WEEKLY FINANCIAL SNIPPETS- 15/09/2018

1. BANK CREDIT ROSE BY 13.49% AND DEPOSITS BY 8.9%: Bank credit grew by 13.49% in the fortnight ended August 31, 2018. The total bank credit as on 31 St August 2018 stood at Rs. 87,89,259 crore. The credit during the same period a year ago stood at Rs. 77,44,237 crore. In the fortnight ended 31 St August 2018, deposits grew by a mere 8.8% to Rs 116,45,870 crore from Rs. 106,96,099 crore in the same period last year. Loans to Agriculture and allied activities rose by 6.6% during the same period.
2. RAHURAM RAJAN CAUTIONS ON MSME LENDING: Mr. Raghuram Rajan, former governor of RBI has warned that the next build-up of Non-Performing Assets (NPAs) could be in the loans to Medium Small and Marginal Enterprises (MSMEs) under the credit guarantee schemes. Mr. Rajan said that the government should now concentrate on sources of the next crises and should refrain from setting ambitious targets. He said that credit targets were sometimes achieved by abandoning appropriate due-diligence, thereby creating the environment for future NPAs. Both Mudra and Kisan Credit cards have to be examined more closely for potential credit risk. He also pointed out that the Credit Guarantee Scheme for MSME (CGTMSE) run by SIDBI is a growing contingent liability and needs to be examined with urgency.
3. MUTUAL FUND ASSETS SURPASS Rs. 25 TRILLION: The assets managed by domestic Mutual Funds Industry have crossed the Rs 25 trillion mark at the end of August 2018, marking a year-on-year growth rate of 25%. Out of this, Rs. 4.6 trillion was added in the last one year. This feat has been achieved by the industry in 25 years after it was opened for private investors. The Industry now has aimed to achieve the next 25 trillion in five years.
4. GOVERNMENT MAY END EPFO REGULATORY: The government is considering relieving the Employees’ Provident Fund Organisation (EFPO) of its regulatory duties and plans to create a separate entity to handle such regulatory functions. The idea and rationale behind the proposal is to avoid conflict of interest as now the EFPO is India’s largest provident fund provider and as well a regulatory.
5. NOW PAY TAX ON PROVIDENT FUND WITHDRAWAL: Provident Fund withdrawal consists of principal portion and interest earned on it portion. The taxability of the two differs based on the time of withdrawal. If the withdrawal is made before 5 years of continuous service then the entire contribution made by the employer is taxable and the tax would be deducted if the amount exceeds Rs. 50,000/-. And if the deduction has been claimed under section 80C while making such investment over the tenure of the service, then the entire contribution will be taxed.
6. INDIANS ARE MORE ADHERED TO PERSONAL LOANS: According to RBI data, in May 2010, the total outstanding personal loan amount with banks was Rs. 5.89 lakh crore. This amount as on June 2018 was Rs. 19.33 lakh crore. Consumer durable loans as on May 2010 were Rs. 8,010 crore, and on June 2018 it was Rs. 20,300 crore. Outstanding credit cards amount as on May 2010 was Rs. 19,579 crore, and on June 2018 it was Rs 74,400 crore. Sine 2010 banks have changed their strategies and have started focussing on these un-secured loans. A large proportion of customers taking personal and consumer durable loans are working class in
the age group of 25-45 years.

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WEEKLY FINANCIAL SNIPPETS – 08/09/2018

1. BANKS WITH MORE THAN 10 BRANCHES TO HAVE INTERNAL OMBUDSMAN: The Reserve Bank of
India has instructed all the Scheduled Commercial Banks with more than 10 branches to appoint an
Internal Ombudsman (IO). Regional Rural Banks are excluded from this. The Internal Ombudsman
scheme is introduced by RBI to strengthen the internal grievances of the bank and to ensure that
the complaints of the customer are redressed at the earliest. The bank shall escalate all such
complaints which are not fully redressed to their respective IOs before conveying the final decision to
the complainant. The customer need not approach the IO directly.
2. RBI SLAPS Rs. 1 CRORE FINE ON SOME BANKS: Reserve Bank of India has imposed a fine of Rs 1 crore
each on Union Bank of India, Bank of Maharashtra and Bank of India. The penalty has been imposed
taking into account the delay on the part of the banks to detect and report fraud in an account. The
penalty has been imposed in exercise of powers vested in RBI under Banking Regulation Act.
3. PAYTM BUILDING NEW TECHNOLOGY TO CHECK “CREDIBILITY SCORE” OF BORROWER: Paytm is
evolving a mechanism to determine the “Credibility Score” of a person seeking loan from banks. The
company’s team in Toronto is actively working on a reliable system that can be relied upon by banks
to ascertain the credibility of a loan seeker. Paytm’s Toronto team is working on an algorithm based
on a person’s digital transactions to present a solution. If reliable system is evolved, it can predict with
sufficient accuracy about the capacity and willingness of an individual to repay his loan.
4. AIRTEL PAYMENTS BANK OFFERS CARD-LESS CASH WITHDRAWAL AT SELECT ATMs: Airtel Payments
Bank has tied up with Empays Payment systems to enable its savings account holders to withdraw
cash using their mobile phones through the card-less cash technology of Empays which is called
Instant Money Transfer (IMT). So now Airtel Payment Bank customers can make card-less cash
withdrawals at select ATMs across the country using IMT technology. IMT is the largest interoperable
card-less cash ATM network in the world, built and run by Empays Payment Systems India Pvt Ltd.
5. BANKS ASK RBI TO EASE ATM CASH MANAGEMENT RULES: Banks have approached RBI to relax rules
on how cash is carted to ATMs on the grounds that the revised rules are very hard to follow. Banks
were expected to put in place a host of measures from July 2018 with respect to cash movement.
These were aimed at preventing various kinds of frauds. In an attempt to prevent such frauds, the RBI
had come out with some stringent steps which included refilling ATMs using the “cassette-swap
method”, under which cash would be filled inside locked cassettes which would then be inserted in
ATMs by service providers.
6. TAX RETURNS FILED BEFORE DEADLINE SURGES BY 70%: With the government introducing fine for
delayed filing of income tax returns after 31 St august 2018, the number of I-T returns filed before
deadline touched to 5.42 crore which is 70% more than last year. Last year 3.17 returns were filed
before deadline. The improvement is on account of the gentle and sustained persuasion by the tax
department by way of SMS messages and Emails.
7. MONETARY LIMIT FOR FILING CASES IN DRT INCREASED TO Rs 20 LAKH: The government has
increased the monetary limit to Rs. 20 lakh for filing loan recovery application in the Debt Recovery
Tribunals (DRTs) by banks and financial institutions. As a result any bank or financial institution cannot
approach DRTs if the claim amount is less than Rs. 20 lakh. This amount is enhanced to help reduce
pendency.
8. IDEA-VODAFONE MERGER TO BECOME LARGEST TELECOM SUBSCRIBER: Vodafone India & Idea
Cellular announced completion of their merger, creating the country’s largest telecom subscriber with
a subscriber base of over 408 million, revenue market share of 32.2% and subscriber market share of
41.1%. The combined entity also has largest spectrum holding around 1850 MHz across bands.

WEEKLY FINANCIAL SNIPPETS – 01/09/2018

1. ICICI BANK REPORTS FIRST QUARTER LOSS: ICICI Bank reported a historic loss in the first quarter ended June 2018 due to the rise in its provisions. The bank reported a loss of Rs.120 crore as against a profit of Rs 2,049 crore during the same period last year. The provisions were more than doubled to 5,971 crore from 2,609 crore last year.

2. BANKS SERVING SUMMONS TO DEFAULTERS THROUGH WhatsApp AND EMAILS: Banks are using WhatsApp and Email to pin down those defaulters who slip through the banks grip when more traditional mode of correspondence is used. Banks are issuing court summons through WhatsApp and Email. This digital means of correspondence is being followed after a judgement earlier this year. A letter through post can get unduly delayed and addresses keep on changing but phone numbers and Email addresses can remain constant, making these digital modes of correspondence handier to the lenders. HDFC Bank has already issued 214 court summonses through WhatsApp and Email.

3. BANKS WILL HAVE TO STOP LENDING TO INFRA PROJECTS: State Bank of India has said that banks will have to stop lending to infrastructure projects, especially to Power sector because of the bad experiences of the past as most of the loans given in the last decade have turned bad. Due to the changes in Non-Performing Assets recognition after February 12, 2018 RBI circular, wherein RBI had given August 27TH as the deadline, as many as 30 power projects with accumulative exposure of Rs. 1.7 trillion ( Rs 1.7 lakh crore) are now facing bankruptcy proceedings. If the banks fail to resolve the issues within the next 15 days, then they will have to be sent to National Company Law Tribunal (NCLT).

4. UIDAI CRACKS DOWN ON BANKS MISSING TO MEET AADHAAR UPDATE DATA TARGET: The Unique Identification Authority of India (UIDAI) has withdrawn electronic Know-Your-Customer (KYC) facilities for 13 Indian Banks and many authentication agencies for failing to meet targets on enrolment and updating citizen information for its Aadhaar biometric database. For these banks, the suspension of electronic KYC facility means they will not be able to offer several financial services linked to the authentication facility.

5. IBA ASKS BANKS TO GET CYBER SECURITY INSURANCE: The Indian Banks Association (IBA) has asked member banks to buy Cyber Insurance covers in the wake of several incidents of digital attacks on banks. Such a policy has turned into a basic need for the banks now. While large banks have cyber insurance covers ranging from Rs. 350 to Rs. 500 crore, many of the smaller banks have not yet opted for the same. Usually these smaller banks have only the Banker’s Blanket Policy which does not cover cyber heists.

6. RBI MAY SOON DO AWAY WITH MCLR: The Reserve Bank of India, in its annual report of 2017-18 has indicated that it would review the Marginal Cost of Lending Rate (MCLR) guidelines. The review is imminent because MCLR system has not reflected the changes in interest rates. And moreover, World-wide the bank rates have moved to an external benchmark which leads to uniform pricing. From April 2018 onwards RBI has asked all banks to link all old loan interest rates to MCLR, which most of the banks are yet to implement.

7. INCOME TAX SCRUTINY TO GO ELECTRONIC: The Central Board of Direct Taxes (CBDT) has mandated “e-proceedings” for all income-tax scrutiny in 2018-19. E-proceeding refers to the communication of date and documents between the Income-Tax department and the assessees through electronic mode and where the assessments are done electronically. It has also specified situations where e-proceeding will not be mandatory.

WEEKLY FINANCIAL SNIPPETS-25/08/2018

1. RECORD INCOME TAX COLLECTION FOR FINANICIAL YEAR 2017-18: Income Tax collection for the financial year 2017-18 has touched new heights. The Income Tax collection for FY 2017-18 stood at 10.03 lakh crore with a record number of 6.92 crore I-T returns. During FY 2016-17 there were 5.61 crore IT Returns, a growth rate of almost 24%. The data show that net Direct Tax collections are 17.1% higher than the net collections for FY 2016-17.

 

2. WRONG REPORTING HIDES SMALL BUSINESS LOANS WORTH Rs 10 LAKH CRORE: According to a report by Boston Consulting Group (BCG) on behalf of IBA and FICCI, the size of Micro Small & Medium Enterprises (MSME) market is around 25 lakh crore. The report splits the borrowings by MSMEs into two categories—Rs 15 lakh crore availed in the name of the business entity and Rs 10 lakh crore in the name of the proprietor. This portion of Rs 10 lakh crore is mis-reported as personal advances made to their proprietors. These loans which are mostly financed by MNC Banks, Private Sector Banks and NBFC’s are sometimes backed by gold and property or sometimes clean loans as well depending on the credit history of the borrower. Most of the loans are availed in the name of the proprietor and family and then channelled to support the business needs.

 

3. NO ATM TO BE REPLENISHED WITH CASH AFTER 9 pm FROM NEXT YEAR: as per the directive of Home Ministry, no ATMs will be replenished with cash after 9 pm in urban areas and 6 pm in rural areas. In a notification, the Home Ministry said the new Standard Operating Procedures (SOPs) would come into effect from February 2019.

 

4. AFFORDABLE HOUSING RACING AHEAD IN REALITY SECTOR: With government allotting subsidies for economically weaker sections for low cost housing schemes, the developers have focussed more on affordable housing schemes. The total residential sales in low cost housing has gone up to 21% from just 8% three years ago. Affordable housing has become the fastest growing segment in Indian reality market with maximum new launches. One in every  five houses sold in India now costs less than Rs 25 lakhs.

 

5. BANKS SHARE IN MSME FINANCING REDUCING OVER THE YEARS: The share of credit financed by banks to Micro, Small & Medium Enterprises (MSMEs)  has declined since 2016. This share is being taken up by Non-Banking Financial Companies (NBFCs). The share of credit financed by NBFCs to MSMEs has nearly doubled to 10%. NBFCs with their rigorous marketing and increased risk taking capacity will continue to eat the market share from banks in future as well.

 

6. RBI ASKS RATING AGENCIES TO SCAN COMPANIES’ BANK ACCOUNT DETAILS: The Reserve Bank of India has directed rating firms to scan bank account details (capturing the flow of funds in and out of the Company) in assessing its capacity or ability to repay loans. There would be resistance from companies as most of the companies will be reluctant to part with such information. Such information is only shared with external agencies only when the banks or the regulatory body order a forensic audit. A rating agency, when it tracks such data on money flows could be in a position to identify possible diversion of funds through subsidiary shell companies.

 

7. TOP INDIAN TALENT RETURNING TO JOIN DOMESTIC INVESTMENT BANKS: The appeal of plum jobs at foreign banks is fading away as domestic outfits are becoming more attractive with the promise of expanding opportunities. More than three dozen top Indian executives have moved to domestic investment banks in the last one year. There is an increased inclination to work with domestic investment banks. Indian Investment banks have also stitched up strategic alliances with foreign groups to offer full service to its clients and hence the overall investment banking activity has improved in India over the last three years in terms of fees and revenue.

WEEKLY FINANCIAL SNIPPETS- 18/08/2018

1. SEBI MAY MAKE SUBMISSION OF NET WORTH STATEMENT COMPULSORY FOR RETAIL INVESTORS: On a recommendation by the committee on fair market conduct headed by former Law Secretary Mr. Vishwanathan, Securities and Exchange Board of India (SEBI) may soon ask retail investors to submit a Net-Worth statement to their brokers. The aim is to keep a check on Retail Investors’ trading limits. This is as per a news report by Business Line.

 

2. INDIRECT TAX BASE INCREASES BY 65% SINCE GST ROLL-OUT: Since the roll-out of GST in July 2017, the Indirect Tax base has expanded by 65% to 1.6 million in a year. Under the previous tax regime it was 7 million. The number of people filing Income Tax (Direct Tax)   has also increased to 67.50 million compared to 40 million in 2013-14, which is a rise of 68%.

 

3. FINANCE MINISTRY SEEKS A CLEAR DIVIDEND POLICY FROM RBI: The Finance Ministry has asked the Reserve Bank of India to review its dividend and capital conservation rules. The government wants a clear policy on the pay-outs it gets from RBI. These matters were discussed during a meeting between Finance Ministry officials and RBI Deputy Governors.

 

4. BANKS TO COME OUT OF PCA FRAMEWORK BY THIS YEAR END: Financial Services Secretary Mr. Rajiv Kumar has expressed that the banks would come out of Prompt Corrective Action (PCA) framework by the end of this fiscal. As many as 11 banks are under PCA. Of these, Dena Bank and Allahabad Bank are facing restriction on expansion of business. Noting that Public Sector banks are growth engines, Mr. Kumar said that Banks have made a recovery of Rs 36,551 of bad loans during the first quarter, registering a growth of 49% over the last fiscal.

 

5. COSMOS BANK’S SERVER HACKED, Rs.94 CRORE SIPHONED OFF IN 2 DAYS: Hackers managed to siphon off over Rs.94 crore through a malware attack on the server of Pune-based Cosmos Bank by cloning thousands of bank’s ATM cards over a period of two days. In two days around 91 crores were withdrawn from various ATMs in 28 countries and another Rs.2.5 crore were taken out in India.

 

6. RBI LENS ON 200 BAD-LOAN ACCOUNTS: The Reserve bank of India has started examining about 200 bad-loan accounts from as far as 2011 onwards as part of its annual inspection of bank books to rule out any nasty surprises in bankruptcy court or subsequent to debt resolution. These include the accounts of Videocon, Essar Steel, ABG Shipyard, Bhushan Steel etc. RBI is looking at repayment history, classifications, provisions and debt restructuring among other things to ensure that all procedures were correctly followed.

 

7. 88% OF RURAL HOUSEHOLDS HAVE SAVINGS ACCOUNTS: As per a survey conducted by NABARD, The Financial Inclusion drive has resulted in increasing of bank accounts in rural areas with 88% of rural households having savings accounts. Incidence of Indebtedness (IOI), which is a proportion of households having outstanding debt on the date of the survey, was 52.5% and 42.8% for agricultural and non-agricultural households respectively. Similarly about 26% of agricultural households and 25% of non-agricultural households were found to have been covered under insurance. 20.1% agricultural households and 18.9% of non-agricultural households have subscribed to pension schemes.

WEEKLY FINANCIAL SNIPPETS-11/08/2018

1. SBI POSTS Rs. 4,876 CRORE LOSS IN THE FIRST QUARTER OF FY’18-19: State Bank of India has reported net loss of Rs. 4,876 crore for the quarter ended June 2018. This is due to fresh slippage of Rs. 26,249 crore in the Non-Performing Asset (NPA) category for which the bank had to keep provisions. The profits were also hit by large depreciation in the value of its bond portfolio following an increase in interest rates.

 

2. BANKS COLLECTED Rs. 5,000 CRORE FROM CUSTOMERS FOR NOT MAINTAINING MINIMUM BALANCE IN FY’ 17-18: As many as 21 Public Sector Banks and 3 private banks collected around Rs. 5,000 crore as penalties from customers’ for not maintain minimum balance in their accounts in 2017-18. State Bank of India, who suffered a staggering net loss in this period, was the highest grosser in penalising its customers.

 

3. OVER 2,00,000 “NON-FILERS” FILED ITR IN FY’18 : As many as 2,00,000 “non-filers” have filed their Income Tax Returns in last fiscal. I-T department had issued notices to 3,04.000 individuals who had deposited cash of more than Rs 1 million in their respective accounts post demonetization but had not filed returns before the due date. As a result returns were filed by 2,09,000 persons and have paid self-assessment tax of Rs 64.16 billion. This was told by Minister of State for Finance Mr. Shiv Pratap Shukla in Rajya Sabha.

 

4. RBI CANCELS LICENCES OF 368 NBFCs IN 2018: The Reserve Bank of India has cancelled licences of 368 Non-Banking Financial Companies (NBFCs) in six months ended June 20018 for failing to meet regulatory norms. The move is being seen as an attempt to clean up the sector, which has more than 11,402 NBFCs of which 222 are non-deposit taking NBFCs. Industry experts say that majority of the licences thus cancelled belong to NBFCs which had failed to meet RBI’s requirement of net owned fund of Rs. 2 crore.

 

5. PNB IN TALKS WITH GOVERNMENT DEPARTMENTS TO SELL ITS HQ: Punjab National Bank (PNB) is in negotiation with a few of government departments, including Income tax and central excise, to sell its headquarters situated  at Bhikaji  Cama Place in New Delhi. The bank is going for second round of valuation of the property due to high demand. The bank expects to raise nearly Rs. 700-800 crore from the sale of its earlier head office in New Delhi. The bank has set a target of Rs.8,600 crore from sale of its non-core assets in FY 18-19.

 

6. SBI LAUNCHES “MOPAD”: State Bank of India has launched a payments machine called “MOPAD” (Multi Option Payment Acceptance Device) that would help merchants eliminate the multiple choices that they keep to facilitate transactions from cards to QR code based payments. MOPAD is a Point Of Sale (POS) terminal that would accept payments from cards, UPI, Bharat QR, and SBI Buddy wallet which till now required different modes of tools to receive payments.

 

7. RBI DECLARES Rs. 50,000 CRORE DEVIDEND FOR 2017-18: The Reserve Bank of India (RBI) has announced the transfer of Rs. 50,000 crore to the centre from its 2017-18 surplus. The amount included Rs. 10,000 crore transferred as an interim dividend to aid the Centre’s efforts to control the FY18 fiscal deficit.

 

 

8. 10 PSU BANKS WILL BE HEADLESS BY THIS MONTH END: Seven Public Sector banks are already functioning without their Chiefs and the term of three more bank CEOs will end this month end, making it 10 banks without CEOs. This has created a huge void in state-run banks, that too at this time when most of the banks are grappling with bad loans and are in a bad shape.

WEEKLY FINANCIAL SNIPPETS- 04/08/2018

1. INCOME TAX RETURN FILING DEADLINE EXTENDED TO AUGUST 31: The Finance Ministry has announced the extension of Income Tax Return (ITR) filing deadline by a month to August 31^ST Until last assessment year there was no penalty for delayed filing of ITR. But from Assessment Year 2018-19 there is a penalty of Rs 5,000/- for delayed filing of ITR till December 2018 and thereafter Rs 10,000/- If Total Income is less than Rs.5 lakhs then the penalty is Rs.1,000/- only.

 

2. MULTI YEAR THIRD PARTY INSURANCE FOR VEHICLES: Last week Supreme Court gave a decision to have mandatory multi years third party insurance of two years for cars and five-years for two wheelers. This may lead to inflation adjusted pricing due to which consumers may have to shell out at least 10-12% more for their multi-year third party motor insurance.

 

3. RBI RAISES REPO RATE BY 25 BASIS POINTS: The Reserve bank of India has raised the repo rate by 25 basis points (bps) to 6.5%. The bank lending rates may be hiked because of this in future. This is the second hike by RBI during this financial year. Loan rates have been going up for the past few months as banks are looking to protect their margins. With deposits growing up steadily there is a need for banks to increase the deposit interest rates as well.

 

4. INDIA POST PAYMENTS BANK TO START OPERATIONS SOON WITH 650 BRANCHES: India Post Payments Bank (IPPB) is expected to go live with 650 branches across India with around 17 crore accounts by August 2018. RBI has given its approval to IPPB after testing its entire system. The final approval for the launch is pending before RBI. IPPB is the third entity to receive payments bank permit after Airtel and Paytm.

 

5. PUBLIC SECTOR BANKS PLAN TO LINK PAY WITH PERFORMANCE: Senior Management staff of Public Sector Banks (PSBs) may now have to perform to earn more. In a first of its kind move for PSBs, SBI, Punjab National bank and Bank of Baroda are planning to introduce performance-linked pay. It will have a component of fixed and variable pay. But this will take time to evolve. Performance-linked pay is widely used in private sector to reward the better performers in the organisation.

 

6. RBI INSTRUCTS PAYTM PAYMENTS BANK TO STOP OPENING FRESH ACCOUNTS: The Reserve Bank of India has instructed Paytm Payments Bank (PPB) to stop opening fresh accounts till all the concerns it has raised against the PPB are solved. Firstly RBI has asked PPB to go for a physical verification of Know-Your-Customer (KYC) process instead of e-KYC for adding new customers. RBI is also not in agreement with the close relations between PPB and Paytm’s parent body One97 Communications, which has been giving away cash backs and other promotional offers to PPB  account holders.

 

7. ICICI BANK WARNS OF RISK TO REPUTATION IN REPORT TO SEC: ICICI bank has warned its domestic and international shareholders that the bank faces reputation risk and regulatory action. It has highlighted the on-going investigations into the allegations relating to its CEO Ms Chanda Kochar as risk factor. The bank has filed its Annual Report both for Indian and international investors. The balance sheet was filed with the Securities Exchange Commission (SEC) to comply with the listing requirements for bank’s American depository receipts (ADRs).

WEEKLY FINANCIAL SNIPPETS- 28/07/2018

1. SEBI PROPOSES FRAMEWORK ON 25% BORROWING VIA CORPORATE BONDS FOR LARGE COMPANIES: With a view to deepen the corporate bonds market to make it more vibrant and liquid and to reduce the reliance of big corporates on banks for financing, Security Exchange Board of India (SEBI) has come out with a proposal that will require Large Corporates to raise 25% of their borrowings through corporate bond market from next fiscal. If implemented this will come in force from 1^ST April 2019.

 

2. PRIVATE BANKS SHOWING INTEREST IN FUNDING HIGHWAY PROJECTS UNDER PPP MODE: Private Banks including HDFC, have shown interest in funding highway projects in Public Private Partnership (PPP) mode. Road Transport & Highways Minister Mr. Nitin Gadkari has informed the Lok Sabha that private Banks have assured funding to the tune of 1.30 lakh crore for highway construction.

 

3. AMENDMENT IN PREVENTION OF CORRUPTION ACT WILL ENCOURAGE BONAFIDE DECISION MAKING IN BANKS: Bankers who are presently living under the fear of investigative agencies for foisting cases even where a bonafide decisions go wrong, are a lot relieved with both the houses of Parliament passing certain amendments to the Prevention of Corruption Act that provides a shield against random arrests by the police. Now it is mandatory for the police to seek prior permission from a relevant authority before initiating prosecution against government officials, including bankers.  Further a case has to be closed within 4 years. According to Mr Rajnish Kumar, CMD SBI, this will have a very positive impact on decision making among bankers.

 

4. GOVERNMENT ASKS RBI TO SUGGEST ON PSU BANK MERGER: The government has asked the RBI to examine the possibility of merger among public sector banks to achieve synergy and increase scale of But it has not set any timeline for merger of PSU banks. With a view to facilitate consolidation among PSU banks to create strong and competitive entities, serving as catalysts for growth with improved risk profile of the bank, the government has put in place an Alternative Mechanism (AM) comprised of three Ministers. The proposals received from banks for in-principle approval to formulate schemes of amalgamation shall be placed before the institution although there is no proposal for consideration yet.

 

5. TOP STATE-RUN BANKS SIGN INTER-CREDITOR AGREEMENT: More than a dozen lenders led by State Bank of India have signed the Inter-creditor agreement (ICA), potentially paving the way for speedy resolution of stressed assets. No Foreign Bank or any private Bank has signed the agreement yet. An Inter-creditor agreement is an agreement signed amongst the bankers which stipulates how their competing interests are resolved and how to work in tandem in service to their mutual borrower. The objective is to use this ICA for faster facilitation of resolution of stressed assets.

 

6. BANK OF BARODA SETS UP “WAR ROOM LAWYER TEAM” FOR BAD LOAN RECOVERY: Bank of Baroda has set up a dedicated team of lawyers which is named as ‘War Room Lawyer Team” to speed up recovery of bad loans that get embroiled in litigation. The bank has 380 high-value bad loan accounts with a total outstanding of about Rs 15,000 crore. Such recovery measures are expected to reap benefits to the bank and bring back the bank’s profits.

 

7. 25% ATMs OF PUBLIC SECTOR BANKS MAY BE VULNERABLE TO FRAUD: The government has indicated that nearly 25% of the ATMs run by public sector banks  may be vulnerable to frauds as 74% of the cash dispensers are running on outdated software and they lack basic security features. The government however did not disclose details of such ATMs that were run by private sector banks.

 

8. RBI TO ISSUE NEW Rs. 100 NOTES : The Reserve Bank of India will shortly issue new Rs.100 denomination notes in Mahatma Gandhi series. The base colour of the note will be lavender. The note has other designs as well aligning with the overall colour scheme on both sides.

WEEKLY FINANCIAL SNIPPETS – 14/07/2018

1. RBI’S NEW CASH MANAGEMENT NORMS HIKE BANKS’ COSTS: With Reserve Bank of India’s new standards for cash logistics companies starting from July 6^th 2018, some banks are raising the issue of higher costs and demanding higher inter-bank payments for use of ATMs. As per the new norms, banks must ensure that service providers and their sub-contractors they engage, must have a net worth of at least Rs. 100 crore. In case of existing contracts the bank must ensure that the net worth criteria is met by March 2019. The cash logistic companies must have a fleet size of minimum 300 specifically fabricated cash vans and these vans should be equipped with GPS, tubeless tyres, emergency hooters and CCTV covering.

 

2. IMPS FUND TRANSFER DOUBLES IN THE FIRST QUARTER OF FY’ 19: IMPS (Immediate Money Transfer) offers instant round-the-clock interbank electronic funds transfer service that can be accessed through multiple channels like mobile, internet, SMS.  Transfer of funds through IMPS crossed a whopping Rs. 3.23 lakh crore in April-June quarter of 2018-19 financial year. The figure stood at 1.17 lakh crore during the same period in the last fiscal. The number of transactions through IMPS crossed 10 crore mark in March 2018 and touched a high of 12.04 crore in June 2018.

 

3. PUBLIC SECTOR BANKS MAY NEED Rs. 1.3 LAKH CRORE FOR LOAN RECAST PLAN: The committee on Stressed Assets has estimated that public sector banks will need around Rs. 1.30 lakh Crore over a period of two years to deal with resolution of stressed loans , including funding of the proposed Asset Management Company  and the stressed asset fund. The capital requirement may be over and above the additional funds that banks would need to set aside for potential losses from loans that are classified as Non-Performing Assets during the two year period. While the government is set to provide Rs. 65,000 crore, the remaining amount will come through the sale of non-core assets, internal accruals and planned equity raising.

 

4. PUNJAB NATIONAL BANK MAY POST NATION’S BIGGEST BANK PROFIT IN QUARTER 2 OF FY 2018-19: Punjab National Bank that saw its earnings wiped out by an unprecedented fraud, aims to report the nation’s biggest bank profit in the second quarter ending September 2018. This may materialise through sale of assets and recovery of bad loans. Much of its earnings will come from a planned sale of PNB’s stake in its housing finance unit.

 

5. FITCH WARNS AGAINST AUTO-LOAN DELINQUENCIES: Rating agency Fitch has warned against fresh auto-loan delinquencies if fuel prices continue to rise. It said that high petrol and diesel prices could strain India’s commercial vehicle operators and lead to a rise in auto-loan delinquencies. Freight rates have so far not kept pace with the fuel price increase and this would bleed the commercial vehicle operators.

 

6. RBI MAKES IT MANDATORY TO MENTION BUYER’S NAME ON DEMAND DRAFT: Reserve Bank of India has decided to make it mandatory to mention the buyer’s name in the demand draft at a bank branch. This is one of the measures taken by RBI to make banking instruments safe and stronger.

 

7. GROSS NPAs OF PSBs STOOD AT 14.5% AT THE END OF FY 18: The Gross Non-Performing Assets (GNPAs) have continued to rise. The bad loans have surged to a staggering 11.6% of the total advances at the end of FY 2018, up from 9.6% in FY 2017. Public Sector Banks are badly hit by this bad loan scenario with 14.5% of their loans turning bad at the end of FY 2018.

WEEKLY FINANCIAL SNIPPETS – 07/07/2018

1. PROJECT SASHAKT”—BANKS GIVE SHAPE TO INTER-CREDITOR PACT FOR BAD DEBTS: Banks have finalised an inter-creditor agreement and are working on details of an Asset Management Company as part of Five-pronged mechanism they have identified to resolve the mounting issue of Non-Performing Assets under “ Project-Sashakt”. Under “Project Sashakt”, financial institutions will enter into an inter-creditor agreement to authorise the lead bank to implement a resolution within 180 days. The agreement is the base for the Bank-Led Resolution Approach (BLRA) for loans between Rs. 50 – 500 crores. The inter-creditor agreement will be a legal document and enforceable in any court of law.

 

2. RBI REGULATIONS ON AUDITORS PUT BANKS IN A SPOT: Reserve Bank of India has come out with a framework for statutory auditors and has issued certain regulations around auditors and in case of errant auditors, they can be barred from auditing. Now several banks and NBFCs have approached PwC and other big audit firms seeking clarity on likely implications of a clause that could bar audit firms accused of irregularities from servicing financial institutions.

 

3. SBI CARD LAUNCHES ARTIFICIAL INTELLIGENCE POWERED VIRTUAL ASSISTANT ELECTRONIC LIVE ASSISTANT: SBI cards, the country’s second largest credit card issuer has announced the launch of “ELA” (Electronic Live Assistant), a virtual assistant for customer support and services. Driven by Artificial intelligence and Machine Learning, ELA is designed to enhance customer experience by providing relevant and instant responses to customer queries.

 

4. RBI GRANTS LICENCE TO BANK OF CHINA TO SET UP BRANCHES IN INDIA: The Reserve Bank of India has issued licence to Bank of China to launch operations in India. Bank of China is one of the very few state owned commercial banks in China. India and China are focussing on expanding their economic ties notwithstanding differences on several sticky issues.

 

5. UNSECURED BANK LOANS RISE FOUR –TIMES IN LAST THREE YEARS: Banks’ unsecured loan book has grown four times in the bank credit during the past three years, helped by a rise in discretionary spending, technology-driven disbursements and lower interest rates. Between 2015 and 2018, unsecured credit, comprising of personal, MSME and credit card loans have grown on a compounded annual growth rate of nearly 27% which is almost four times growth in bank credit.

 

6. PSU BANKS TO SET UP AMCs FOR LOAN RESOLUTION: Public Sector Banks will take lead in setting up an Asset Management Company (AMC) for resolution of loans above Rs. 500 crore as part of further efforts aimed at rescuing bad assets and restoring lenders to health so that they can focus on further credit growth to push forward India’s ongoing economic recovery. The initiative will be run by the banks without any government support, will be in harmony with all current laws and will function as an additional supporting element to the Insolvency and Bankruptcy Code (IBC) process.

 

7. COMPANY DIRECTORS’ TO FURNISH PERSONAL NUMBERS FOR VERIFICATION: In a significant move, the Corporate Affairs Ministry has decided to carry out KYC (Know Your Customer) process for all Directors of a Company, including those who have been disqualified. The Directors will have to share their personal mobile numbers and E-mail ids with the government as part of verifying their credentials, amid continuing efforts to weed out shell companies.