Friday, January 02, 2009

India RBI Fund Infusion

Stimulation Package 1: 20, 000 Cr
Stimulation Package 2: 20, 000 Cr
SPV for liquidity: 25,000 Cr

The number around the older schemes seem to rotate around 2,80,000 Cr. (Will try and get a handle on that).

But cool stuff @ 3,50,000 Cr, we have 10% of GDP has already been infused as liquidity.

And what is cost of this potentially disastrous move (RBI Circular of second jan) :

(a) All accounts covered under the circular dated December 8, 2008 which were standard accounts on September 1, 2008 would be treated as standard accounts on restructuring provided the restructuring is taken up on or before January 31, 2009 and the restructuring package is put in place within a period of 120 days from the date of taking up the restructuring package.

(b) The period for implementing the restructuring package would stand extended from 90 days to 120 days in respect of accounts covered under the circular dated August 27, 2008 also.

(c) The special regulatory treatment will also be available to 'standard' and 'sub-standard accounts', covered under circulars dated August 27, 2008 and December 8, 2008 even where full security cover for WCTL is not available, subject to the condition that provisions are made against the unsecured portion of the WCTL, as under:

  • Standard Assets: 20%.
  • Sub-standard Assets: 20% during the first year and to be increased by 20% every year thereafter until the specified period (one year after the first payment is due under the terms of restructuring).
  • If the account is not eligible for upgradation after the specified period, the unsecured portion will attract provision of 100%
Basically you can push some of the NPA s later, why not give full disclosure to investors and then intervene later? Will any shortfalls of capital be met from the SPV above?

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