27 February 2020

Editors Space

Ace of Trumps

The land mark meeting between India’s
PM Modi and US President Trump will reap a lot of benefits for India.  This is PM Modi’s second  visit with a US President,  earlier being with Barack Obama.  Modi hopes to continue Indo-US trade negotiations with Trump from where Obama left. 

It’s a win-win situation for both countries. The US is looking forward to exporting more energy, including major long-term contract to purchase natural gas for India, a growing economy where power availability is critical.

Both have pledged long term commitment towards strong India-USA bilateral trade relations. 

And considering Trump’s hardnosed attitude towards a lot of other countries, his comment about India having a true friend in the White House is very telling. During his election campaign Trump had pledged that if elected, India will have a true friend in the White House, which is exactly the case now.  After his meeting with Modi, Trump declared that ties between Washington and New Delhi had “never been stronger.”
If the Americans have Trump, in Modi India has an Ace who trotted the globe tirelessly to seal strategic alliances.


The NPA Mess

Recently Moody’s Investors Service said that the Reserve Bank of India’s plans to resolve 12 large stressed accounts, which account for 25 per cent of stressed assets, will be credit positive for the banks as any meaningful resolution will only improve their overall asset quality. It will also set a precedent for resolving NPAs from smaller borrowers.  A lot of these NPAs are in the infra sector, where many EPC contractors have stressed balance sheets. 

There has been a spurt in infrastructure financiers' bad assets and the book of such companies is expected to be subdued in the near future.

The gross NPA of infrastructure finance companies (IFCs) has aggravated according to ratings agency ICRA, who has warned that asset quality indicators of IFCs may not be a true reflection of the underlying stress in the infrastructure portfolio, given that some of the stressed assets may not have slipped to the NPA category yet and are classified as restructured assets.

Last year India’s total infrastructure credit, including banks and NBFCs, dropped to Rs.16.5 lakh crore as on September 30, 2016, from Rs.17 trillion as on March 31, 2016. Banks account for 58 per cent of the total infra credit followed by state-run infra finance companies at 38 per cent and private sector infra financiers at 4 per cent. ICRA says a shift in asset quality recognition, where NBFCs are gradually treated at par with banks' 90-day due for recognition as NPA, will lead to a spurt in the sector's bad loans.

Major NPAs in the infra sector include, Jaypee Infratech Ltd, Lanco Infratech Ltd, Era Infra Engineering Ltd, among others.

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