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Khaleej Times
3 days ago
- Business
- Khaleej Times
Indian companies raising funds through qualified institutional placement route
Question: I believe that many banks and large companies in India are raising funds by tapping the primary market through what is called the QIP route. Some well-known private companies are raising funds to finance green projects. I would appreciate it if you could throw some light on this fund raising exercise. ANSWER: QIP stands for Qualified Institutional Placements. It is an avenue for raising capital that allows listed companies to issue equity shares, fully and partly convertible debentures or any other security. The equity shares, debentures and other securities are subscribed by Qualified Institutional Buyers (QIBs). However, warrants which are convertible into equity shares cannot be issued under this route. The Securities and Exchange Board of India considers QIBs as institutional investors that possess the experience and financial muscle to evaluate and invest in the capital market. It has been observed that there is a spurt in QIP activity when the secondary market is bullish. A few weeks ago, Indian banks, Punjab and Sind Bank and Indian Overseas Bank raised capital through the QIP route. A few well-known private companies listed on the Indian stock market have also raised substantial funds through this route in the recent past. Public sector banks have been raising funds through QIPs to bolster their capital base, raise capital to finance their expansion plans and comply with shareholding regulations of the Reserve Bank of India. Question: With India putting emphasis on clean energy, will it be able to get access to minerals and metals which are critical for production of turbines, solar panels and electric vehicle batteries? ANSWER: India holds two licences from the International Seabed Authority (ISA) which is a body set up under the UN Convention on the Law of the Sea that regulates all mineral related activities on international sea beds. The first licence is for an area spread over 75,000 square kilometres in the Indian Ocean which is considered to be rich in polymetallic or manganese nodules, which are packed with minerals like iron, manganese, nickel, cobalt and copper. The second licence, valid till 2031, covers 10,000 square kilometres where three tectonic plates converge. This zone holds polymetallic sulphides, which are rich in nickel, cobalt, zinc, manganese, copper rare earth and platinum-group elements. Experts believe that minerals can be extracted from the oceans to meet future demands of rare minerals with minimal ecological impact. Researchers are mapping biodiversity to establish a baseline for assessing environmental impact and ensure sustainable mining. The Ministry for Earth Sciences is building an indigenous research vessel which will deploy buoys and submersibles to collect samples and use seismic waves to locate minerals on the sea bed. A Deep Ocean Mission has been set up to develop a deep sea mining system and cutting-edge technologies. This is the only way by which India can become self-sufficient in minerals and rare earths which are critical to clean energy transition. Question: Recently there was a report on Indian television channels in respect of a company which defrauded two state run financial institutions and diverted funds received as loans for personal purposes. Are auditors of the company not responsible for exposing this diversion of funds? What steps are being taken in this regard? ANSWER: Auditors are certainly responsible for detecting frauds and bringing them to the notice of shareholders and regulatory authorities. In the past, The Institute of Chartered Accountants of India has taken firm measures to bring the errant auditor to book. Likewise, ICAI will now review through the Financial Reporting Review Board the financial statements and statutory audit reports of the company which has allegedly committed the fraud. If allegations are found to be true, the disciplinary committee of the Institute will take action against the auditor. Stringent measures are being taken by the Institute from time to time in appropriate cases to ensure auditor accountability. In this financial year, the audit rotation policy will come into play and mandatory rotation will have to be done so that the same firm of auditors does not audit the financial statements of the company for more than ten years. Well governed companies listed on stock exchanges in India are currently in the process of evaluating different audit firms. These companies are adopting a more structured and competitive process than a decade ago before selecting the new firm of auditors. Firms are being evaluated based on multiple dimensions like the quality and credibility of the audit team, especially the lead partner. Prior experience with similar businesses is given due weightage. Technology is another key differentiator. Companies now expect automation, analytics, and tech-enabled audits. Another key factor which audit committees of companies are taking seriously is the independence of auditors by ensuring that apart from the audit assignment, the same firm does not get other professional work which would compromise their independence. The writer is a practising lawyer, specialising in corporate and fiscal laws of India.
Zawya
26-05-2025
- Business
- Zawya
India's central bank seeks approval for overseas rupee lending to neighbours, sources say
NEW DELHI - India's central bank is taking another step to internationalise the rupee, seeking approval to allow domestic banks to lend the currency to overseas borrowers for the first time, two sources said. The Reserve Bank of India (RBI) has asked the federal government to allow domestic banks and their foreign branches to lend Indian rupees to overseas borrowers to enhance the use and acceptability of the local currency in trade. The proposal, which was sent to the finance ministry last month, suggests lending in rupees to non-residents can begin in neighbouring countries such as Bangladesh, Bhutan, Nepal and Sri Lanka, the sources said. If successful, such rupee-denominated lending could be extended to cross-border transactions globally, one of the sources said. According to Ministry of Commerce data, 90% of India's exports to South Asia were to these four nations in 2024/25, amounting to nearly $25 billion. Currently, foreign branches of Indian banks are restricted to providing loans in foreign currencies and such loans are extended mainly to Indian firms. The sources declined to be identified as the discussions are confidential. Emails sent to the Finance Ministry and the RBI requesting comment did not receive a response. The central bank has been taking steps to increase the use of the local currency in global trade and investment. As part of the strategy, RBI recently permitted the opening of rupee accounts for non-residents outside India. Earlier this month, Reuters reported the RBI has sought government's approval to remove the cap on foreign banks with so-called vostro accounts buying short-term sovereign debt, to boost rupee-denominated investment and trade. The RBI will open the foreign loans in rupees only for the purpose of trade, the sources said. Currently, rupee liquidity is provided in other countries only through a limited number of government-backed credit lines or bilateral currency swap arrangements. "The objective is to reduce dependence on such arrangements and instead allow commercial banks to provide rupee liquidity on market terms," the first source said, citing a communication from the central bank in April. The second source said enabling easier access to rupee-denominated loans will help facilitate trade settlements in rupees and reduce exposure to foreign exchange volatility. The government has received several requests from financial institutions to support strategic projects through rupee-denominated financing, the second source said. India's experience with local currency pacts with the United Arab Emirates, Indonesia, and the Maldives, as well as Special Rupee Vostro Accounts used for trade with Sri Lanka and Bangladesh, has underscored the need to deepen the availability of rupee liquidity, the source said. If implemented, the policy would mark a major step toward integrating the rupee into the global financial system, positioning it as a more widely accepted currency for international trade and investment, the second source added.
Reuters
26-05-2025
- Business
- Reuters
India's central bank seeks approval for overseas rupee lending to neighbours, sources say
NEW DELHI, May 26 (Reuters) - India's central bank is taking another step to internationalise the rupee, seeking approval to allow domestic banks to lend the currency to overseas borrowers for the first time, two sources said. The Reserve Bank of India (RBI) has asked the federal government to allow domestic banks and their foreign branches to lend Indian rupees to overseas borrowers to enhance the use and acceptability of the local currency in trade. The proposal, which was sent to the finance ministry last month, suggests lending in rupees to non-residents can begin in neighbouring countries such as Bangladesh, Bhutan, Nepal and Sri Lanka, the sources said. If successful, such rupee-denominated lending could be extended to cross-border transactions globally, one of the sources said. According to Ministry of Commerce data, 90% of India's exports to South Asia were to these four nations in 2024/25, amounting to nearly $25 billion. Currently, foreign branches of Indian banks are restricted to providing loans in foreign currencies and such loans are extended mainly to Indian firms. The sources declined to be identified as the discussions are confidential. Emails sent to the Finance Ministry and the RBI requesting comment did not receive a response. The central bank has been taking steps to increase the use of the local currency in global trade and investment. As part of the strategy, RBI recently permitted the opening of rupee accounts for non-residents outside India. Earlier this month, Reuters reported the RBI has sought government's approval to remove the cap on foreign banks with so-called vostro accounts buying short-term sovereign debt, to boost rupee-denominated investment and trade. The RBI will open the foreign loans in rupees only for the purpose of trade, the sources said. Currently, rupee liquidity is provided in other countries only through a limited number of government-backed credit lines or bilateral currency swap arrangements. "The objective is to reduce dependence on such arrangements and instead allow commercial banks to provide rupee liquidity on market terms," the first source said, citing a communication from the central bank in April. The second source said enabling easier access to rupee-denominated loans will help facilitate trade settlements in rupees and reduce exposure to foreign exchange volatility. The government has received several requests from financial institutions to support strategic projects through rupee-denominated financing, the second source said. India's experience with local currency pacts with the United Arab Emirates, Indonesia, and the Maldives, as well as Special Rupee Vostro Accounts used for trade with Sri Lanka and Bangladesh, has underscored the need to deepen the availability of rupee liquidity, the source said. If implemented, the policy would mark a major step toward integrating the rupee into the global financial system, positioning it as a more widely accepted currency for international trade and investment, the second source added.
Times of Oman
21-05-2025
- Business
- Times of Oman
Indian Banks are better prepared now to handle financial stress now: Fitch Ratings
New Delhi: Indian banks have shown a marked improvement in their risk profile and asset quality, according to a recent report by Fitch Ratings. The global rating agency noted that this progress has led to upgrades in the Viability Ratings (VRs) of several large Indian banks. Fitch said the recent VR upgrades reflect stronger underwriting standards, better loan diversification, improved asset quality, and stronger buffers to absorb losses. The upgrades signal that Indian banks are better prepared to handle financial stress than in the past. It said, "The recent upgrades of Indian banks, Viability Ratings (VRs) reflect improved risk profile and asset quality". In March 2025, Fitch upgraded the VRs of Punjab National Bank, Union Bank of India, and Bank of India. All three banks are rated at BBB-/Stable for Issuer Default Rating (IDR) and bb- for Viability Rating. In April 2025, Bank of Maharashtra and ICICI Bank Limited also saw their VRs upgraded. Bank of Maharashtra holds a BBB-/Stable IDR and a bb- VR, while ICICI Bank stands out with a BB+/Stable IDR and a bb+ VR--the highest among the nine large Indian banks rated by Fitch. Despite these improvements, the report expects the Issuer Default Ratings of these banks to remain unchanged. This is because these ratings are largely based on the expectation that the Indian government (rated BBB-/Stable) will provide extraordinary support if needed. Therefore, the improvement in banks' internal strength does not directly affect the IDRs. The report also pointed out that some banks, like Bank of Baroda and Canara Bank, continue to face constraints on their VRs due to high growth appetite and risks related to newly issued loans. However, if these banks can sustain their recent financial improvements, Fitch may consider upgrading their VRs as well. After the recent upgrades, all nine large Indian banks rated by Fitch now fall within the 'bb' category in terms of Viability Ratings. This indicated a moderate level of financial strength, with ICICI Bank leading the pack due to its better performance, lower risk appetite, and more stable track record.
