WEEKLY FINANCIAL SNIPPETS 16/06/2018

1. GOVERNMENT PLANS TO FORM A LARGE PUBLIC SECTOR ASSET RECONSTRUCION COMPANY: The government is planning to set up a large Public Sector Asset Reconstruction Company (ARC), sort of a big Bad Bank. The government wants to fast track the resolution of stressed assets in the banking system. This way it can set right the PSBs’ impaired capacity  to ease credit flows,especially to Medium & Small Enterprises. A committee under Sunil Mehta, Non-Executive Chairman of PNB has been asked by the government to appraise on this issue.

 

2. 90,000 NON-FILERS ON TAX RADAR: More than 90,000 persons who had deposited Rs. 10 lakh or more in their bank accounts during demonetization period are on the radar of Income-Tax department for not filing tax returns by March 31, 2018. Department had served notices to nearly 3 lakh persons who had deposited Rs. 10 lakh or more during the said period and of these nearly 2.1 lakh persons filed their returns by March 31, 2018. The rest will now face action.

 

3. RESERVE BANK OF INDIA ISSUES GUIDELINES ON LOAN SYSTEM FOR DELIVERY OF BANK CREDIT: The Reserve bank of India has issues guidelines on loan system for delivery of bank credit. According to this, the borrowers who have a total working capital limits of Rs. 150 crores and above should have at least 40% of it as  Term Loan component FROM Ocober1, 2018. The same will be revised to 60% from April 1, 2019. This is a move to instil discipline among large borrowers with working capital limits.

 

4. GOVERNMENT TO SET UP NBFC FOR FOOD COMPANIES: The government is planning to set up a Non-Banking Finance Company (NBFC) dedicated for funding food processing industry. This NBFC will exclusively fund food processing projects. This would be named as Agro Processing Financial Institute. It will be a lending institution driven by private sector, where government will have a stake. The government will have 20% stake and soon will issue a Request For Proposal (RFP), inviting both private and foreign sector financial firms to hold the residual stake.

 

5. PSU BANKS’ NPA WRITE-OFFS SURGE TO 140% OVER THEIR LOSSES IN FY-18: Public Sector Banks          (PSBs) have written-off Non-Performing assets (NPAs) worth Rs. 1.2 Trillion, ( Rs 1, 20,000 Crores), an amount that is nearly 1.5 times more than their total losses posted in 2017-18. This is the first time that banks have made huge writ-offs on bad loans. A write-off means the bank has made 100% provision from its earnings against the loss asset and this loss asset (NPA) is no longer a part of bank’s balance sheet.

 

6. BANKS MAY ASK BIG BORROWERS FOR MORE PROOF BEFORE SANCTIONING LOANS: The government may ask state-run banks to run a re-check on big borrowers with Corporate Affairs Ministry or Registrar of Companies (ROC) before sanctioning high value consortium loans. The idea is to find out if the borrower has any associated shell companies, get a fix on subsidiaries with direct or indirect beneficiaries and to determine whether there are any red flags against the prospective borrower. This follows the fraud and diversion of funds being uncovered at present,where in most of the cases it was found that the loans from banks were diverted to shell companies. State owned banks may also seek such information on their own for smaller value loans if they want a higher degree of comfort.

 

7. RBI MUST ACT AS AN ALERT INSPECTOR, NOT JUST OFF-SITE SURVEYOR: Reserve Bank of India Union has requested Governor Mr. Urjit Patel to monitor banks through a combination of risk-based supervision, off-site surveillance and on-site inspections of operational systems. In a written letter to the Governor, the union has suggested that the RBI should undertake random supervision of bank branches in all parts of the country periodically, possibly 10% of bank branches comprising all regions on an annual basis which will give the best result.

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WEEKLY FINANCIAL SNIPPETS- 09/06/2018

1. BANKS’ BAD LOANS CROSS Rs. 10 LAKH CRORE: Indian Banks’ Gross Non-Performing Assets
(NPAs) stood at Rs. 10.25 lakh Crore as on 31/03/2018. As on 31/12/2017 the bad loans were
Rs. 8.86 lakh Crore. That means in the last quarter of FY 2018 the pile has grown by Rs. 1.39
Lakh crore or 16% jump from December quarter which is really alarming. A break-up of NPAs
shows that 21 Public Sector Banks (PSBs) have a Gross NPA of Rs 8.97 lakh crore and that of 18
private sector banks stood at Rs 1.28 lakh crore as on 31/03/2018.
2. AFFORDABLE HOME LOANS A WORRY FOR RBI: Reserve Bank of India has said that it is closely
monitoring the small Housing loan segment of up to Rs. 2.00 lakh and after careful analysis of
the said data, it has been observed that the level of NPAs (Bad loans) for ticket size of up to Rs.
2.00 lakh is very high and has been rising briskly. Reserve Bank has warned all banks that it will
be constrained to make small ticket housing loans more expensive under the affordable housing
scheme and force borrowers to pay up more money if banks don’t tighten the standards and
address the rising bad loan scenario in this segment.

3. CO-OPERATIVE BANKS COULD BECOME SMALL FIANANCE BANKS: Reserve Bank of India has
opened the doors for Urban Co-operative Banks (UCBs) to convert into Small Finance Banks
giving them more freedom and access to open branches pan India and thus opening up a larger
market for these lenders which at present are of local nature. The details of the scheme will be
announced separately.

4. CAPITAL FIRST’S MERGER WITH IDFC BANK GETS RBI NOD: Reserve Bank of India has issued a
No Objection Certificate for the merger of IDFC Bank and Capital First. Now IDFC Bank has to
approach the shareholders and creditors of the merged companies. A clearance from NCLT is
also required to clear the way for both the entities to merge. Capital First Home Finance and
Capital First Securities will also merge with IDFC bank.

5. TROUBLED MSMEs GET A BREATHER FROM RBI: In a relief to Micro, Small & Medium
Enterprises (MSMEs) affected by the rollout of GST, RBI has given them a temporary breather
by allowing them to delay their loan repayments by 180 days without being classified as NPA.
This facility will be available to all MSMEs with aggregate credit limits of up to Rs. 25 crore,
irrespective of whether they are registered under GST or not. Accordingly, eligible MSME
accounts, which were standard as on 31/08/2017 shall continue to be standard asset if
payments due as on 01/09/2017, and falling due thereafter up to 31/12/2017 were paid not
later than 180 days from their original due date.

6. PSBs’ FY18 LOSSES HAVE WIPED OUT GOVERNMENT’S $ 13 BILLION INFUSIONS: Losses by
state run banks have entirely wiped out $ 13 billion ( Rs 87,100 Crores) capital infusion by the
government and the situation is not likely to improve in the current fiscal as well. Rating agency
Fitch has said that the big losses will pressure the banks viability rating.

7. BANKS PLAN TO SELL Rs. 28,000 CRORE NPAs: Seven banks including the big brothers like SBI
and ICICI Bank are in the process of selling their bad loan portfolio totalling to Rs. 28,000 crore
to asset reconstruction companies in the coming weeks without waiting for the resolutions. SBI
and ICICI bank have already disclosed their list of assets that would be put on sale and other
banks are in final stages. The largest share is that of IDBI bank which has identified 30 accounts
with Rs. 21,399 crore. SBI has identified 12 accounts worth Rs. 1,325 crore while ICICI bank has
identified 16 accounts amounting to Rs. 2,330 crore.

8. AXIS BANK LAUNCHES NEW CHAT BOT SERVICE: Axis bank has launched a virtual assistant for
its customers armed with artificial intelligence and machine learning algorithms and named it
“AXIS AHA” The chatbot is designed to provide relevant contextual responses to customer
queries and even help them make transactions on the chat window itself.

WEEKLY FINANCIAL SNIPPETS- 02/06/2018

1. INDIA’S STRESSED AND DEBT-LADEN BANKS GET CHEAP OVERSEAS LOANS: Indian Banks are getting syndicated loans at a very low interest rate from international lenders. Indian banks will have cleaner balance sheets and stronger credit portfolios in the long run as a result of RBI’s multi-year push to recognise bad assets (Non-Performing assets) more accurately in Indian banking system. Axis Bank, State Bank of India and IndusInd Bank Ltd are some of the banks which are getting cheaper funds in international market as confidence in World’s fastest growing economy increases.

 

2. GOVERNMENT LOOKS AT WAYS TO APPOINT TOP OFFICIALS AT ALLAHABAD BANK AND PNB: The government is exploring ways to appoint top executives in Allahabad Bank and Punjab National Bank (PNB) after existing executives were divested of their official charge, pending investigations in to Nirav Modi fraud case. The managing Director of Allahabad Bank along with two Executive Directors of PNB was divested of all powers recently. Since these executives have not been removed from the service but have been just divested from their official powers, it is technically not possible for the government to appoint fresh MD and ED for the said posts. The government is looking at all options including the removal under the Banking Regulation Act.

 

3. UIDAI GIVES BREATHER TO BANKS: Unique Identification Authority of India (UIDAI) had instructed each of the Indian Banks to ensure that 10% of their branches to have Aadhaar enrolment centres and these centres had to meet the target of 16 daily enrolments or updation. As per the new circular, the stipulated bank branches with Aadhaar facility will have to ensure at least 8 enrolments or updation each day from July 1, 2018. These targets will then be raised to 12 per day from October 1, 2018 and to 16 per day from January 1, 2019 onwards.

 

4. NPA LADEN UNITED BANK OF INDIA TO CAP LOANS TO A SINGLE BORROWER: Kolkata based United Bank of India (UBI), which has a gross Non-Performing assets (NPA) ratio of 24.1% will cap corporate loans to a single borrower at Rs. 150 crore. Because of the deteriorating asset quality, the bank has allowed its corporate loan book to shrink by around to 6,000 crore during FY 2017-18. The share of corporate loans in the bank’s total assets is at 28% now. It will be brought down to 25% in this fiscal.

 

5. GOVERNMENT MAY ASK LARGE BANKS TO BUY SMALL BANKS’ RISKIER LOANS: The government may ask loss-making public sector banks to sell their riskier loans to their larger peers, such as SBI so as to reduce the capital requirement of public sector banks that have been hit hard by the latest norms of RBI on provisioning for bad debts. Riskier loans are those loans given to companies with weak finance. This is because the government has ruled out further fund infusion beyond Rs. 65,000 crore that was announced as part of the Rs. 2.1 lakh crore re-capitalisation plans. Further, these lenders are being pursued to aggressively sell non-core holdings including stake in mutual funds and insurance arms.

 

6. 37 BANKS SEE Rs. 1.3 TRILLION JUMP IN GROSS NPA IN QUARTER 4: Weighed down by RBI’s new rules on restructured assets, domestic banks ( both public and private) have added over 1.3 trillion in gross Non-Performing Assets (NPAs) in the fourth quarter ended March 2018. Provisions and contingencies set aside for these NPAs also rose to Rs. 1.4 trillion in the same period.

 

7. MHA LAUNCHES ONLINE ANALYTICAL TOOL TO MONITOR FOREIGN FUNDING OF NGOs:Ministry of Home Affairs (MHA) has launched a new online analytical tool tofacilitate closer monitoring of the flow and utilisation of foreign contributions received by NGOs and other organisations registered under Foreign Contribution (Regulation) Act 2010 (FCRA).There are hundreds and thousands of transactions annually which can be monitored effectively through this tool. This will help the government to regulate the acceptance and utilisation of foreign contributions by these NGOs.

WEEKLY FINANCIAL SNIPPETS-26/05/2018

1. GOVERNMENT BEGINS WORK ON MERGERS OF INSURANCE COMPANIES: The Finance Ministry has started the process for appointing a consultant to take forward the merger of three general insurance companies – National Insurance Company, United India Insurance Company and Oriental India Insurance. The consultants thus appointed will prepare a road map and then the government will invite bids. But merger and listing would not be possible in this fiscal as mergers of such huge scales take a long time.
2. INDIA NOW IS THE SIXTH WEALTHIEST COUNTRY IN THE WORLD: According to a report by Afr-Asia Bank Global wealth Migration Review, India is the sixth wealthiest country in the World with a total wealth of $ 8,230 billion. United States of America is the wealthiest country in the world with a total wealth of $ 62,584 billion. China stood second with $ 24,803 billion and Japan was at the third position with $ 19,522 billion. Other countries in the top 10 wealthiest list include United Kingdom, Germany, Australia, Canada France and Italy.
3. FINANCE MINISTRY TIES UP WITH 40 ENTITIES TO EXTEND MUDRA FUNDING: The Finance Ministry has announced that it has tied up with 40 entities including Flipkart, Swiggy, Patanjali, Make My trip, Zomato Meru cab, Muthoot, Edelweiss, Amazon, Ola, Big Basket and Amul etc, for extending loans to small entrepreneurs under Mudra Scheme. Under the scheme these companies will identify small entrepreneurs who need loans and underwrite them and will extend loans to them under the Mudra Scheme.
4. OVER 2,100 COMPANIES SETTLE Rs 83,000 CRORE BANK DUES: The fear of losing control over their companies and assets has prompted promoters, who have defaulted on repayment of loans to banks, to settle their dues of around Rs. 83,000 crores involving around 2,100 companies before action was initiated under the newly enacted Insolvency &Bankruptcy Code ( IBC).
5. HDFC BANK ACHIEVES Rs. 1,000 CRORE THROUGH DIGITAL LENDING: HDFC Bank has clocked Rs. 1,000 crore per month through digital platforms across products and expects it to go up further with its launch of an online platform for loan against mutual funds. The bank has launched this new product offering loan against mutual funds in association with CAMS, which controls 65% of market share. The bank has an approved credit limit of Rs. 10,000 crore on loans against mutual funds and insurance policies. The digital alternative will reduce the time taken to pass the loan to just three minutes as against the current the current time of up to 6 days.
6. DIRECT TAX COLLECTION FOR FY 2017-18 SEES 19.3% GROWTH: The government’s direct tax collection has gone up by 19.3% to 6.95 lakh crore. Net Direct tax collected so far represents 69.2% of the total revised direct taxes. Gross collections (before adjusting for refunds) have increased by 13.3% to Rs 8.21 lakh crore during April 2017 to January 2018.
7. SBI REPORTS RECORD LOSS OF Rs. 7,718 CRORE IN MARCH QUARTER: State Bank of India reported a loss of Rs. 7,718 crore ($ 1.1 billion) in January-March quarter of FY 2017-18. This is because of the provisions made for bad loans after a change in banking regulations. SBI had posted a loss of Rs. 2,416 in December quarter.
8. INTEREST ON PROVIDENT FUND FIXED AT 8.55% FOR 2017-18: The government has fixed 8.55% as the rate of interest for PF accounts for 017-18, the lowest rate since 2012-13 fiscal. Around 5 crore PF account holders will be affected by this. The Employees’ Provident Fund Organisation (EPFO) had provided 8.65% interest for 2016-17, 8.8% in 2015-16 and 8.75% each in 2013-14 and 2014-15. In 2012-13 it was 8.5% , thus at 8.55% for 2017-18, it is the lowest since FY 2012-13.

WEEKLY FINANCIAL SNIPPETS – 18/05/2018

1. PNB POSTS BIGGEST EVER QUARTERLY LOSS: Punjab National Bank (PNB) reported Rs 13,416 crore loss in the fourth quarter of 2017-18 as against a profit of Rs 262 crore in the same period last year. As a result of this, PNB posted a consolidated net loss of Rs 12,282.82 crores against a profit of Rs 1.324 crores last year. The significant reason for this huge loss was the rise in provisions to Rs. 20,353.51 crore in quarter ended March 2018. PNB’s Non-Performing Assets grew to a whopping 86,620 crore in the quarter and the gross NPA ratio rose to 18.38%.

 

2. RBI ISSUES FINAL NORMS ON NET STABLE FUNDING RATIO (NSFR): RBI has issued final guidelines on Net Stable Funding Ratio (NSFR). The concept of NSFR emerged in the aftermath of global financial crisis proposed by Basel Committee on Banking Supervision to make banks more resilient. NSFR ensures banks have sufficient stable sources of funding to finance their activities over long run. The ratio can be defined as the amount of available stable funding (ASF) in relation to the amount of required stable funding (RSF). ASF is the portion of capital and liabilities expected to be realisable over a year.

 

3. SBI CARD BASE GROWS 20% IN 6 MONTHS: SBI card has been increasing its card numbers at a compounded annual growth rate of 40%. Small cities are driving the growth rate for SBI Card. It took SBI cards one year to increase the card base from 4 million in September 2016 to 5 million in September 2017. But since then, the card base has grown to 6.3 million in March 2018, an increase of 1.3 million cards in 6 months. The market share of SBI cards in number of cards is now 16%.

 

4. COMBINED FOURTH QUARTER LOSS OF 4 PSU BANKS IS $1.74 BILLION: Four Public Sector Banks reported huge losses in the fourth quarter of FY 2017-18 which amounts to  a combined net loss of       $ 1.74 billion ( Rupees 117.29 billion). This is due to a jump in bad loan provisioning following tightening of the RBI rules in respect of NPAs. Out of the four banks, Canara Bank posted a net loss of Rs.48.6 billion, Allahabad Bank reported a net loss of Rs. 35.10 billion, UCO Bank Rs. 21.34 billion and Dena Bank Rs.  25 billion Net loss.

 

5. NO GST FOR FREE BANKING SERVICES, INCLUDING ATM WITHDRAWAL: Free banking services like cheque book issuance, ATM withdrawals are likely to remain out of the ambit of GST. The revenue department is likely to instruct the financial services department that GST will not be levied on free banking services. The Indian Banks Association (IBA) on behalf of the management of all banks too had made representation to tax authorities.

 

6. ALLAHABAD BANK BOARD DIVESTS ITS CEO FROM FUNCTIONAL POWERS: After the government initiated removal of Allahabad Bank Chief Executive Officer (CEO) Ms Usha Ananthasubramaninan following a CBI charge sheet in Nirav Modi scam, the bank’s board divested her of all her functional responsibilities. After similar government action against 2 Executives of PNB, K V Brahmaji Rao and Sanjiv Sharan, the PNB board too has divested them of their financial and executive powers.

 

7. RBI PUTS FRESH LENDING RESTRICTIONS ON ALLAHABAD BANK: Reserve bank of India has placed additional restrictions on Allahabad Bank, which is already under Prompt Corrective Action (PCA) since January this year. RBI has debarred the bank from high risk lending and raising high cost deposits. The RBI has also restricted the bank from creation of non-banking assets and has advised it to restrict from accessing or renewing wholesale or costly deposits. The bank’s board has already taken note of the same.

 

8. CENTRE MAY ASK RBI TO EASE PCA FRAMEWORK: The government may ask RBI to ease the Prompt Corrective Action (PCA) framework so that a complete restriction on fresh lending does not affect credit flow to business, particularly to Small and Medium Enterprises. This was decided after the Ministry held a review meeting with 11 PSU banks which are under PCA.

WEEKLY FINANCIAL SNIPPETS – 12/05/2018

1. HDFC BANK POSTS RECORD PROFIT OF Rs 4,799 CRORE FOR Q4: HDFC Bank Ltd posted a record 4^Th quarter net profit of Rs. 4,799 .28 crores, a 20.27% year-on-year growth. This is also driven by stable asset quality. Net Interest Income (NII) increased to 17.70% and Asset Quality remained stable, as percentage of gross Non-Performing assets (NPAs) were at 1.30% against 1.29% as compared to last year. The consolidated net profit for the year ended March 2018 was Rs. 18,510 crores, up by 21.4% as compared to last year. When most of the banks (both public and private sector) are reeling under the bad loans scenario, HDFC Bank has come out successfully in these difficult times as well because of its business mantra of “Retail Banking” all along.

 

2. BANKS UNDER TAXMAN SCANNER FOR GST REFUND ON ATM TRANSACTIONS: The Indirect Tax Department is scrutinising the 100% input GST credit availed by most of the banks on taxes paid by their ATM vendors. The scrutiny started when banks started claiming 100% input tax credit on the amount paid to ATM vendors who are responsible for maintenance and cash supply to the machines. These vendors charge per transaction and add GST to the bills. The tax officials believe that since banks don’t charge on many ATM transactions which are free to customers, 100% input credit cannot be claimed by them.

 

3. LENDERS FIND RESCUE PLAN FOR STRESSED POWER ASSETS: Lenders to the power sector led by SBI have decided to float a fund to take over 14 stressed power plants. The decision is aimed to prevent power generation plants from going in to liquidation, receiving better valuations and securing speedy resolution. It was decided that lenders will have to make investments according to their share of exposure in each power plant.

 

4. GOVERNMENT LIKELY TO WITHDRAW TAX NOTICE ON FREE BANKING SERVICES: The tax department is likely to withdraw the show-cause notice issued to several banks asking them to pay service tax on “free services” provided to the customer. Following the Finance Ministry’s instructions, the Department of Financial Services (DFS) has presented its views and is likely to withdraw the notice.

 

5. GST DIGITAL DISCOUNTS MAY COST Rs. 15,000 CRORES TO THE GOVERNMENT: The government has estimated that the centre and states may lose up to Rs. 15,000 crores by offering discounts of up to Rs.100 on GST for every digital transaction, including those done using credit and debit cards or mobile wallets. This figure is arrived at, based on the average ticket size of each transaction being Rs. 1,400 and a 2% discount being proposed on it.

 

6. PNB BANKS ON ARTIFICIAL INTELLIGENCE TO CHECK FRAUDS: Punjab National Bank has said it plans to rely on Artificial Intelligence (AI) for reconciliation of accounts and incorporate analytics for improving audit systems as it seeks to clean up the process. The bank has also discussed its road map with a target of reaching a total business of Rs. 12,000 lakh crore.

 

7. MONTHLY GST RETURN SYSTEM TO BE IMPLEMENTED: The GST council has finally approved the single monthly return with an aim to boost collections and compliance. The new system is scheduled to be implemented in next six months. Though the council has approved the new system but the software will take six months to get fully operationalized. However the new system will be implemented in 3 phases.

        8. NBFCs HIRE TALENT FROM BANKING INDUSTRY AMID RISING GROWTH:                     Non- Banking Financial Companies (NBFCs) are recruiting candidates from                           banking industry. According to industry estimates, 60 to 70-% of the NBFCs hiring               pertains to the candidates from banking industry. While banks are struggling to                 come out of bad loan mess, NBFCs are in a comfortable position. By hiring these                 candidates from banking industry they tend to get experienced hands.

WEEKLY FINANCIAL SNIPPETS-05/05/2018

1. TCS IS THE FIRST INDIAN IT COMPANY TO TOUCH 100 BILLION DOLLAR MARKET VALUE: Tata Consultancy Service (TCS) is the first Indian IT Company to touch 100 billion dollar (Rs 6.49 lakh crores) in market capitalization. Reliance Industries (Energy-Telecom) is the only other Indian Company to reach $100 billion mark in the year 2007. It is also heartening to note that TCS gave its employees 120% payout of target variable pay (bonus).

 

2. GROWTH IN BANK DEPOSITS FALLS TO FIVE DECADE LOW: Bank Deposit growth fell to a five decade low in fiscal year ended March 2018. Data from RBI website shows aggregate deposits in the banking system grew a mere 6.7% in 2017-18, the lowest since fiscal year 1963. There was huge influx of bank deposits during demonetization but now due to low interest rates, people have started saving in mutual funds and insurance which has eroded banking competitiveness.

 

3. NPAs HIT MONETARY POLICY TRANSMISSION IN INDIA: Bad loans have impaired Monetary Policy transmission in India as Banks were unable to increase  their lending rates  and protect Net Interest Margin (NIM—means the difference between the yield the bank earns on loans and that it pays on deposits). This is as per a research report by RBI. The report says that as gross NPAs of banks rose, they were unable to increase interest rates due to competitive pressures. Gross NPAs in banks rose from 3.4% in 2013 to 9.9% in 2017.

 

4. PNB TIGHTENS OFF-SITE CREDIT MONITORING RULES TO AVOID FURTHER FRAUDS: Punjab National Bank has tightened bank’s credit underwriting norms and has put in place an off-site monitoring to identify risks. The process has been divided into four components with different employees focussed on sourcing, appraisal, processing, documentation, disbursal and recovery. Internal Audit process has been strengthened to give higher weightage to off-site credit  monitoring mechanism.

 

5. REGIONAL RURAL BANK EMPLOYEES TO GET PENSION AT PAR WITH NATIONALISED BANKS: A Supreme Court verdict has paved way for Regional Rural Bank (RRB) employees to draw pension at par with nationalised banks. About 27,000 RRB employees are set to gain from this verdict. Currently there are 56 RRBs spread across the country with a work force of 95,000.

 

6. GST MONTHLY REVENUE TOUCHES Rs. 1 LAKH CRORE: The GST revenue for the month of April 2018 has crossed Rs. 1 lakh crore. This is for the first time that GST collections are crossing the Rs. 1 lakh crore mark since GST was rolled out. The Finance Ministry has announced that the total Gross GST revenue collected in April 2018 is Rs. 1,03,458 Crore.

 

7. NBFCs TOOK 40% OF ALL NEW CORPORATE LOANS BY BANKS: Loans to Non-Banking Financial Companies (NBFCs) accounted for nearly 40% of the total new corporate loans disbursed by banks in financial year 2018. The quantum of increase of loans to corporate sector was Rs. 2.68 Lakh Crore of which Rs. 1.05 lakh Crore (around 39.3%) was availed by NBFCs.

 

8. GST COUNCIL MAY SOON ANNOUNCE CASH BACKS TO BUSINESSES FOR DIGITAL TRANSACTIONS: The GST council may soon announce cash backs to businesses and price benefits to consumers who are paying through digital mode. Consumers paying through digital mode would be offered a discount over maximum retail price. Businesses will get cash back based on the quantum of turnover through digital mode.

WEEKLY FINANCIAL SNIPPETS-28/04/2018

1. TAX DEMAND AGAINST FREE SERVICES PROVIDED BY BANKS: The Director General of Goods & Services Tax Intelligence has sent notices to many banks to pay taxes on free or bundled services (free services provided to customers who maintain balance in the account) provided by the banks to the account holders. The total demand as per ET report could exceed Rs. 6,000 crore. The demand is retrospective with a 12% service tax claimed since 2012, 18% interest on the amount and a 100% penalty. The notice has shocked the banking industry which is already reeling under an enormous amount of bad loans. The Indian Banks’ Association is planning to appeal against the arbitrary tax notice.

 

2. DEPOSITS IN JAN-DHAN ACCOUNTS CROSS Rs. 80,000 CRORE: Total deposits in Jan Dhan accounts crossed Rs. 80,000 crore mark with more people joining the flagship financial inclusion programme. The latest report of the World Bank titled “Global-Findex Report 2017” released last week cited the success story of the Jan Dhan Yojana. Deposits under these accounts are on the rise after the demonetization exercise.

 

3. SBI TO SAVE Rs. 30 CRORE EVERY YEAR FROM WIND, SOLAR POWER INSTALLATIONS: State Bank of India has announced that it has saved Rs. 125 crore in the last 8 years by installing windmills and many solar power units and expects to save Rs. 30 crore annually through its “renewable energy” investments. The bank has installed 10 windmills with a capacity of 1.5 MW each, of which three are in Tamil Nadu, six in Maharashtra and one in Gujarat. It has also invested in solar power and now possesses a capacity of 21.23 MW in renewable power sources. Energy generated through these renewable sources is solely for captive use by the bank’s various offices and branches across the country, making them free of any carbon emission.

 

4. PNB TO HIRE DETECTIVE AGENCIES TO LOCATE UNTRACEABLE BORROWERS: Fraud hit Punjab National bank has invited applications for empanelment of detective agencies to locate its untraceable borrowers as it looks to strengthen and supplement its efforts to recover bad loans which surged to Rs. 57,519 crore as on 31/12/2017. All NPA accounts (Sub-standard, Doubtful and loss assets category) would be allocated to detective agencies thus appointed for gathering information.

 

5. CREDIT GROWTH OUTSTRIPS DEPOSITS IN FY’18: Banks have ended Financial Year 2018 (FY’18) with more credit growth than the deposits. During this period credit growth was at Rs. 8,29,187 crore, while the Deposit growth was Rs. 7,28,765 crore. The incremental credit-deposit (CD) ratio for FY’18 works out to 114%. But what is alarming is during the last fortnight of FY’18, banks seem to have gone all out to disburse loans in a hurry. Credit disbursal during this last fortnight jumped by Rs. 2,79,361 crore, which almost amounts to 34% of the total credit disbursed in FY’18. In our opinion, this kind of last minute disbursals just to meet the year end targets may further lead to more  deterioration in quality of credit.

 

6. I-T DEPARTMENT SAVES Rs. 977 CRORE IN 5 YEARS ON POSTAGE AFTER RISE IN ONLINE COMMUNICATION: The Income Tax Department has said that it has saved up to Rs. 977 crore over the last 5 years due to the rise in online communications or E-mails. The department has saved on postage cost due to the increase in online communications. Online communication of the department has more than doubled since 2013-14.

WEEKLY FINANCIAL SNIPPETS-21/04/2018

1. KOTAK MAHINDRA BANK BECOMES SECOND MOST VALUED BANK: Kotak Mahindra Bank Ltd pipped State Bank of India to become India’s second most valued bank after HDFC Bank in terms of market capitalisation. Data from BSE shows that Kotak Mahindra Bank now has a market capitalisation of Rs. 2,22,970 crores where as SBI’s Market cap is Rs. 2,22,043 crores. HDFC remains the country’s most valued bank with a market cap of Rs. 5.04 lakh crore.

 

2. LIC PROFIT BOOKING RISES TO Rs. 25,000 CRORE IN FINANCIAL YEAR 2018: Life Insurance Corporation of India (LIC) has booked record equity trading profits of Rs. 25,000 crore in 2017-18, up from Rs. 19,000 crore during 2016-17. LIC’s record profit booking is a positive sign for market and this means the insurer now will be able to announce better bonus to its policy holders and pay better dividends to the government. LIC will also be in a better position to pump in more funds in to the market.

 

3. AS BANKS SHY AWAY FROM EDUCATION LOANS, NBFC’s SEE A LUCRATIVE OPPORTUNITY: While public sector banks are facing high accretion levels of Non-Performing Assets (NPAs) in the education loans, leading to a slowdown in education loans in PSBs, Non- Banking Finance Companies (NBFCs) are expanding their education loan books. Over the last few years many standalone education loan NBFCs have come up, and many of them are experimenting new products as well, by adopting student-led approach which includes an overall screening of students, these NBFCs are redefining the norms of education loan lending.

 

4. E-WAY BILLS HIT TRUCK DISPATCHES, INTER-STATE GOODS MOVEMENT DOWN BY 15%: By introducing the E-way Bill concept in GST, truck movement is becoming more difficult. Because of this, dispatches by Road transport under GST were almost down by 15% in the first 15 days of E-way bill mechanism. In our opinion these are initial teething problems which will become normal in days to come.

 

5. PSBs FAILING TO RECOVER BAD LOANS: Public Sector Banks are having lot of difficulty in recovering bad loans. The recovery rate in NPAs which were written off is declining. As per a RBI report, 90% of written off loans could not be recovered during the period 2014-15 to 2017-18. The worst performer is UCO bank, which had written off Rs. 6,087 crore during the above mentioned period, has failed to recover a single rupee.

 

6. ICICI BANK LAUNCHES DIGITAL FORM FOR OPENING CURRENT ACCOUNT: ICICI Bank has introduced a “Digital form” which will help open current account in a few hours. The bank captures the information about the customer and the business digitally and verifies KYC documents in real-time at the premise of the customer. This is for the first time that any bank has introduced digital format for opening current account and as per the bank it will help in “ease of doing business” and help increase the bank’s market share.

 

7. INCOME TAX DEPARTMENT WARNS AGAINST TAX EVASION BY SALRAIED EMPLOYEES: The I-T Department has cautioned salaried tax payers against under-reporting their income or inflating their deductions in assessment year 2018-19. It has also warned intermediaries like chartered accountants and other consultants against abetting such tax evasion. Any infractions will invite action under various provisions of Income Tax Act. The I-T Department will also ask their employer to take action against such erring employees.

WEEKLY FINANCIAL SNIPPETS- 14/04/2018

1. BANK OF BARODA SLAPPED WITH Rs. 9 CRORE FINE OVER REMITTANCE SCAM: The Financial Intelligence Unit (FIU) has slapped Rs. 9 crore penalty on Bank of Baroda for failing to adhere to Anti-money Laundering norms and not having an effective system of reporting suspicious transactions linked to the Rs. 6,000 crore scam in Delhi based branch.

 

2. REGIONAL RURAL BANKS COME UNDER PROMPT CORRECTIVE ACTION PLANS: Prompt Corrective Action (PCA) framework will also be applicable to Regional rural Banks (RRBs). The National Bank for Agriculture & Rural Development (NABARD), which supervises RRBs, has directed them to initiate self-corrective action plans based on parameters such as capital adequacy, asset quality and profitability which largely is based on the framework for bigger commercial banks. Accordingly, RRBs will also slow down their business if their capital adequacy falls below 9%, net non-performing assets rises over 10% of total advances and return on assets falls below 0.25%.

 

3. SBI AND PNB PUT 15 NON-PERFORMING ASSETS WORTH Rs. 1,063 CRORE FOR SALE: Leading public sector banks, State Bank of India and Punjab National Bank have put their 15 Non-Performing Assets worth Rs. 1,063 crores for sale. They will be conducting the E-Auction of the said assets on 20^Th

 

4. START-UP INVESTORS MUST DISCLOSE DEAL VALUATIONS IN TAX RETURNS: Promoters and Investors in new age start-ups can no longer expect to make easy profits from any exits without paying taxes on them. The Income Tax Department has introduced new disclosure norms in the latest edition of I-T Return forms which requires the Individual tax payer to provide the fair value of the unlisted shares and disclose the full value of the consideration received or receivable in respect of unquoted shares sold by them during the year. This norm is included to ensure that promoters and investors disclose the information correctly.

 

5. 5 STATES ACCOUNT FOR 61% OF E-WAY BILL GENERATION : The 5 states, Gujarat, Uttar Pradesh, Telangana, Kerala and Andhra Pradesh have accounted for 61% of the inter-state E-way bill generation. The Electronic Bill or E-bill has become mandatory for movement of goods valued over Rs. 50,000 from one state to the other from 1^ST These 5 states have emerged as the leaders in generating E-way bills and is an example for other states to follow.

 

6. BANKS CANNOT DENY PENSION PAYMENT FOR LACK OF AADHAAR: There is good news for senior citizen who are drawing their monthly pension. In a major relief to pensioners, Employees Provident Fund Organization (EPFO) has asked all the pension-disbursing banks not to turn away pensioners for want of Aadhaar. EPFO has issued circular to heads of all pension disbursing banks, instructing them to provide with alternate options of identification in cases where the pensioner is unable to provide Aadhaar proof.

 

7. CANTEEN SERVIVCES TO EMPLOYEES WILL ATTRACT GST: Henceforth providing canteen meals to its staff for a price will attract GST. According to a decision of the Authority for Advance Taxes, Recovery of food expenses from the employees for canteen services provided by the employer would come under the definition of outward supply as defined under the GST Act 2017.