WEEKLY FINANCIAL SNIPPETS- 18/02/2017

1. STATE RUN BANKS TO OFFER “ESOPS” TO STAR PERFORMERS: Employees of state run banks may stand eligible for Employee Stock Options (ESOPS) from next fiscal. This is as per the suggestion made by the Banks Board Bureau (BBB). This will be kind ofa reward to bank staff based on their performance. The total ESOPs will be a certain percentage of Bank’s net profit. For large banks the employee stock option plan could be as much as 5% of profit after tax.

2  RBI PROPOSES LOW MDR FROM APRIL 1st TO KEEP DIGITAL PAY MOMENTUM: The Reserve Bank of India has proposed to drastically cut the Merchant Discount rate (MDR) charges on debit card payments from April 1st with a view to maintain the momentum of digital transactions post note ban. The Merchant Discount Rate charge, which is charged to merchants on debit card transactions will be as low as 0.4% or 0.3% of the transaction value.

3.RBI TO REIMBURSE BANKS’ MDR CHARGES ON DEBIT CARD PAYMENTS TO GOVERNMENT: RBI in a notification has said that it will reimburse banks the MDR ( Merchant Discount Rate) charges on debit cards used for payment of tax and non-tax dues to the Government of India with effect from January 1, 2017. Banks have been asked to forward their claim for reimbursement of MDR along with statutory auditor’s certificate on a quarterly basis.

4. SBI CHIEF SEEKS MORE CLARITY, DISPENSATIONS TO RESOLVE NPAs: State Bank of India ChairpersonMs.Arundhati Bhattacharya has said banks need more clarity and dispensations to resolve the stressed assets problem. Banks should be allowed to amortise losses on account of haircuts(estimating Investor losses in debt restructuring) they will have to take while resolving a bad asset ( NPA) .

5. BANKS RUSH TO BUY CYBER SECURITY COVER AS DIGITAL PAYMENTS RISE: At a time when cyber threats are on the rise for banks for increasing cashless transactionsand effects of demonetization, insurers see rise in demand for cyber insurance and cyber liability insurance. The present industry base cyber insurance is currently as low as Rs 60 crore. There are various cyber insurance covers available but it is the cyber liability insurance which is in maximum demand.

6. INDIA RATING SAYS BANKS’ CAPITAL NEEDS IS Rs 91,000 CRORES: The Government , which owns majority in  nearly two dozen banks, has plans to inject Rs 20,000 crore in to those banks over the next financial years beginning April. But as per the India Rating & Research, banks need almost Rs91,000 crore to grow at a bare minimum pace of 8 to 9% onan   Some of the eminent analysts have said that the government will have to increase the capital injection significantly to keep some weak banks afloat as global Basel III banking norms are due to be fully implemented by march 2019.

7. TAX DEPARTMENT SCANS OVER ONE CRORE ACCOUNTS IN CLEAN MONEY DRIVE: The income tax department has done data analytics in more than one crore accounts through its data bank and has tried to match with tax payer profile. In a bid to clamp down on un-accounted money deposited in to the bank accounts post demonetization, the income tax department has scrutinized as many as one crore accounts and has asked 18 lakh people to explain the source of funds.

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WEEKLY FINANCIAL SNIPPETS- 04/02/2017

1. RBI LIFTS CAP ON DAILY WITHDRAWALS FROM ATMs, & CURRENT ACCOUNT: After nearly three months of cash rationing finally Reserve Bank of India lifted the cap on daily cash withdrawals from ATMs and current accounts effective from 1st February 2017. But retainedthe cap of Rs 24,000/- from savings bank accounts.

2. BUDGET GIVES MORE RELIEF TO START-UPS: More than 4700 start-ups in the country can now look forward to certain tax benefits. The government has extended the profit-linked deduction for start-ups to three years out of seven years from the earlier norm of three years out of five years. Further there are relaxations on income tax exemptions for carry forward losses, provided the holding of the original promoters remains.

3. DIVIDEND OF FAMILY TRUSTS TO BE TAXED IN FUTURE: Promoters holding shares through private trusts will have to pay 10% tax on dividend income for more than Rs 10 lakh. At present income by way of dividend in excess of Rs 10 lakh is chargeable at the rate of 10% for individuals, Hindu undivided Family (HUF) and partnership firms. But now the rule has been extended to include private trusts as well.

4. GOVERNMENT GIVES SWEEPING POWERS TO TAX OFFICERS FOR SERACH AND SURVEYS: The government has armed tax officers with sweeping powers to conduct search and surveys. Now junior officers can conduct an inquiry in a case where no proceedings are pending, without getting sanction from higher authority. This move could lead to lot of harassment for income tax assessees.

5. NOW CYBER CRIMES HAVE TO BE REPORTED TO RBI WITHIN 6 HOURS: The Reserve Bank of India has instructed banks to report any cyber security incidents within two to six hours. This warning has come at a time when the government is pushing digital payments in a big way, including new channels such as Aadhaar Enabled Payment System (AEPS)and the BHIM app launched by the National Payments Corporation of India (NPCI) which runs on the Unified Payment Interface(UPI).

6. FINANCE MINISTER LAUNCHES INDIA POST PAYMENTS BANK:Union Finance Minister Mr. Arum Jaitley inaugurated the India Post Payments Bank ( IPPB) through video conferencing from Delhi. The pilot branches have been launched at Raipur and Ranchi. These payments bank will pose serious competition to traditional banks due to lower cost involved. The launch of India Post Payments bank will prove to be a great step towards financial inclusion in the country. The postman connects every household. They can reach every house for banking activity and if this is tapped and planned properly it will open the doors for door to door banking.

7. ORDINANCE PAVES WAY FOR PSU INSURERS TO GO PUBLIC: State owned general insurance companies can now get listed on the stock exchanges with the recent ordinance by the government on the insurance bill. Government looks to raise Rs.11,000crores from listing of PSU insurers. This is a step towards meeting the government’s disinvestment target of Rs.72,500crores in the next fiscal.

INDIAN UNION BUDGET 2017- HIGHLIGHTS

  • FY 18 revenue deficit pegged in at 1.9% of GDP.
  • Fiscal deficit for 2017-18 pegged at 3.2% in line with market expectations.
  • Total Budget of Rs.21.47 Lakh Crores for 2017-2018.
  • No Income  tax on income up to Rs.3 lakhs.
  • Income tax rate from Rs.2.50  lakhs to Rs.5 lakhs reduced to 5%.
  • 10% surcharge for income between Rs.50 lakhs and Rs.1 crore.
  • One page income tax return proposed.
  • No transaction over Rs.3 lakhs will be permitted in cash.
  • 6% presumptive tax for companies with a turnover upto Rs.2 crore doing digital transactions.
  • 5% tax exemption for companies having a turnover below Rs.50 crores.
  • Holding period of Long Term Capital Gains for Land & Building reduced to 2 years.
  • Increase in Direct tax collection by 34% after demonetization.
  • Maximum donation receivable from unknown sources by political parties will be Rs.2 lakhs.
  • Propose to reduce tax for small companies with a turnover of less than Rs.50 crore to 25%.
  • Defence capital expenditure Rs.80,000crores.
  • New FDI policy under consideration.
  • Aadhaar-Pay will be launched shortly.For senior citizens, Aadhaar based Health Cards will be introduced.
  • Govt. doubles lending target of banks to Rs.2.44 lakhs crores
  • Amend Negotiable Instruments Act to protect payees dishonoured cheques.
  • National Highway allocation at Rs.64,000crores.
  • Unmanned Railway lines to be eliminated by 2020
  • Propose to feed 7000 solar railway stationsin medium term.
  • Propose to amend drug rules to ensure drugs available at reasonable prices.
  • Affordable housing to be given Infra status
  • 100% rural electrification by May 01, 2018.
  • Propose to finish 1 crore houses by 2019 for those living in kachcha houses.
  • To up crop insurance coverage to 50% in FY 2019.
  • Govt. to set up dairy processing fund.
  • Focus on Rural India – Total allocation for rural sector up by 24% at Rs.187,000crores.
  • NABARD to digitise 63,000primary agri co-ops.
  • Additional Rs.20,000crore allocated to NABARD for long term irrigation fund.
  • SEC 40A (3) amended—cash expenses reduced from Rs 20,000 to Rs 10,000( Foe example, cash salary, cash rent, cash conveyance etc.)
  • New Section 234F introduced for delay in filing income tax returns beyond due date – late filing fee of Rs.5,000/- up to 31stDecember of the year in which due date of income tax return filing is due and thereafter Rs.10,000/-.
  • Budget agenda was to – Transform Energize and Clean India – TEC India.
  • Oil prices, rising dollar and volatile commodity prices seen as risks to Indian economy.
  • Focus on digitizing India to continue.
  • Service charge on rail tickets booked through IRCTC to be withdrawn.
  • Maximum cash donation any Political party can receive will be Rs.2,000 from one source.