Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Thematic (Sector/Industry)

*New Circular, New Loopholes: The Reserve Bank of India (RBI) has proposed capping non-bank financial company (NBFC) dividend payout ratios to a maximum of 50%. The methodology is predicated on the net NPL ratio and CAR. The new proposal is riddled with loopholes, as NBFCs can easily manipulate these ratios; and*Well-Placed NBFCs: Excluding LIC Housing Finance (LICHF.IN) and Shriram Transport (SHTF.IN), most large NBFCs are well placed to meet the proposed dividend cap if the guidelines are made applicable from the previous year.

*New Circular, New Loopholes: The Reserve Bank of India (RBI) has proposed capping non-bank financial company (NBFC) dividend payout ratios to a maximum of 50%. The methodology is predicated on the net NPL ratio and CAR. The new proposal is riddled with loopholes, as NBFCs can easily manipulate these ratios; and*Well-Placed NBFCs: Excluding LIC Housing Finance (LICHF.IN) and Shriram Transport (SHTF.IN), most large NBFCs are well placed to meet the proposed dividend cap if the guidelines are made applicable from the previous year.

Reserve Bank of India – Nothing Changes

*Adding To The Confusion Again: Just when we thought Indian banking couldn’t get any muddier, the Reserve Bank of India (RBI) released its Report of the Internal Working Group (IWG) to Review Extant Ownership Guidelines and Corporate Structure for Indian Private Sector Banks which convened on June 12, 2020; and*Proposed Changes: The IWG has proposed: a) a higher promoter stake cap of 26% (from 15% currently); b) harmonization of corporate structures to non-operative financial holding companies (NOFHC); c) large corporates can be given a banking license subject to conditions and checks; and d) large non-bank financial companies (NBFCs) with assets greater than INR 500 bn can be considered for a banking license.

*Adding To The Confusion Again: Just when we thought Indian banking couldn’t get any muddier, the Reserve Bank of India (RBI) released its Report of the Internal Working Group (IWG) to Review Extant Ownership Guidelines and Corporate Structure for Indian Private Sector Banks which convened on June 12, 2020; and*Proposed Changes: The IWG has proposed: a) a higher promoter stake cap of 26% (from 15% currently); b) harmonization of corporate structures to non-operative financial holding companies (NOFHC); c) large corporates can be given a banking license subject to conditions and checks; and d) large non-bank financial companies (NBFCs) with assets greater than INR 500 bn can be considered for a banking license.

Reserve Bank of India – How Simple Becomes Really Complicated

* RBI Failure To Think Through Moratorium Leads To Continued Uncertainty for India: On September 3, 2020, the Supreme Court of India held a hearing on interest rate waivers for loans under moratorium granted by the Reserve Bank of India (RBI). On September 10th, the Supreme Court clarified: a) the matter under discussion is related to interest on interest payments and not on the interest payments themselves; and b) that banks should not classify loans as NPL for another two month period, if they were not classified NPLs on August 31st.; and   *Dissatisfied Borrowers: The Supreme Court has now disposed of the 'interest on interest waiver' related petitions where borrowers were satisfied with the interest on interest waiver measures implemented by the RBI and the financial sector. However, there remain other borrowers (ie. power companies) who aren’t satisfied and have proposed further modifications to the RBI’s restructuring scheme.

* RBI Failure To Think Through Moratorium Leads To Continued Uncertainty for India: On September 3, 2020, the Supreme Court of India held a hearing on interest rate waivers for loans under moratorium granted by the Reserve Bank of India (RBI). On September 10th, the Supreme Court clarified: a) the matter under discussion is related to interest on interest payments and not on the interest payments themselves; and b) that banks should not classify loans as NPL for another two month period, if they were not classified NPLs on August 31st.; and   *Dissatisfied Borrowers: The Supreme Court has now disposed of the 'interest on interest waiver' related petitions where borrowers were satisfied with the interest on interest waiver measures implemented by the RBI and the financial sector. However, there remain other borrowers (ie. power companies) who aren’t satisfied and have proposed further modifications to the RBI’s restructuring scheme. 

Reserve Bank of India – The Fun Never Stops

*HFC Harmonization With NBFCs: The Reserve Bank of India (RBI) had initially published a draft proposal for changes in regulations for Housing Finance Companies (HFC) in June 2020, seeking commentary from stakeholders by July 15, 2020; and*Final Regulatory Changes: After stakeholder review, there is essentially one key change to the draft proposal mandating a higher 60% of total assets be “qualifying housing finance assets” and that a minimum of 50% of total assets be housing loans. The RBI has indicated that other differences between HFC and NBFC regulations will be eliminated over a period of two years.

*HFC Harmonization With NBFCs: The Reserve Bank of India (RBI) had initially published a draft proposal for changes in regulations for Housing Finance Companies (HFC) in June 2020, seeking commentary from stakeholders by July 15, 2020; and*Final Regulatory Changes: After stakeholder review, there is essentially one key change to the draft proposal mandating a higher 60% of total assets be “qualifying housing finance assets” and that a minimum of 50% of total assets be housing loans. The RBI has indicated that other differences between HFC and NBFC regulations will be eliminated over a period of two years.

Reserve Bank of India  - Final HFC Changes

*Another Plan, More Forbearance: The Reserve Bank of India (RBI) has announced a one-time restructuring framework or asset classification forbearance to resolve assets under stress related to COVID-19 across corporate, M-SME, and retail; * Mitigating Bank P&amp;L Impact: In general, all banks will be able to restructure the exposures under stress and mitigate the impact to the bottom-line in FY 2H21. This amounts to between 50%-55% of system loans; and  * Devil In The Details: Like everything else with the RBI and the bureaucracy of India, not everything is as it seems. This plan needs to be thoroughly reviewed  - although we hope its not another robbing Peter to pay Paul deal as we have become so accustomed to in India.

*Another Plan, More Forbearance: The Reserve Bank of India (RBI) has announced a one-time restructuring framework or asset classification forbearance to resolve assets under stress related to COVID-19 across corporate, M-SME, and retail; * Mitigating Bank P&amp;L Impact: In general, all banks will be able to restructure the exposures under stress and mitigate the impact to the bottom-line in FY 2H21. This amounts to between 50%-55% of system loans; and  * Devil In The Details: Like everything else with the RBI and the bureaucracy of India, not everything is as it seems. This plan needs to be thoroughly reviewed  - although we hope its not another robbing Peter to pay Paul deal as we have become so accustomed to in India.

Reserve Bank of India – Read The Fine Print

India

LIC Housing Finance is a major Indian housing finance company that provides long-term financing for the purchase, construction, repair, and renovation of residential properties for individuals and corporate entities. The company offers a diverse product portfolio including home loans, plot loans, home improvement loans, and loans against property. It was founded in 1989 and is headquartered in Mumbai, India.

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LIC Housing Finance (LICHF IN)

Reserve Bank of India – Nothing Changes

RESERVE BANK OF INDIA: New proposed dividend cap on Nonbank financials companies, while trying to rein-in systemic risk, is laden with loopholes.

Thomas J. Monaco

Reserve Bank of India – How Simple Becomes Really Complicated

RESERVE BANK OF INDIA: New Just when we thought Indian banking couldn’t get any muddier, the Reserve Bank of India (RBI) released its Report of the...

Thomas J. Monaco

Reserve Bank of India – The Fun Never Stops

RESERVE BANK OF INDIA: Certain Borrowers Are Dis-Satisfied With "Interest On Interest Waiver" And Proposed Additional Modifications To RBI...

Thomas J. Monaco

Reserve Bank of India - Final HFC Changes

RESERVE BANK OF INDIA - Final Housing Finance and Non-Bank Financial Company Rule Harmonization Regulations Now Set With Stricter Rules.

Thomas J. Monaco

Reserve Bank of India – Read The Fine Print

*Another Plan, More Forbearance: The Reserve Bank of India (RBI) has announced a one-time restructuring framework or asset classification...

Thomas J. Monaco

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