CNBC-TV18 caught up with VG Kannan, chief executive of IBA, Sunil Srivastava, former deputy MD of SBI, Sanjay Jain, CFO of Future Group and Praveen Sood, ex-CFO of HCC, to discuss the new bank exposure norms.
Here's what the experts have to say about the new regulations:
VG Kannan: "Regarding the derivative exposure, just now we have got a letter from the Reserve Bank of India and this very clearly says non-centrally cleared derivatives exposure will be outside the purview of exposure limits till April 1, 2020. However, banks must compute this exposure separately and report to the department of banking regulations on a quarterly basis. So, this is a major relief which has come to the banks who have been dealing with across the counter on derivatives because the PFA exposure used to be pretty high for many of the derivative transactions and then it would have ensured that it will be breached and which would have resulted in many transactions not taking place."
Praveen Sood: "We have to put basically the right kind of an atmosphere and right kind of rules and regulations for the bond market to flourish because right now there are no rules and regulations for the bond market to basically even start ... earlier we used to give infrastructure companies a big kind of leeway to use to foreign currency loans for the large projects and all those things and for meeting the term requirement. There are also some limits to that nowadays ... most of the bankers nowadays shy away from lending money to infra companies and especially when no other alternate source is available, I think the rules and regulations which are being imposed on April 1 are premature."
Sunil Srivastava: "In the context of the Rs 25,000, Rs 15,000 and Rs 10,000 limits - there are two parts. You have been talking about the infrastructure sector, but there is a large non- infrastructure structure sector as well which would have to access the market. So if the market is alright for a AAA and AA in some cases, but beyond that moving them into the market would require some sort of a liquidity support or some sort of a credit enhancement and that in fact - recent report I read somewhere probably Rs 1.5 lakh crore will come into the market because of this. But there has to be some mechanism for giving some partial credit enhancement or there has to be market making an institutional mechanism which has to be thought of by RBI."Sanjay Jain
: "These steps are good steps in a good direction to make the financial system robust and healthy. The point is the transition phase through which all these norms are to be absorbed. Earlier we talked that all the large groups may get affected but the large groups have been very proactively working on alternate sources of capital and now suddenly you find that from one source of capital there are defined norms implementable from April 1, at the same time from a bond and equity capital market, if one company goes bust, if one industry gets impacted, the entire bond market, the lender refrain from extending more money and that somewhere is a reflection of lack of depth or lack of width in the market. So, that is the only humble request, let the markets evolve, be deepened."