business. These include restructuring

  • Deferred payment liabilities of spectrum auction of telecom service providers (TSPs).
  • Revising the limit of the cap for spectrum holding for TSPs.

Key Facts

Restructuring of Deferred Payment Liabilities of TSPs for spectrum

It extends time period for payment of spectrum bought in auction to 16 years from the present 10 years. It will give one-time opportunity for TSPs to opt for higher number of instalment (maximum 16 instalment) apart from currently permitted 10 instalments

The increased instalment is based upon principle that Net Present Value (NPV) of Payment Due is protected as per respective notice inviting application for auction of spectrum from 2012. The total amount received will be higher by Rs. 74,446 crore till 2034-35.

Revision of limits of cap for spectrum holding

Based upon the recommendations of TRAI and Telecom Commission, the Union Cabinet also approved revision of limits of cap for spectrum holding. They are

  • Overall spectrum cap is revised from current limit of 25% to 35%.
  • Current intra-band cap is removed. Instead, there is cap of 50% on combined spectrum holding in sub-1 GHz bands (700 MHz, 800 MHz and 900 MHz bands).
  • There will be no cap for individual or combined spectrum holding in above 1 GHz band.

Telecom Regulatory Authority of India (TRAI) had recommended revision in existing limits of cap for spectrum holding taking into consideration technological advancement, efficient use of spectrum, measures to facilitate consolidation etc. The revised spectrum caps limits may be revisited in future after Final Acts of World Radiocommunication Conference (WRC) 2019.

Comment

Restructuring of deferred payment liability will increase cash flow for telecom service providers in immediate timeframe and provide them some relief. Revising spectrum limit cap holding will facilitate consolidation of telecom licensees, thus aid mergers and acquisitions in the sector and may encourage TSPs participation in future spectrum auction.

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Lok Sabha passes Banking Regulation (Amendment) Bill, 2017

The Lok Sabha has passed the Banking Regulation (Amendment) Bill, 2017 by voice vote. It will replace the Banking Regulation (Amendment) Ordinance, 2017.

The bill seeks to amend the Banking Regulation Act, 1949 to insert provisions for handling cases related to stressed assets or non-performing assets (NPAs) of banks. Stressed assets (NPAs) are loans defaulted by borrower in repayment or the loan which has been restructured by changing the repayment schedule.

Key Features of the Bill

Initiating insolvency proceedings: It will enable the Central government to authorize the Reserve Bank of India (RBI) to direct banking companies to resolve specific stressed assets by initiating insolvency resolution process. These proceedings will be under the Insolvency and Bankruptcy Code, 2016.

Issuing directions on stressed assets:  It empowers RBI to issue directions to banks for resolution of stressed assets from time to time.

Committee to advise banks: It enables RBI to specify committees or authorities to advise banks on resolution of stressed assets.  RBI will appoint or approve members on such committees.

Applicability to State Bank of India (SBI): It inserts provision to make above provisions applicable to the SBI and its subsidiaries and also Regional Rural Banks (RRBs).

Need for Amendment

Non-performing assets (NPAs) or bad loans of banks have risen to over Rs. 9 lakh crore resulting in choking the banking system. So it had become necessary for the RBI to intervene in order to take urgent measures for their speedy resolution.

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