| Railway FDI policy may have caution note on Chinese firms |
|
New Delhi, 30 January Even as the government readies to open some segments of the railways to 100 per cent foreign equity participation, in an unprecedented move, it might incorporate in the enabling policy aclause cautioning against investment from Chinese companies. It is even opposed to Chinese labourers working in areas near India's borders with China and Pakistan. The proposal to allow 100 per cent foreign direct investment ( FDI) in the construction and maintenance segments of the railway network was floated by the Department of Industrial Policy and Promotion (DIPP) in August last year. On this, the department had prepared a Cabinet note on December 26 but was awaiting a final go- ahead from the home ministry. It seems, the ministry had " strong objections over allowing the participation of Chinese companies in the Indian railway network", according to a top official who did not want to be named. China, according to the home ministry, is perceived as India's main rival — in the economic field as well as militarily — especially with unresolved border disputes between the two countries. On that basis, the ministry is learnt to have told DIPP that investments made by Chinese firms, particularly in the core and sensitive areas, should be viewed with caution. It has said Chinese investments should also not be allowed in Jammu and Kashmir, the Northeast and Sikkim. From the security point of view, the ministry has added, Chinese workers or technicians should not be allowed to work near the areas along the international borders India shares with China and Pakistan. They might be allowed to work in such cases but only after the government's permission. Turn to Page 10 > CAVEAT ON CARDS: Railway FDI policy to have a special caveat on Chinese firms; the home ministry has supported FDI in railways' construction and maintenance segments but cautioned against investment by Chinese firms RATIONALE: Ministry says China is considered India's rival in the economic and military fields and there are unresolved border disputes with it OUT OF BOUNDS: Chinese investment may not be allowed in sensitive and core areas because that might pose danger to national security; so, J& K, the Northeast and Sikkim could be out of bounds for these companies LIMITED LABOUR: Chinese labourers and technicians may be barred from working in areas along India's border with China and Pakistan. Permission likely only after government's approval and proper visa procedures |
| New NPA norms: RBI offers some breather |
|
Mumbai, 30 January The Reserve Bank of India (RBI) has offered some leeway to banks for early detection and resolution of bad loans. Under the new regime kicking off from April 1, lenders can finance 50 per cent of the outstanding loan value, RBI said in Framework for Revitalising Distressed Assets in the Economy, released on Thursday. Earlier, RBI had proposed to allow takeover of existing loans by new financiers at 60 per cent or more of the loan value. The central bank also diluted rules for accelerated provisioning it had proposed for non- performing accounts. Now lenders will make 25 per cent provision for unsecured loans that remain unpaid for six months. Initially, RBI had proposed 30 per cent provisions. Plus, for loans that have remained unpaid for two years, banks have to set aside 40 per cent, instead of 50 per cent. The new framework calls for early formation of a lenders committee with the timeline to agree to a plan for resolution. It also offers incentives for lenders to agree collectively and quickly to a restructuring plan. It will give better regulatory treatment of stressed assets if a resolution plan is underway. However, it will attract accelerated provisioning if no agreement can be reached. Seeking improvements in the current debt restructuring process, the framework allows independent evaluation of large value restructuring. This is for purpose of framing viable plans and a fair sharing of losses ( and future possible upsides) between promoters and creditors. It also mooted steps to enable better functioning of asset reconstruction companies. This is apart from encouraging sector- specific companies and private equity firms to play active role in stressed assets market. It has offered liberal regulatory treatment provided for asset sales. Lenders can spread loss on sale over two years, provided the loss is fully disclosed. Leveraged buyouts will be allowed for specialised entities for acquisition of ' stressed companies'. KEY DRIVERS UNDER NEW REGIME |Early formation of Joint Lender's Forum for action plan |Carrot for lenders to agree collectively and quickly to a plan |Penalty of higher provisioning for delayed actions |Independent evaluation for large recast deals |Take- out and refinancing will not be treated as restructuring |Losses from selling of NPAs can be spread over two years |Buying and selling of NPAs between asset recast firms |
| Postal banks effective globally: Mor |
|
Mumbai, 30 January Nachiket Mor, head of the Reserve Bank of India ( RBI)' s committee on financial inclusion, on Thursday said the postal bank model had been a success globally. In a report by the committee, Mor had advocated differentiated banks and a new structure for priority sector lending. A former deputy managing director of ICICI Bank, Mor is also a member of an advisory committee under former RBI governor Bimal Jalan that is vetting the applications of 25 applicants for bank licences. The committee has been mandated to communicate its suggestions to the banking regulator. While India Post has applied for a bank licence, there are differences within the government on whether the entity should be allowed to enter the sector. While the communications and information technology ministry is pushing the idea, the finance ministry is opposed to the move. "I don't want to comment anything about India Post. What Iam saying is worldwide, postal banks have been very effective as payment banks," Mor said at the sidelines of a seminar of financial inclusion. The finance ministry is not keen on letting India Post convert itself into a bank, citing practical difficulties. This is despite the fact that about 90 per cent of its 155,000 post offices are located in villages. As of March 2013, postal savings stood at ₹ 6.05 lakh crore, half the total deposits of State Bank of India, India's largest lender. Last week, Minister for Communications & Information Technology Kapil Sibal said his ministry would ensure India Post got a banking licence. |
| The succession question |
|
Appointing an interim successor (either the chairman or a retired or about- to- retire senior executive takes up the job in most cases) is the usual practice when a large company has suffered the abrupt exit of a CEO. But it's not enough. Companies often fail to recognise that while the loss of a senior executive is bound to send shock waves through the system, the sense of void has to be minimised. That calls for a wellcrafted plan to have a deep talent pool, so that a replacement is found in the shortest time possible. The plan's starting point could be as follows: the company's senior executive team should ask themselves, "What would we do if we lost our CEO tomorrow?" The other aspect that companies should consider is to have a doomsday strategy in place that includes a planned communication strategy in case of such tragic events. It's not enough to just keep quiet after giving out sketchy details since it leads to nervousness among key stakeholders. Companies such as McDonald's have done exactly that — a strategy that helped the fast- food giant come out of such a crisis not once but twice in the past decade: its celebrated CEO Jim Cantalupo died of a heart attack in 2004 and his successor Charlie Bell died of cancer less than a year later. In the first case, less than six hours after Cantalupo's death, McDonald's board named 43- yearold Bell, who was the chief operating officer, for the top job. It was a tough decision since under Cantalupo the company reported a surge in its profits. That was a big deal since Cantalupo had joined at a time when McDonald's had reported its first quarterly loss in 38 years. But the transition was a smooth affair since the McDonald's board executed a plan that was already in place. That strategy was followed again when Bell died of cancer, and the chain named Jim Skinner as CEO almost immediately. One of the key planks of this strategy was communication that showed the company was open and transparent about the situation. Bell, who was diagnosed with cancer just two weeks after taking charge, communicated to employees through emails and voicemails some details of his treatment. He also attended the company's annual meeting to reassure shareholders that his battle with cancer had not hurt the company's operations. Also, in July that year, two months after his treatment started, the company issued a release about management changes and promotions, including an expansion of duties for Skinner. The release, thus served as a kind of de facto announcement of the succession plan. Bell resigned in November, paving the way for Skinner's elevation as CEO, and died within a couple of months. In an interview with CNN Money, McDonald's Director Andrew McKenna said the company faced three choices: make no CEO appointment, name an interim CEO, or promote the heir apparent prematurely. The board found the first two options unacceptable and opted for the third one, and all this was possible because of its robust succession plan. It's not only big companies alone. Even their smaller counterparts need to put in place a variation of an emergency CEO succession plan. For proof, look at what happened to Milestone Capital, a private equity firm managing assets worth ₹ 4,000 crore, after its CEO Ved Prakash Arya, 42, died in a freak accident in 2011. Milestone, where the Arya family held an 88 per cent stake, didn't know how to fill the void. His wife, Ruby, even contemplated selling the company. Since offers weren't attractive enough, she decided to steer the company herself and is now getting ready to raise fresh funds. But two valuable years were lost in the process. The two case studies show clearly why it's important for boards to discuss who will take over in case of an emergency. No one can predict an emergency, but it's clear that the task will be a lot easier if a company's board has discussed this issue before a crisis occurs. Human resource consultants say emergency successions act as a stress test of a company's CEO succession process. A Conference Board report quotes research to say that emergency CEO successions have a substantial impact on post- succession company performance. For example, studies have found that the rare but important succession event of the sudden death of a CEO is associated with an 18 per cent decline in operating profitability, along with declines in asset growth and sales growth, in the year following the emergency succession. So, a contingency CEO succession plan must be integrated into the corporate crisis- preparedness process. Personal products companies Marico and Godrej have what they call a drop- dead succession plan, under which there is a replacement available almost immediately after any tragic event. In any case, if companies can have business continuity plans for IP, technology systems and operations, there is no reason why the human angle can't be introduced as well. Tata Motors MD Karl Slym's sudden death shows it is time companies asked themselves ' What would we do if we lost our CEO tomorrow?' HUMAN FACTOR SHYAMAL MAJUMDAR |
|
This mail and its attachments (if any) are confidential information intended for persons to whom the email is planned for delivery by the sender. If you have received this mail in error please notify the sender of the error by forwarding the email and its attachments (if any) and then deleting the mail received in error and the relevant email trail in this connection without making any copies or taking any prints.
__._,_.___
No comments:
Post a Comment