WEEKLY FINANCIAL SNIPPETS – 28/01/2017

1. EVEN RBI DOES NOT HAVE ANY IDEA ABOUT FAKE NOTES: The Reserve Bank of India has no confirmed data on the value of the fake currencies detected since the demonetization of Rs 500 and Rs 1000 notes. This is in reply to a query raised under RTI.

2. CASH WITHDRAWAL RESTRICTIONS TO GO AWAY BY FEBRUARAY END:The Reserve Bank of India has recently raised the ATM withdrawal limit to Rs.10,000/- a day but it has maintained the weekly cap of Rs.24,000/-  for savings account and Rs.1 lakh for current account holders.  But as per SBI estimates, over 80% of currency could be back in circulation by February end, and hence the restrictions on cash withdrawals may be completely lifted by February end.

3. RESTRUCTURED EDUCATION LOANS NOT TO BE TREATED AS NPAs: In order to encourage banks to provide education loans , The RBI has clarified  that rescheduling of payment period of such loans due to unemployment of the borrower will not be treated as restructured accounts for computing NPAs. Banks may allow three spells of moratorium ( not exceeding 6 months each) during the life cycle of theeducation loan, taking into account the unemployment/underemployment, and this will not be treated as restructuring of loan account.

4. RBI WORKING ON PLAN TO REDUCE ONLINE CHARGES: The Reserve Bank of India is working on a plan to reduce online transaction costs which the banks at present are charging. This is a positive move to encourage more digital banking.

5. MORE PSU BANKS MAY SKIP DIVIDEND PAYOUT THIS FISCAL:Some Public Sector Banks have already indicated to the Finance Ministry that it may not be possible for them to pay dividend this year as their profits are likely to remain very low due to very poor credit offtake, after effects of demonetization and increase in bad loans.

6. BORROWERS MAY SWITCH FROM BASE RATE TO MCLR: Declining interest rates, driven by demonetization, will prompt existing bank borrowers to shift from base rate system to the new MCLR mechanism as it will help them reduce interest burden and also reduce their repayment cost. MCLR linked advances are estimated to be around 15-20% of the total banking sector advances. This is as per ICRA  press release.

7. BANKS’ SEEK TAX RELIEF TO EASE NPA BURDEN:  Banks have asked the government for lower taxes in the forthcoming budget, to compensate them for their efforts on financial inclusion and demonetization. They have demanded tax exemption of 100 % on provisions against bad loans. At present only 7.5% of the capital set aside for NPAs and 10% of the rural advances are deducted from gross income of the bank while all other earnings are taxable.

8. ELECTION COMMISSION (EC) REQUESTS RBI TO INCREASE CASH WITHDRAWAL LIMIT IN 5 STATES: The Election Commission has requested the RBI to enhance the weekly cash withdrawal limit from Rs. 24,000/- to Rs.2,00,000/- for candidates contesting elections in the 5 states which will have the state elections soon. The candidates have  representedtheir difficulty  to Election Commission in meeting their campaign expenditure.

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WEEKLY FINANCIAL SNIPPETS- 21/01/2017

1. Rs.2 LAKH INSURANCE COVER FOR 3 YEARS FORJAN-DHAN ACCOUNT HOLDERS ON CARDS: The government is considering an insurance scheme under which all PradhanMantri Jan Dhan Yojana ( PMJDY) account holders will be offered Rs.2 lakh free insurance for three years . This will be a big push by the government to create strong social security for the poor. There are around 27 crore account holders under PMJDY and if the proposed insurance scheme provides both accident and life insurance cover, the benefit could cost the government more than 9,000 crores as the government would bear the premium cost for three years.

2. GOVERNMENT MAY LOWER LIMIT FOR QUOTING PAN NUMBER FOR CASH TRANSACTIONS: In a move to further push the momentum it gained for cash-less economy after demonetization, the government may announce big disincentives in the upcoming Budget for usage of cash. One amongst them will be to reducethe  threshold limit for quoting PAN card number for cash deposit. The present limit which is Rs 50000/-, may be brought down to Rs 30000/- . In addition to this the government may also announce cash- handling charges for cash payments above a certain limit.

3. REVEAL THE SOURCE OF INCOME IF YOU HAVE DEPOSITED Rs 10 LAKH OR MORE IN BANK ACCOUNT AFTER NOVEMBER 8TH: In the next fortnight, the I-T Department will ask everyone who deposited more than 10 lakh or more in their bank accounts after November 8th to spell out the source of income. A new e-platform put in place by the Central Board of Direct Taxes, will be used to reach out to these account holders who will have to file their response online.

4. THIS YEAR’S BUDGET HAS LOT OF “FIRSTS” : Mr. ArunJaitley will be the first Finance Minister to have ushered in many changes in this year’s Budget. Here are some of the “FIRSTS” in this year’s Budget:

A) Budgets are normally announced on the last working day of February. But this year, it has been advanced by a month to February 1ST .

B) There won’t be a separate railway Budget. Railway Budget is merged with General Budget from this year onwards.

C) Economic Survey, a snapshot of the state our country is in, will be out on the first day of the Budget session.

D) This is the first time that the finance ministry is going paperless for the Budget. There will be no hard copies of the circulars. All the important documents will be submitted through Union Budget Information System ( UBIS).

E) There will be no plan and non-plan distinction in finance bill. And hopefully the abolition of the Planning Commission will find reflection in the general Budget.

5. WHAT WILL HAPPEN TO YOUR PAYTM-WALLET WHEN PAYTM BECOMES PAYMENT BANK?: The Parent Company, One 97 Communications is preparing to merge Paytm  wallet services with the payment bank. And if you are a Paytm wallet holder then your balance amount in Paytm will be transferred to the Paytm Payment bank Limited and this will happen automatically and you need not do anything. The app will continue to work as before and you will continue to use it as before.  The company will give you an offer to open a separate account and if u choose to open a payment bank account then you will earn interest on your money in your wallet.

WEEKLY FINANCIAL SNIPPETS- 14/01/2017

1. BANK OF BARODA BEATS SBI IN OFFERING CHEAPEST HOME LOAN: Traditionally as it always happens, it is the India’s largest Bank, State Bank of Indiawhich offers home loans at cheapest rates. But this time Bank of Baroda has lowered its home loan rate of interest to as low as 8.35% which is the cheapest in the banking industry. This rate will be applicable for customers having a strong CIBIL score, which is a measure of creditworthiness of the borrower. This according to us, will pave way for a literally interest rate war amongst the banks across the country.

2. VERY SOON YOUR CREDIT RATING WILL DETERMINE YOUR HOME LOAN RATE: The interest rate youwould pay on your home loan will soon be linked to your credit rating or the discipline you maintain in repaying your existing loans. If your credit score improves you will pay less EMI and is vice-versa. Bank of Baroda is the first bank to link interest rates on home loans to credit scores of the borrower. The bank will initially rely on credit scores of Credit Information Bureau of India (CIBIL) and if this score is above 760 then the lowest rate of 8.35% will be offered. Other banks will take cue from Bank of Baroda’s initiative.

3. LOAN REPAYMENTS WORTH Rs 80,000 CRORE MADE IN CASH AFTER DEMONETIZATION: The government’s financial intelligence agencies which normally analyse data from multiple sources, have found that an estimated that Rs 3 to 4 lakhs crore of tax-evaded income have found its way  in the form of cash deposits during the demonetization period. The agencies have also compiled a data where in it is found that more than Rs 80,000 crore in cash deposits in loan accounts as repayments during this demonetization period.

4YOUR CASH WITHDRAWALS FROM BANK ACCOUNTS MAY BE TAXED IN FUTURE: Among many moves which the government is taking to push the digital transactions in the country, the government may consider a “cash tax” on cash withdrawals from bank accounts. The government is weighing the pros and cons of the proposal underwhich tax can be levied on cash withdrawals above a certain ceiling from bank accounts. The main aim of the new tax is to curb the scope of cash economy and encourage digital transactions.

 5CURRENCY CIRCULATION DOWN BY ALMOST 50%:The currency circulation or the currency with the public has gone down to 8.9 lakh crore, according o the latest figures released by Reserve Bank of India. The Remonetisation exercise is not keeping pace with the Demonetization. The currency circulation in March 2016 was Rs 16.63 lakh crore.

6. BANK’S BOARD BUREAU SEEKS LONGER TERMS FOR BANK CHIEFS: Vinod Rai, the Chairman of Bank’s Board Bureau (BBB) opines that chief executive officer/ Managing Directors/Executive Directors of public sector banks should have a minimum tenure of six years in order to ensure accountability. Rai further noted that the compensation package of these public sector institutions needs to be improved. The package needs to be more attractive in order to attract talent.

 7NRIs CAN DEPOSIT OLD NOTES TILL JUNE 30th: The Reserve Bank of India has allowed non-resident Indians to exchange the scrapped currency of Rs 500 and Rs 1000 notes till June 30. This facility will be available through RBI offices in Mumbai, Delhi, Chennai Kolkata and Nagpur. While there is no monetary ceiling for exchange of old notes, the limit for NRIs’ will be as per the relevant FEMA (Foreign Exchange Management Act) regulations which is Rs 25000/- per person.

WEEKLY FINANCIAL SNIPPETS- 07/01/2017

1. RBI CLARIFIES REGARDING OLD NOTE DEPOSITS: The Reserve Bank of India has issued clarification after various news agencies, citing sources, had come out with estimates of old notes deposited in the banking system. Neither the RBI nor the government has come out with a final official figure in this matter. The Reserve Bank of India in its last official release said that till December 10th, Rs 12.44 lakh crore worth of old notes were returned to the banking system. RBI has already initiated the process and the final figure will be announced soon.

2. GOVERNMENT TO FINALISE SECOND TRANCHE OF CAPITAL INFUSION IN STATE-RUN BANKS: Finance Ministry is likely to finalise the second tranche of capital infusion in public sector banks in the next few days and the decision will be crystallised before the budget. The government has already announced a fund infusion of 22,915 crores, out of the 25,000 crores earmarked. Of this, 75% has already been released. The remaining amount will be linked to performance with particular reference to greater efficiency, growth of both deposits and credit in addition to the reduction in cost of operations.

3. PM MODI ANNOUNCES SOPS FOR MSMEs, RURAL INDIA AND HOUSING SECTOR: Prime Minister Shri Narendra Modi has announced new schemes for rural and urban housing, farmers, senior citizen and MSME sector. The Prime Minister has announced a 60 day waiver of interest on farm loans. Home loans up to Rs 2.00 lakhs, Rs 9.00 lakhs and Rs 12 Lakhs will now be eligible for interest relief of 3%, 4% and 3% respectively. The government has also waived interest on existing farm loans for the latest kharif and rabi crops. Under MSME the CGTSME coverage has been increased to Rs 2.00 crore from the existing 1.00 crore. Besides this, the cash credit limit for small businesses has been raised to 25% from 20%. The Senior citizens will now be eligible for 8% interest on their deposits up to 7.5 lakh for 10 years.

4. RBI IMPOSES RESTRICTIONS ON WITHDRAWAL FROM CERTAN ACCOUNTS: Tightening the noose around the people who misused banking channels to park their un-accounted money, the Reserve Bank of India has now imposed restrictions on withdrawal of more than 2.00 lakhs from bank accounts. Withdrawal/transfer will not be permitted without quoting PAN or submission of Form 60. These restrictions have come in effect after the misuse of Jan-Dhan and dormant accounts. As per RBI notification, withdrawal and transfer of funds (more than Rs 2.00 lakh) will not be permitted in account without quoting PAN or submission of Form 60.

5. SBI’S NEW HOME LOAN SCHEME—“HAMARA GHAR”: In an effort to push home loans, SBI has floated a new scheme offering fixed rate for first two years at 8.50% for women and 8.55% for men. In this new schematic “Hamara Ghar“ housing loan, once the fixed tenure of two year ends, the interest rate will be linked to the prevailing one year Marginal Cost of Lending rate ( MCLR) with a normal spread over MCLR, which is 50 basis points.

6. TWO LARGE PSU BANKS MAY MERGE: The Centre may merge two large state-run banks in the coming financial year once a clean-up of bad assets is completed. Consolidation of India’s public sector Banks (PSBs) would be the final step of the government in rebuilding a financial system capable of underwriting credit growth and job creating investment in Asia’s third largest economy.