Asian stock markets finished broadly higher on Friday with shares in China leading the region. The Shanghai Composite is up 1.1% while Japan's Nikkei 225 is up 0.7% and Hong Kong's Hang Seng is up 0.1%. Wall Street ended flat, pulling back from early gains after Facebook disclosed a security breach.
Back home, India share markets opened on a negative note. The BSE Sensex is trading down by 98 points while the NSE Nifty is trading down by 57 points. The BSE Mid Cap index and BSE Small Cap index both opened the day down by 1.7%.
Barring FMCG stocks and IT stocks, all sectoral indices have opened the day in red with realty stocks and consumer durable stocks witnessing maximum selling pressure.
The rupee is trading at Rs 72.50 against the US$.
Bandhan Bank share price plunged in the opening session after the RBI on Friday barred Bandhan Bank from opening new branches. The lender said the restrictions put by the regulator on new branch opening will not hinder its growth and the management is trying its best to cut promoter holding to below 40%.
In the news from the banking sector. As per an article in a leading financial daily, the Board of Vijaya Bank has given its approval to a government proposal of consolidation with Bank of Baroda and Dena Bank.
The government had asked the Reserve Bank of India to prepare an action plan and a list of banks for consolidation, the government is going ahead in full swing with its plan to clean up the banking sector by converting them into a stronger and better-capitalized lender.
Earlier, Dena Bank, gave its approval to the merger of the three banks. The merged entity of Vijaya Bank, Dena Bank and Bank of Baroda will become the third largest lender in India after State Bank of India and HDFC Bank, the reports noted.
The government had proposed the three-way merger of Vijaya Bank, Bank of Baroda and Dena Bank on September 17.
After the announcement of merger of Bank of Baroda, Dena Bank and Vijaya Bank, the government has pipelined the merger of another three banks namely, Punjab National Bank, Oriental Bank and Andhra Bank.
Reportedly, the government is currently on discussion stage and the conditions are being analyzed to a pathway for the proposed merger of the banks. The government may proceed with the merger of Punjab National Bank, Oriental Bank and Andhra Bank by December this year.
Moving on to the news from the financial sector. infrastructure Leasing & Financial Services (IL&FS) has again defaulted on repaying loans. This time the amount in question is about Rs 2.7 billion, even as it received the shareholders' nod to raise up to Rs 150 billion through debentures.
Cash-strapped IL&FS on Sunday said that the company was unable to service its obligations on account of loans from banks and financial institutions of Rs 2.23 billion due on September 28 and Rs 470 million due on September 29.
Earlier, it could not service repayments due on September 18 and 14. Also, there was a delay in servicing some inter-corporate deposits, which resulted in the downgrading of the company.
Now the group flagship and holding company, IL&FS, and key group entities carry either the default 'D' grade or a sub-investment grade rating.
The shareholders approved the company's proposal to raise up to Rs 150 billion by issuing secured non-convertible debentures through a private placement. They also gave the nod to increase the borrowing limit from Rs 250 billion to Rs 350 billion.
The IL&FS group has a complicated structure, with the holding company owning stakes in its financial services arm as well as the subsidiaries that operate its infrastructure assets.
Further, a look at the shareholding pattern of IL&FS underlines the scale of the problem.
IL&FS - Too Big to Fail?
Two of India's biggest entities comprise of the top 5 shareholders in IL&FS. LIC has a 25.3% stake. HDFC Ltd owns 9%. Along with Central bank of India (7.7%) and State Bank of India (6.4%), these entities own almost half of IL&FS.
Adding all these stakeholders signifies how much is at stake on the revival of IL&FS.
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