‘Corporate debt, a drag on investment’

‘Corporate debt, a drag on investment’

Context

Policy action needed to tackle balance sheet vulnerabilities that pose a risk: IMF

What has happened?

The corporate debt overhang and associated banking sector credit quality concerns exert a drag on investment in India, the International Monetary Fund (IMF) said on Tuesday, in an apparent reference to the PNB scam involving diamantaire Nirav ModiR 

Recommendations

• Balance sheet vulnerabilities pose a downside risk to medium-term growth prospects in many emerging market economies, requiring policy action
• Recapitalization should be part of a broader package of financial reforms to improve the governance of public sector banks, and banks’ debt recovery mechanisms should be further enhanced 

Mitigating rollover risk

Moreover, given that sudden repricing of term premiums remains a distinct possibility and that portfolio shifts could occur, it is important to mitigate rollover risk by avoiding excessive reliance on short-term borrowing.

Bharat-22 ETF may eye Rs. 10,000 cr.(The Hindu)

The Finance Ministry may come out with a Rs. 10,000-crore follow-on fund offer of the Bharat-22 exchange traded fund (ETF) as it looks to dilute stake in Coal India to meet the minimum public holding norm

The Ministry is keen to take the ETF route to sell off government shares held through SUUTI in private firms — ITC, Axis Bank and L&T,

• The government, in November, introduced Bharat-22 ETF comprising shares of 22 firms, including PSUs, public sector banks, ITC, Axis Bank and L&T
• The fund had garnered bids to the tune of Rs. 32,000 crore, although the government retained only Rs. 14,500 crore