WEEKLY FINANCIAL SNIPPETS- 29/04/2017

1. SBI MERGER: CUSTOMERS BANK ON ONLINE SERVICES AND EXPECT CROWDED BRANCHES: Most of the customers of former associate banks are finding the merger of their bank with SBI beneficial and feel more secure. Over the past two weeks since the merger, customers have not been through many hassles as there has been no change in account number and IFSC code as of now. SBI will start the data –merging of the six banks soon. Once this is done then the bank will decide on which branch to keep and which branch to close down. There will be reduction of staff as some will get transferred and shifted. Because of this, most customers feel that the branches will be over crowded.

2. RBI GOVERNOR Mr URJIT PATEL SAYS PUBLIC SECTOR BANKS MERGER COULD HELP INDIAN BANKING SYSTEM: RBI Governor Mr Urjit Patel has said that the Indian banking system could be better off if some public sector banks are consolidated to have fewer but healthier entities as it would help in dealing with the problem of stressed assets. He said merging of weak banks with strong banks will not pose much problem since there are cooperative banks and micro-financial institutions to provide community level banking. He also said that the public sector banks need to raise private capital from the market than relying on government help.

3. INDIA POST PAYMENT BANK TO OPEN 650 BRANCHES THIS YEAR: India Post Payment Bank (IPPB) is planning mega expansion to open 650 branches this year. The first two branches have been opened in Ranchi and Raipur in January 2017. They intend to open at least one branch per district across the country and each branch will be networked with about 1200 to 1500 post offices in a district.

4. PROVIDENT FUND RULES CHANGED. NOW PAY HOME LOAN EMIs AND BUY HOUSE FROM DEPOSITS: The government has amended rules of the Employees’ Provident Fund Scheme which will be helpful to over four crore subscribers. Some of the finer points are: A) Subscribers will be able to withdraw up to 90% of their accumulations for purchase/construction of houses or purchase of land. B) To avail this facility the subscriber needs to be a member of a cooperative society or a society registered for housing purpose and the payment will be made directly to the housing agency and not to the provident fund subscriber. C) The new rule also provides that monthly loan instalments towards house purchase can be paid from provident fund deposits.

5. PRIME MINISTER LAUNCHES NEW BHIM-AADHAAR PLATFORM TO BOOST DIGITAL PAYMENTS: The BHIM app,  already launched in December 2106 has created world record by registering 1.9 crore downloads. In a further push towards digital economy, Prime Minister has launched a new platform called BHIM-Aadhaar, for merchants to facilitate digital payments. BHIM-Aadhaar, the merchant interface of BHIM app will enable every Indian citizen ( whose Aadhaar card is linked to his bank account) to pay digitally  by using their biometric data like their thumb imprint on a merchant biometric  enabled device which could be a smartphone having biometric reader. This will be a huge boost for Indian Economy moving towards digital payments.

6. HDFC BANK TRIMS 6,000 JOBS IN THREE MONTHS: HDFC Bank’s head count has come down by 6,000 owing to digitisation. This is the result of “Natural Attrition” which has driven down the head count as newer hands are not hired for those who have resigned. This has improved the bank’s cost-to-income ratio to 42.4% from 44.9%.

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WEEKLY FINANCIAL SNIPPETS- 22/04/2017

1. BANK CREDIT SLOWEST IN FINANCIAL YEAR 2017: Growth in bank credit in financial year 2017 has turned out to be the lowest in over 60 years. The state owned banks have achieved a growth of only 5.1% in FY 2017. According to a report released by RBI a large part of the growth in lending has come in the last month of March 2017 when banks disbursed Rs 3.16 lakh crore. But even after this last minute surge in disbursements, loan growth for the whole year was Rs 5.1% as against 10.3% last year. As against this, the banks have ended the year with an 11.8% growth in deposits.

2. SECURITIES AND EXCHNAGE BOARD OF INDIA (SEBI) MAY ALLOW INVESTORS TO BUY MUTUAL FUNDS VIA DIGITAL WALLET: SEBI is considering a proposal to allow investors to buy mutual funds worth up to Rs 50,000/- through digital wallets to make it easier for investors to purchase these instruments, especially by young generation. This would help in speedy and easy transactions.

3. FINANCE MINISTRY EXPESCTS 6 BANKS TO RAISE FUNDS VIA FPO: The Finance Ministry is expecting that at least 6 banks will hit the capital market to raise funds and ease the pressure on the government of pumping in capital to these banks. The Finance Ministry Official states that it is up to the individual banks to decide to tap the capital market but they expect that at least half a dozen banks would take advantage of the opportunity and raise capital from the market.

4. GST: GOVERNMENT LOOKING TO KEEP SINGLE RATE FOR EACH PRODUCT GROUP TO AVOID COMPLEXITY: After having opted for multiple rates under the upcoming GST ( Goods and Service Tax) regime, government is  looking in to the aspect of keeping single rate of tax on the same type of products to ensure that the tax structure does not get too complicated. For example all types of air conditioners/mobile phones/footwear etc., will attract single rate of tax. This kind of single rate structure for one product group will bring simplicity and make implementation easy.

5. SBI SAYS MERGER TO BOOST PROFIT BY Rs 3,000 CRORES IN THREE YEARS: SBI chairperson Ms Arundhati Bhattacharya has said that  as a result of the merger of 5 of its associate banks with SBI ,there will be a  boost to annual profits of as much as Rs 3,000 crore in three years. This is the result of cost and efficiency gains from absorption of associate banks.  She has also predicted a turnaround in India’s weak credit cycle this financial year.

6. RBI INSTRUCTIONS FOR MORE PROVISIONING TO HIT BANKS’PROFITABILITY : Reserve Bank of India has asked banks to increase provisioning for even standard assets as a precautionary measures. Due to this higher provisioning, profitability of the banks will take a hit. Particularly large banks like SBI, ICICI Bank, Axis Bank, Yes Bank, to name a few, are likely to set aside a higher amount than previously anticipated as some loans would have to be  classified as non-performing.

WEEKLY FINANCIAL SNIPPETS – 15/04/2017

1. RBI PROPOSES LONG-TERM FINANCE BANK: Reserve Bank of India has proposed setting up of Long-Term Finance Banks, specially to fund infrastructure and greenfield projects of industries. The minimum capital requirement will be Rs. 1,000 crore.As per the eligibility criteria, big Industrial houses cannot take more than 10% stake in these banks. These banks will be exempt from opening branches in rural and semi urban areas and will not lend to agriculture and weaker sections of the society.

2. BANKS GET TIME TILL JUNE 30 TO OBTAIN PAN FROM ACCOUNT HOLDERS: The tax department has given banks three more months till June 30th to obtain Permanent Account Number (PAN) or Form-60 from all account holders as it looks to tighten the grip around tax evaders. After an estimated Rs. 15 lakh crores in junked currency notes coming back into the banking system post demonetization, the tax department has started analysing the bank deposit trends.

3. NO DEADLINE FOR INTRODUCTION OF SHARIA BANKING IN INDIA: Islamic or Sharia Banking is a finance system based on the principles of not charging interest, which is prohibited under Islam. Responding to an RTI application, the RBI has said that it has not taken any steps to introduce “Sharia Banking window”  in banks across India. However, on instructions from the central government RBI has examined the legal, technical and regulatory issues in this respect and has submitted a detailed report to the government.

4. FINANCE MINISTRY MAY ASK SEBI TO EXTEND PUBLIC FLOAT DEADLINE FOR PSBs: As per the Public Float guidelines of SEBI, government stake in Public Sector Undertakings should be 75% or less by August 2017. There are seven public sector banks where the government holding is above 75%, post second round of capital infusion in March 2017. Efforts are being made to reduce the government stake and to meet SEBI’s public float guidelines but in case some banks are unable to do so then the government will seek exemption in such cases.

5. AMAZON GETS RBI NOD FOR E-WALLET IN INDIA:Amazon India has received approval to launch its own digital wallet, paving the way for the online retailer to gain a slice of India’s fast growing digital payments business. Amazon’s new wallet service will try to address a vital problem in the world of payments as it will help customers to bypass the two-step authentication process for online payments using credit or debit cards thus making the process smoother for online shoppers.

6. RBI TALKS TOUGH ON WEAK BANKS: The Reserve Bank of India has come out with a revised set of “ Prompt Corrective Action” (PCA) – steps that it will take to get failed banks on track. Banks with unsound financials may face the prospects of a merger or winding up or even risk their board and management being sacked by RBI. These are some of the extreme measures/steps that the Central Bank has in mind for banks that badly breach the threshold for bad loans and minimum capital requirements. RBI has said that a shortfall of the common equity tier I capital by 3.625% from the prescribed limits, then that bank will be identified as a likely candidate for resolution through tools like amalgamation, reconstruction or even winding up. There are new trigger points for the net non-performing assets as well, which call for tougher actions.

WEEKLY FINANCIAL SNIPPETS – 08/04/2017

1. RESERVE BANK OF INDIA TO ISSUE Rs.200 NOTES: The Reserve Bank of India has cleared a proposal to issue Rs.200 currency notes from June 2017. According to a report by India Today, the new note is already in the pipeline but RBI is only awaiting instructions from the Central government to go ahead with the printing procedures.

2. BAN ON CASH TRANSACTIONS OF ABOVE Rs 2 LAKH NOT APPLICABLE TO BANKS AND POST OFFICE WITHDRAWALS: The Finance Act 2017 provides that no one can deal in cash in excess of Rs 2 lakh in a single day, in respect of a single transaction or transactions relating to one bill/event or occasion. The Central Board of Direct Taxes has clarified that the ban on cash transactions of more than Rs 2 lakh a day will not apply to withdrawals from banks, post office savings account, and cooperative banks. The restriction will also not apply to any receipt by government, banking company, post office savings bank and cooperative banks.

3. BANKS WANT RBI TO RELAX NORMS FOR LOANS TO HIGHLY INDEBTED FIRMS: Effective April 1, banks have to set aside higher provisions for loans given to highly indebted firms. But, under the International Financial Reporting Standards ( IFRS) norms, banks will not get any relief on any kind of exposure to indebted companies. Hence banks have requested the RBI to give them more time.

4. GOVERNMENT ASSURES THAT THERE IS NO PLAN TO DEMONETISE Rs.2,000 NOTES: The government has assured that there is no plan to demonetise Rs.2,000 notes. The government has clarified that these are only rumours and has requested the public and the press not to go by such rumours.

5. LINK AADHAAR CARDAND PAN CARD: Both PAN Card and Aadhaar card are unique identification cards that serve as proof of identity that are necessary for registration and verification purposes. Now the government has urged all entities across the country to link the PAN cards with the Aadhaar Cards. By linking these two cards the government will be able to keep tabs on taxable transactions of a particular individual or entity. This will also not allow anyone to avail multiple PAN cards. Those who have linked their PAN and Aadhaar cards will be able to file their E-returns with ease and they no longer have to submit their IT acknowledgement to the department. There are rumours that linking of PAN card with Aadhaar card will be made mandatory in future.

6. NEFT TRANSFERS TO BE FASTER AS RBI CUTS CLEARANCE TIME: RBI has decided to slash the clearance time for National Electronic Funds Transfer (NEFT) which will enhance the efficiency and speed of the electronic payment system. Henceforth the NEFT settlement cycle will be reduced from hourly batches to half hourly batches, as a result of which the number of settlement batches will be 23, adding 11 more additional settlement batches.

7. PAYMENT VIA UNIFIED PAYMENTS INTERFACE (UPI) INCREASES: The value of transactions made through UPI channel in March 2017 rose by 25.7% over the previous month to Rs. 2,390 crores. The volume of such transactions jumped by 47.6%. Out of the 2.2 lakh transactions per day, around 80,000 to 90,000 transactions are done through BHIM app.