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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