WEEKLY FINANCIAL SNIPPETS – 17/11/2018

1. BANKERS’ PANEL INCORPORATES “SASHAKT INDIA AMC: Sunil Mehta, the Chairman of Bankers’ Panel said that an Asset Management Company (AMC) has been formulated for large stressed assets and will be called as “Sashakt India Asset Management” The Bankers’ Panel is working on faster resolution of stressed assets in banks. He further stated that now the panel is working towards identifying potential investors for an Alternative Investment Fund (AIF) which will fund the AMC. In July this year the government had proposed a Five Pronged Strategy under Project Sashakt to tackle large stressed assets and formed a Panel led by Mr Sunil Mehta.

 

2. RBI REFUSES TO GIVE INFORMATION ON NPAs, LOAN DEFAULTERS TO SEBI: Security Exchange Board of India (SEBI) had sought information regarding Non-Performing Assets (NPAs) and Loan Defaulters List from RBI. The Reserve Bank of India has declined to pass on the said information. The denial of RBI to divulge the information is because it fears further data leakage as it becomes known to wider range of people which in turn will hurt the business prospects of the companies involved. The Central Information Commission (CIC) has sent a show-cause notice to the RBI Governor for not providing the information.

 

3. RBI IMPOSES FINE OF Rs. 3.00 CRORE EACH ON DEUTSCHE BANK AND J&K BANK: The Reserve Bank of India has imposed a penalty of over Rs. 3.00 crore each on Deutsche Bank and J&K Bank for non-compliance of various norms, including Asset Classification and The penalties on these two banks have been imposed taking into account the failure of these banks to adhere to the directions issued by RBI.

 

4. SEBI MAY TIGHTEN LIQUID MUTUAL FUNDS: The Securities Exchange Board of India (SEBI) is considering tightening the rules of Liquid Mutual Funds holding assets worth Rs. 8 lakh crore or more. This is to curb the volatility in flows following the challenges faced by the Finance companies in the wake of recent debt default by IL&FS.

 

5. SEBI TIGHTENS DISCLOSURE, REVIEW NORMS FOR RATING AGENCIES: The Securities Exchange Board of India (SEBI) has tightened the disclosure and review norms for Credit Rating Agencies (CRAs). SEBI has ordered CRAs to analyse deterioration in the liquidity conditions of an issuer while monitoring its repayment schedules and also analyse any asset-liability mismatches. SEBI has also instructed CRAs to disclose parameters like liquid investments or cash balances, access to any un-utilised credit lines and adequacy of cash flows in a specific section on liquidity.

 

6. OVER 2 LAKH ASSESSEES WHO MIGRATED FROM VAT TO GST OPTED OUT OF GST NET: Over 2 lakh Goods & Services Tax (GST) assessees have opted out of the GST net as their annual business turnover is below the threshold limit of Rs 20 Lakh. These are assessees who had migrated from the Value added Tax (VAT) regime to GST regime. This will benefit both the GST network and the tax    assessees, as the GST network will now have less load and the concerned assessees will not be required to file the GST returns.

 

7. DIRECT TAX COLLECTIONS TO EXCEED TARGET THIS YEAR: Direct Tax collection as on October 2018 has already crossed Rs. 5 lakh crore which is 44% of the net Direct Tax collection target. At this rate this will cross the budgeted target of Rs. 11.5 Lakh crore for the current fiscal. The Income Tax Department has already issued refund orders amounting to Rs. 1.15 lakh crore and hence from now onwards the net collections will increase.

 

8. HOW DOES RBI BUILDS ITS RESERVES ? : The Reserve Bank of India builds its reserves from several factors. Mainly it is built from three sources. First, by interest on government bonds held for conducting open market operations, fees from governments market borrowing programme and income from investment in foreign currency assets. Second, is earnings retained after giving dividends to government. Third source is revaluation of foreign assets and gold.

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WEEKLY FINANCIAL SNIPPETS – 10/11/2018

1. FOUR PUBLIC SECTOR BANKS MAY COME OUT OF PCA SHACKLES: Four Public Sector Banks (PSBs) are expected to come out of the RBI’s Prompt Corrective Action (PCA) framework based on their improved financial performance. The turnaround should happen by the end of the third quarter. This shows that PSBs are diligently and sincerely following the action plan shared with the government. The banks expected to come out of PCA include Bank of India, Corporation Bank and Bank of Maharashtra. The government will site this example to persuade RBI to relax the PCA norms which is one of the issues over which the government and RBI are in conflict.

 

2. GOVERNMENT TO INFUSE Rs. 3,054 CRORE IN ALLAHABAD BANK: The government is releasing Rs. 3,054 crore to Allahabad Bank during the current fiscal. The bank has been informed by the government about the fresh capital infusion of Rs. 3,054 crore towards contribution of the Central Government in the preferential allotment of equity shares. Allahabad Bank’s Capital Adequacy Ratio as per Basel-III stood at 6.88% by the end of first quarter of the current fiscal and the government owned 71.81% stake in the Bank.

 

3. RBI SLAPS Rs. 1 CRORE FINE ON FINO PAYMENTS BANK: The Reserve Bank of India has slapped a monetary penalty of Rs. 1 crore on Fino Payments Bank Ltd for contravention of the direction to stop opening of new accounts until further instructions. Fino Payments Bank was asked by RBI to stop all new account opening activities after the RBI found out that there were few accounts with the bank with deposits in excess of Rs 1 lakh, which goes against the licensing criteria of a Payments bank.

 

4. NBFC FUND CRUNCH BEGINS TO HIT REAL ESTATE SECTOR: With The Non-Banking Finance Companies (NBFCs) facing liquidity crunch, Real Estate Developers and home buyers are being hit badly as in several cases sanctioned home loans are not being released and funds committed earlier under construction linked home loan schemes are also not being released. The cash crunch has also pushed the home loan interest rates by 50 to 100 basis points and for developers the increase can be as much as 300 basis points (which is 3% more). With funds drying up, several smaller NBFCs are trying to liquidate their loan portfolios to raise funds.

 

5. SBI REDUCES DAILY ATM WITHDRAWAL LOMIT TO Rs. 20,000: In an attempt to address the growing incidence of ATM frauds and boost digital transactions, State Bank of India has reduced its daily ATM cash withdrawal limit to Rs. 20,000/- from Rs, 40,000/- earlier on its Classic Debit Cards. This will surely impact many SBI customers since these cards constitute a sizeable chunk of the bank’s card portfolio.

 

6. 75 LAKH NEW TAX FILERS ADDED TO INCOME TAX NET THIS FISCAL YEAR: About 75 lakh new tax filers have been added to the income tax payers list so far in this fiscal year .The number of policy and enforcement measures undertaken to check tax evasion are among the reasons for achieving these numbers. The target is to add 1.25 crore fresh tax filers by the end of this fiscal.

 

7. PROFITS OF PRIVATE SECTOR BANKS TAKE A DENT DUE TO HIGH PROVISIONING: Net Profit of 17 private sector banks fell by 1.6% in September Quarter on account of higher levels of provisioning and contingencies. On account of the new guidelines issued by RBI on Non-Performing Assets in February 2018, many top private sector banks had to raise their provisioning levels compared to last year.

 

8. BANK’S CONSUMER DURABLE LOAN PORTFOLIO FALLS BY 82%: Most of the banks are shying away from disbursing consumer durable loans probably due to the fear of delinquencies. Outstanding loans in this segment dropped to Rs. 3,225 crore in September 2018, a sharp 82% decline compared to last year. This space is taken over by NBFCs as their exposure to consumer durable loans has increased by 41.5%.

WEEKLY FINANCIAL SNIPPETS – 03/11/2018

1. INCOME TAX DEPARTMENT MAY SEEK FIRST RIGHT ON RECOVERY OF DUES UNDER IBC: At present the recovery of tax dues is possible only after payment to financial creditors under the Insolvency and Bankruptcy Code (IBC). The Income Tax Department is likely to request the Ministry of Corporate Affairs under which the IBC falls, to intervene so that the tax dues get a higher priority over the dues of the Financial Creditors.

 

2. E-FILING OF INCOME TAX RETURNS RISES BY 65%: As per the data released by Central Board of Direct Taxes (CBDT), there is a robust growth in taxpayers filing e-returns as it has grown by 65% between April-September as compared to the e-returns filed during the same period last year. The e-returns are being filed even after the deadline for filing income tax returns ended on August 31^ST. Moreover, the average tax paid by an individual filer has touched a little over Rs.35,000/-.

 

3. RBI ALLOWS BANKS FOR FIRE AUDIT OF CURRENCY CHESTS BY APPROVED AGENCIES: Reserve bank of India has relaxed the norms for Fire Audit of Currency Chests by  allowing banks to get the fire audit done from approved agencies in case of shortage of staff at District Fire Offices. Banks maintaining currency chests are required to get fire audit done once in every two years. Since RBI has been receiving various references from banks about non-availability of staff in State/District Fire Departments for getting the periodical fire audit done, RBI in its recent notification, has allowed banks to get the fire audit done by agencies approved by the respective State/District Fire departments.

 

4. GOVERNMENT EXPECTS NPA RECOVERIES TO CROSS 1.80 TRILLION IN FINANCIAL YEAR 2019: Due to the positive impact of the newly introduced Insolvency and Bankruptcy Code (IBC), the government expects the recoveries of Non-Performing Asset (NPAs) or the bad loans to exceed Rs 1.80 trillion target set for the current financial year 2019. Some big accounts are in the process of getting resolved while some more are lined up for resolution under IBC.

 

5. RBI GIVES LICENCE TO KIRLOSKAR CAPITAL: At a time when the whole of Non-Banking Financial sector is going through lot of liquidity crunch and crisis of confidence, Reserve bank of India has given license to Kirloskar capital for its lending business. Kirloskar Oil Engines Ltd Executive Chairman Mr. Atul Kirloskar has said that they are venturing in to this lending activity as they are seeing a lot of opportunities in financial services and are willing to commit Rs. 1,000 crores of capital over the next three years. The initial focus will be on lending to small and Medium sized enterprises. Kirloskar Group has more than 30,000 retailers and about 1,000 dealers who will be leveraged especially for SME loans.

 

6. IDFC BANK SELLS Rs. 2,400 CRORE NPAs TO EDELWEISS ASSET RECONSTRUCTION COMPANY: IDFC Bank has sold more than Rs. 2,400 crores of Non-Performing Assets to Edelweiss Asset Reconstruction Company for Rs. 622.6 crore, a loss of 75% on the exposure. IDFC Bank has done this as it intends to clean up its books ahead of the pending merger with Non-Banking Finance Company—Capital First.

 

7. RBI AUTONOMY ESSENTIAL, NURTURED BY GOVERNMENT SAYS FINANCE MINISTRY: Amid reports of mounting tension between RBI and the government, the Finance Ministry has said the government respects and nurtures the autonomy of Reserve Bank of India and has been holding extensive consultations with it on many issues and the  autonomy of RBI within the framework of RBI Act is essential in their functioning and have to be guided in the interest of the Public and Indian Economy. The statement by the government however did not mention of the reason of the government citing never-before-used power of issuing directions to RBI Governor to seek a resolution regarding the differences with the Central Bank. The government has sent at least 3 letters on different issues under Section 7(1) of RBI Act that gives the government powers to issue any direction to the Central bank Governor on matters of public interest.

WEEKLY FINANCIAL SNIPPETS-27/10/2018

1. IDFC BANK TO BE RENAMED AS “IDFC FIRST BANK”: IDFC Bank has proposed to change its name to “IDFC First Bank Ltd” as it is in the process of amalgamating Non-Banking Finance Company- Capital First with itself. The amalgamation process is in the advanced stage as it has received approvals from Competition Commission of India, Stock Exchanges, RBI, shareholders and creditors. The Bank would further require approvals for this change of name from RBI, Registrar of Companies and all other statutory regulatory authorities including shareholders and creditors.

 

2. FAKE BANK APPS MAY HAVE STOLEN DATA OF THOUSANDS OF CUSTOMERS: Fake Apps of SBI, ICICI Bank, Axis Bank and other leading banks are available on Google Play, and the deceptive malware in these Apps may have stolen thousands of customers’ account and other credit card details. This is as per a report published by IT Security firm Sophos Labs. These “fake Apps” have logo of respective banks which makes it very difficult for customers to differentiate between fake and original Apps. However many banks have told that they have not come across any such fake apps.

 

3. APP BASED LENDING PLATFORM “EARLYSALARY” CLAIMS TO BE THE LARGEST LENDING APPLICATION: App based lending platform “EarlySalary” has claimed that it has crossed Rs. 550 crore online loan disbursals, making it the country’s largest consumer lending application. The company has so far provided loans to over 1,35,000 customers and cumulatively has disbursed 3,50,000 loans to young working Indians. On an average it is disbursing Rs. 80 crore loans, processes over 60,000 applications and disburses 35,000 loans every month. The company currently services customers across 17 cities in India.

 

4. THE MERGED ENTITY OF BANK OF BARODA-VIJAYA-DENA TO GET GROWTH CAPITAL FROM GOVERNMENT: The government will provide an additional cushion by way of “Growth-Capital” to the proposed merged bank to be formed by amalgamation of Bank of Baroda, Vijay Bank and Dena Bank to start the new bank on a stronger note. The actual capital infusion in money terms will be clear only after the financials of July-September quarter of all the three banks are available.

 

5. SYNDICATE BANK GETS Rs. 728 CRORE CAPITAL INFUSION FROM GOVERNMENT: Syndicate bank has received Rs. 728 crore capital infusion from the government. The Finance Ministry has conveyed to the bank regarding the release of capital infusion to the tune of Rs. 728 crore through preferential allotment of equity shares during 2018-19 as government’s investment. The bank will be taking the necessary approvals for allotment of requisite equity shares to the government in due course of time.

 

6. RBI MAY AMEND PROMPT CORRECTIVE ACTION FRAMEWORK TO HELP BANKING SYSTEM: The Reserve Bank of India may make certain changes in the Prompt Corrective action (PCA) framework that put restrictions on financially weak banks. The changes could be made in the next couple of weeks after taking into account the various aspects and in the larger interest of the banking system. As many as 11 out of 21 banks are under RBI’s PCA watch list, of these Dena Bank and Allahabad bank are facing restrictions on expansion of business.

 

7. INCOME TAX DEPARTMENT LAUNCHES MAJOR DRIVE AGAINST INDIANS WITH ILLEGAL FOREIGN ASSETS: The Income tax Department has launched massive operation to investigate cases of illegal funds and properties held outside India by Indians and is looking to invoke the new anti- black money law for strict criminal action in many such cases. The Department, in coordination with its foreign counterparts, is investigating offshore bank deposits and purchase of assets by Indians and the number may go into thousands of cases.

 

8. GOVERNMENT DENIES ANY LIQUIDITY CRISIS: Defaults by IL&FS and its subsidiaries had led to concerns of grave repercussions on the credit market, leading to a liquidity crisis. But the government has assured that there is no such liquidity crisis in the market as there is surplus liquidity in the system. Banks are buying NBFC portfolios and there is no shortage of liquidity. But looking at the present market conditions, it is apparent that there is a liquidity crunch prevailing in the system.

WEEKLY FINANCIAL SNIPPETS – 20/10/2018

1. RBI COMES TO THE RESCUE OF NBFCs, ALLOWS BANKS TO LEND MORE: Reserve Bank of India relaxed liquidity norms to ease liquidity crunch prevailing in the financial market and allowed banks to lend more to Non-Banking Finance Companies (NBFCs), which are facing Asset-Liability mismatches. RBI said now banks are permitted to raise their exposure to a single NBFC borrower (Only to those NBFCs which do not finance infrastructure) to 15% of its capital. Earlier it was 10%. This move could free as much as Rs. 50,000 crore for lending to NBFC sector. The Asset-Liability mismatch refers to the imbalance between short-term borrowings and long-term investments (lending).

 

2. NBFCs LIQUIDITY CRUNCH TO HIT HOME LOAN SALES: As per a report by Japanese brokerage firm- Nomura, the on-going liquidity crunch faced by Non-Banking Finance Companies (NBFCs) will slow down home loan disbursements by these NBFCs. Banks can utilise this opportunity to increase their market share in housing loans. The real estate developers, which are already reeling under the pressure due to the lack lustre market, will also face further troubles owing NBFCs inability to lend.

 

3. FOREIGN INVESTORS LEAVING INDIAN MARKETS: After 2 years of good Foreign Portfolio Investments (FPI) inflows, the Indian Markets are now witnessing a reversal in the trend as this year the net foreign outflow is $13.7 billion so far as against a net foreign inflow of $ 15.3 billion a year ago. There are several factors that led to FPI outflows—from rising crude oil price to widening of current account deficit.

 

4. MUTUAL FUND COLLECTION VIA SIP INCRESED BY 40%: As per a report by Association of Mutual Fund in India (AMFI), Systematic Investment Plan (SIP) continues to be the preferred route of retail investors to invest in Mutual Fund as it helps them to reduce market risks. Mutual Fund Industry has collected Rs. 7,727 Crore through SIPs in September 2018, as the SIP contribution for the first half of the current fiscal rose to Rs. 44,487 Crore compared to Rs 29,266 Crore in the corresponding period last year, which is a 40% increase.

 

5. DEBIT CARD POS TRANSACTIONS OF AIRTEL, PAYTM AND FINO PAYMENTS BANKS BEAT THOSE OF MID SIZED BANKS: The Point-of-Sale (POS) based transactions reported by the three Payment banks – Airtel, Paytm and Fino has touched a whopping 2.1 million debit card transactions which is higher than those made by debit card holders of some of the mid-sized Public Sector banks. This is as per a data from Reserve bank of India.

 

6. RBI ISSUES e-WALLET INTEROPERABILITY ADVICES: The Reserve Bank of India has issued guidelines for enabling all phases to prepare E-wallets for better interoperability. RBI has clarified that all types of wallet interoperability will happen through Unified Payments Interface (UPI) and cards  through interoperable card network. But for security reasons RBI has mandated PPI issuers to adhere to all security guidelines laid down by National Payments Corporation of India (NPCI) for UPI and card networks. However, interoperability will  be made available to fully KYC wallets only.

 

7. PUNJAB NATIONAL BANK PLANS TO SELL NON-CORE ASSETS WORTH Rs. 8,600 CRORE: Punjab National Bank, the country’s second largest Public Sector bank has identified various non-bank core assets amounting to Rs. 8,600 crore which it plans to sell during this year. This includes its housing finance arm—PNB Housing Finance Co. The bank has already sold some assets worth Rs 400 crore.

 

8. MAHARASHTRA STATE CO-OPERATIVE BANK TO ENTER FRETAIL BANKING: The Maharashtra State Co-operative Bank, the apex lender in the state’s three tier cooperative banking sector, plans to enter retail banking sector and compete with private sector banking. It has already submitted a proposal to merge Urban Co-operative Banks. The proposal is yet to be cleared by RBI.

 

WEEKLY FINANCIAL SNIPPETS- 13.10.2018

1. RBI COULD CANCEL LICENCES OF 1,500 NBFCs : Infrastructure Financing & Leasing Services Ltd (IL&FS), a major infrastructure and financing and construction company sent shock waves through the Non-Banking Finance Company (NBFC) sector when it defaulted on some of its debt obligations in recent weeks. Because of this, many Industry experts have opined that the RBI may cancel licences of as many as 1,500 NBFCs because they do not have adequate capital, and also the RBI may make it more difficult for new entrants to get approval. The way things are moving, there is certainly cause for concern and according to a statement made by former Deputy Governor Mr. Harun Rashid Khan, this sector also could see consolidation.

 

2. CASH MANAGEMENT COMPANIES TO FORM SELF REGULATORY ORGANISATION TO ADDRESS INDUSTRY RISKS: Cash Management Companies, providing cash transport and logistics support at ATMs as well as bank branches, have come together to form Self-Regulatory Organisation (SRO). In April this year, the Reserve Bank of India had come out with certain regulations by setting standards for engaging service providers in cash management activities. Among other things, the RBI had directed banks that the staff associated with cash handling should be adequately trained and duly certified through an accreditation method. By forming this SRO, all the above concerns will be taken care of, which will mitigate the risks to the banking industry and ultimately facilitate the regulation of this sector.

 

3. SBI TO PURCHASE LOAN ASSETS WORTH Rs. 45,000 CRORE FROM NBFCs: State Bank of India will increase its portfolio purchase of loans from Non-Banking Finance Companies (NBFCs) Initially SBI had planned for a growth of Rs. 15,000 crore through portfolio purchase this year, which is being enhanced to around Rs. 45,000 crore. This will provide the much needed liquidity to the funds starved NBFC sector, and simultaneously fulfil SBI’s priority sector lending obligations. As per RBI rules, banks must lend 40% of their deposits to small businesses, agriculture and home loans which come under priority sector and SBI plans to buy these kind of loans from NBFCs.

 

4. CHALLENGES GROW FOR NBFCs AS BANKS STOP LENDING TO THEM: Banks have stopped fresh lending to Non-Banking Finance Companies due to which NBFCs are facing greater challenges at a time when everyone is trying to preserve liquidity and avoid loan defaults. There are wide scale complaints from many NBFCs that some banks are even refusing to release funds against their sanctioned limits.

 

5. SBI REPORTS 1,329 FRAUD CASES WORTH Rs.5,555 CRORE: In response to a query of RTI, State Bank of India has revealed as many as 1,329 cases of fraud, involving an amount of Rs. 5,555 crore in the first 6 months of the current fiscal year. In the first quarter (April to June), 669 cases worth Rs. 723. 06 crore were reported, whereas in the second quarter (July to September), 660 cases involving an amount of Rs 4,832 crores have been reported.

 

6. CBDT EXTENDS DEADLINE FOR FILING ITRs WITH AUDIT REPORTS TO OCTOBER 31^st: The Central Board for Direct Taxes (CBDT) has now  extended the deadline till October 31^st  for filing Income Tax Return and Audit Report for financial year 2107-18. The deadline was earlier extended from September 30^th  to October 15^th for tax payers whose accounts have to be audited.

 

7. RBI TO INFUSE Rs.120 BILLION INTO THE SYSTEM TO MANAGE  LIQUIDITY: Reserve Bank of India has decided to inject Rs. 12,000 crore into the system through purchase of government bonds  to arrest the liquidity crunch  and meet the festival season demand for funds. The government will purchase bonds with maturity ranging between   2020 to 2030. The auction to purchase government bond is a part of the Open Market Operations (OPO)  to manage liquidity in the economy.

WEEKLY FINANCIAL SNIPPETS – 06/10/2018

1. RBI GIVES NOD TO SET UP KERALA BANK: The Reserve bank of India has accorded an in principle sanction to Kerala State Government to set up “Kerala Bank”. This bank would be formed by merging District Co-operative Banks with State Co-operative Banks. RBI has given instructions to the Kerala State government to complete the entire process of merger by March 2019.The Kerala government announced that the much awaited project “Kerala Bank” is expected to become a reality by August 2019.

 

2. NORTH KOREAN HACKERS LINKED TO RECENT COSMOS BANK HEIST: California based cyber security company FireEye has indicated that the recent Cosmos Bank cyber heist in August 2018 may have been planned and executed by a financial crime syndicate backed by North Korea. Cosmos Bank had lost Rs. 80.50 crore in one of the largest banking heists in the country through 14,849 fraudulent ATM withdrawals in a two and half hour period in August 2018.

 

3. RBI ADVISES NBFCs TO RELY ON EQUITY FUND FOR LONG TERM FINANCING: After a series of defaults by IL&FS which led to a near seizure of short-term money markets, Non-banking Finance Companies (NBFCs) received lessons on Asset-Liability Management from RBI. Reserve Bank of India has advised NBFCs to raise more equity and long-term debt instead of relying on short-term funds. Mr. Viral Acharya, RBI Deputy Governor has advised NBFCs to place greater reliance on equity and other long-term modes of finance for funding their long-term assets.

 

4. FEDERAL BANK FINED Rs 5 CRORE FOR NON-COMPLIANCE OF RBI NORMS: Federal Bank has been penalised Rs. 5 crore for non-compliance on reporting of large borrower exposures and non-payment of customer compensations. The bank was found to have not complied with RBI directions on reporting of data on Central Repository of Information on Large Credits (CRILC) and reporting to RBI for assessment under risk-based supervision.

 

5. BANK OF MAHARASHTRA SHUTS DOWN 51 BFRANCHES: Bank of Maharashtra has shut down 51 non-viable branches across India. These branches were incurring huge losses and declared as non-viable. These identified branches after closing have been merged with the nearest neighbouring Branches. This is first such instance by any Public Sector Bank in Maharashtra. Bank of Maharashtra has around 1,900 branches all over India.

 

6. GROSS DIRECT TAX COLLECTION GROWS BY 16.7%: Gross Direct Tax collection in the first 6 months of the financial year grew by 16.7% to Rs 5.47 lakh crore. Refunds amounting to Rs. 1.03 lakh crore have been issued between April 2018 to September 2018, which is 30% higher than refunds issued during the same period in last financial year.

 

7. GOVERNMENT NOTIFIES 10% LONG TERM CAPITAL GAIN TAX ON IPO/FPO GAINS: The Income Tax Department has notified norms for 10% Long-Term Capital Gain (LTCG) tax for gains from investments made in Initial Public Offer (IPO) and Follow-on Public Offer (FPO). The new norms will come into effect from 1^ST April 2019 and will apply in relation to assessment year 2019-20 and then for subsequent assessment years.

 

8. COMPANIES PAY UP THEIR DUES FOR FEAR OF INSOLVENCY ACTION: Banks are seen to be the biggest beneficiaries of Insolvency & Bankruptcy Code (IBC), enacted to bring rogue borrowers to book. The fear of insolvency action has helped the bankers to recover Rs. 1.1 lakh crore from loan defaulters who were earlier reluctant to clear their dues. So far 977 cases have been admitted by National Company Law Tribunal (NCLT). The number of cases filed is actually high but many are withdrawn before they are admitted as the borrower agrees to settle the dues.

WEEKLY FINANCIAL SNIPPETS – 29/09/2018

1. BAD NEWS FOR RENEWABLE ENERGY COMPANIES: The government has ruled out the possibility of giving priority status for renewable energy sector for limit less borrowing. At a time when Banks are reluctant to grant loans to renewable projects, it has been a long standing demand of this sector to give it priority status to trigger easy cash flow. Banks have been reluctant to fund renewable energy projects due to low tariffs, power evacuation issues and NPAs in the thermal sector.

 

2. NO MORE COMMISSION FOR PSB STAFF FOR CROSS SELLING PRODUCTS: The government has asked the Public Sector Banks (PSBs) not to pay any commission to its employees for cross-selling of products. This could discourage PSB employees from cross-selling products like retail loans, insurance and mutual funds as now banks will stop paying cash incentives, rewards and recognition. On the other hand this would mean Public Sector banks like SBI and Bank of Baroda who were till now giving commission to its staff, are at a disadvantage over Private banks who have such schemes of rewarding its staff for cross selling.

 

3. GOVERNMENT BEGINS CONSOLIDATION OF REGIONAL RURAL BANKS: The government has initiated the process of consolidation of Regional Rural Banks (RRBs) along with the Public Sector Banks and intends to bring down their numbers to 36 from the present 56. In this regard, the Centre has begun consultations with States as respective States are one of the sponsors of RRBs. The Sponsor banks have also been informed to formulate a road map for the amalgamation of RRBs within a State. The proposed amalgamation of RRBs will bring in better efficiency, higher productivity, improved Financial Inclusion and greater flow of credit to rural areas.

 

4. RBI SETS THE RULE FOR JOINT PRIORITY SECTOR LENDING: The Reserve Bank of India has directed Public Sector banks to jointly lend to priority sector along with Non-Banking Finance Companies (NBFCs). RBI has now allowed this joint lending along with NBFCs to push priority sector loans and to reap the benefit of the strengths of two sets of lenders. The Priority sector will have the benefit of low cost funds from the banks and lower cost of operations of NBFCs which would be passed on to the ultimate beneficiary through blended rate and weighted average rate. A single blended fixed rate of interest will be offered to the ultimate borrower based on respective interest rates and proportion of risk sharing.

 

5. GOVERNMENT TO TAKE ALL MEASURES TO ENSURE LIQUIDITY IN NBFCs: In the backdrop of the default on a series of its coupon payments by one of the biggest names in the Non-Banking Finance Companies (NBFCs)- Infrastructure Leasing & Financial Services (IL&FS) due to which there was panic selling in the equity market which pulled the markets down, the Finance Minister Mr. Arun Jaitley said that  the government is ready to ensure credit is available to Non-Banking Financial Companies and adequate liquidity is maintained/provided to the NBFCs.

 

6. CURRENCY CIRCULATION SLOWS DOWN: Currency In Circulation (CIC), which increased substantially since the note ban in November 2016 has seen some slow down since May 2018. The Currency In Circulation increased from Rs. 9 trillion in January 2017 to Rs 19.5 trillion in May 2018. And the same is being maintained till September 2018. This may be because of a possible reason that people have cut down on their spending with the recent hike in petrol and Diesel prices particularly in rural areas.

 

7. THREE STATES- MAHARASHTRA, KARNATAKA & TAMILNADU ACCOUNT FOR 40% OF TOTAL RETAIL LOANS: Maharashtra, Karnataka and Tamil Nadu together account for 40% of the total retail loans in the country as on June 30, 2018. This is despite having only 20% of the total population of the country. The growth in retail advances is driven by robust economic development and urbanisation.

 

WEEKLY FINANCIAL SNIPPETS – 22/09/2018

1. INDIA POST INVITES PROPOSAL FOR CONSULTANCY FOR SETTING UP INSURANCE ARM : India post has invited bids to appoint consultant for setting up separate insurance service arm. The consultant thus appointed will prepare project report on setting up of Postal Life Insurance (PLI), Strategic Business Unit (SBU), Impact assessment and overseeing the implementation thereof. The pre-bid in this regard was held on September 18^Th.

 

2. SBI TO INSTALL SOLAR PANELS OVER 10,000 ATMs IN 2 YEARS: State Bank of India is planning to install solar panels over around 10,000 ATMS across country in the next two years. Currently nearly 1,200 of the Bank’s ATMs are running on solar power.  The bank has already installed rooftop solar panels on 150 of its buildings across country and is in the process of identifying more such locations. The bank is also planning to replace all its bank vehicles with electric vehicles by 2030. The route map is to turn totally carbon neutral by 2030.

 

3. BANK OF BARODA, VIJAYA BANK AND DENA BANK TO BE MERGED: The government has proposed the merger of Bank of Baroda, Dena Bank and Vijaya Bank and once the merger is through then this will be the country’s third largest bank. The combined entity will have a strong presence across nation with more than 34% of low-cost deposits (Savings + Current), a capital buffer of around 12%, and a total  business of around 15 lakh crore. Bank of Baroda is the biggest of the three with a total business chunk of Rs.10.29 lakh crore, followed by Vijaya Bank at Rs. 2.70 lakh crore and Dena Bank at Rs. 1.72 lakh crore. Shortly all the three bank boards will meet and after adequate consultation, will take a decision.

 

4. GOVERNMENT DOUBLES NPA RECOVERY FOR PSBs FOR THIS FISCAL: The government expects the state-run banks to recover Rs 1.5 lakh crore of bad debts during the current financial year. This is double the amount that banks had managed to recover last year. Total NPA recovery during 2017-18 was Rs 74,000 crore. NPAs have been a major concern for public sector banks as almost all banks have been under losses because of this.

 

5. E-COMMERCE FIRMS TO COLLECT 1% TAX AT SOURCE FROM OCTOBER 1^st : The Finance Ministry has notified that from 1^St October 2018, all E-Commerce firms shall collect an amount of 1% as Tax Collected at Source (TCS) under the Goods and Services Tax (GST) on the supplies made by them. Out of this, half will go to the state where the supply takes place and half to the Centre.

 

6. SMALLER PSBs ASKED TO CONSOLIDATE OPERATIONS, AVOID COMPETING WITH LARGER BANKS: The government has asked smaller public sector banks to consolidate their banking operations in the same geographic area, close overlapping branches and avoid competing with larger banks and instead has asked them to focus on niche areas. The move comes close on the heels of government’s proposal to merge Bank of Baroda, Vijaya Bank and Dena Bank to create country’s third largest bank. Smaller banks should not be competing for large corporate loans or for sectors where they don’t have strength or capacity to lend. The government is planning National banks and Regional banks and existing lenders have to make plans for reorganising their organisational resources, human resource and Information technology systems. Finally the government is looking at trimming the number of banks to around 10 from the existing 21.

 

7. BANKS UNDER PCA HAVE BEEN TOLD TO PRESENT THEIR TURN AROUND PLANS: Banks that are under Reserve Bank of India’s Prompt Corrective Actions (PCA) framework have been asked to present their turn-around plans and look at leveraging their competitive advantage for regional market business. Finance Minister will hold a quarterly review of the performance of these banks which are under PCA.

 

 

 

 

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.