WEEKLY FINANCIAL SNIPPETS- 24/06/2017

1. PASS ON THE GST BENEFITS TO CONSUMERS OR GET LICENSE SCRAPPED: Any business entity that fails to pass on the benefit it derives from lower taxes under GST regime to its consumers, faces penalties and cancellation of  license under the new antiprofiteering rules. The new National Antiprofiteering Authority would be empowered to force reduction in the prices to the extent of lowering of taxes, and impose penalty or even cancel the registration under the Central GST Act in case the benefit is not passed on to the consumers.

2. SUPREME COURT RULING ON AADHAAR-PAN LINKING AND CBDT CLARIFICATION: Further to the ruling by Supreme Court ruling on the constitutional validity of Aadhaar-PAN linking provision, the Central Board of Direct Taxes (CBDT) has clarified that every tax payer has to quote his Aadhaar number /Aadhaar enrolment ID while applying for obtaining PAN card number and also while filing his/her tax returns from July 1st

3. RBI INSTRUCTS BANK TO PROVIDE ADEQUATE TRANSACTION DETAILS IN PASSBOOKS: The Reserve Bank of India has instructed all banks to provide “adequate details” in the passbooks and account statements so that the customers can cross check the entries easily. RBI has advised banks to avoid inscrutable entries in the passbooks /statement of accounts and ensure that brief and intelligible particulars are entered with a view to avoid inconvenience to the customers.

4. SEBI RELAXES NORMS FOR LENDERS BUYING STAKE IN DISTRESSED COMPANIES: Securities & Exchange Board of India (SEBI) has relaxed the norms for lenders to purchase stakes in distressed companies, exempting them from making open offers for shareholders. The relaxation would be subject to certain conditions, including shareholders’ approval of the stake acquisition by way of special resolution. SEBI said this is aimed at facilitating “turnaround” of listed companies which are in distress which will benefit the shareholders and the lenders.

5. NO TIMELINE ON IDENTIFYING ADDITIONAL LOAN DEFAULETERS: The RBI Deputy Governor has said that there is no specific timeline set for banks to identify additional defaulters on which bankers would need to start bankruptcy proceedings. Earlier this week the RBI had identified 12 largest loan defaulters to pursue bankruptcy proceedings against them.

6. GOVERNMENT IN TALKS WITH RBI TO DEFER BASEL-III NORMS FOR BANKS: The RBI has laid down norms for implementation of international capital norms or “BASEL-III” norms for Indian Banks by March 2019. According to these norms the banks have to maintain a minimum common equity ratio of 8.5% and total capital ratio of 11.5% by March 2019. However banks are struggling to maintain these ratios as they are saddled with huge bad loans scenario. Considering the current bad loan scenario, the government is in discussion with RBI to explore the possibility to defer the full implementation of “BASEL-III” norms.

7. RECORD INCOME TAX COLLECTIONS THIS YEAR: Net Income Tax collection till June 15th 2017 grew at a healthy 26.2% to Rs. 1,01,024crore from across the country. Last year up to June 2016 the tax collection was Rs. 80,075 crore.

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WEEKLY FINANCIAL SNIPPETS- 17/06/2017

1. FARM LOAN WAIVERS DISRUPT CREDIT DISCIPLINE: Farm loan waivers are the populist actions and lead to disruption of credit discipline among borrowers. Frequent farm loan waiver schemes will have a negative impact as farmers expect future loan waivers from time to time and thus delay or stop repaying the loans. Frequent occurrence of such populist actions (loan waivers) may lead to impaired credit repayments and thus reduced credit availability to farmers.

2. RBI TO DIRECT BANKS TO START BANKRUPTCY PROCEEDINGS AGAINST 12 BIG DEFAULTERS: The Reserve Bank of India has identified 12 of the largest loan defaulters and has instructed the bankers to initiate bankruptcy proceedings against them. The move comes about amonth after the government gave RBI greater power to deal with bad loans, including banks to initiate an insolvency resolution process in case  of a default. These 12 accounts constituted about 25% of the overall gross Non-Performing Assets (NPAs), and have been identified, as the committee focussed on those accounts owing more than Rs.5,000 crores, out of which more than 60 % of the loan had been classified as NPA.

3. ONLINE BANKING TO KILL PHYSICAL BANKING IN 5-6 YEARS: As per NITI Aayog CEO Mr Amitabh Kant, low cost internet based banking transactions and business efficiency due to technology advancements are expected to kill the physical banking trend in 5-6 years. In 5-6 years it will be very difficult for physical banks to survive because the cost of physical banks will be enormous. This cost will be very huge to bear for the banks compared to the cost of an online fintech company and their ability to do data analysis and providing credit.

4. NPCI TO LAUNCH RUPAY CREDIT CARD BY JULY: The National Payments Corporation of India (NPCI) has said it will launch a RuPay credit card by July this year. As many as 56 different banks have shareholding in NPCI despite it being a non-listed entity with no dividend declarations. Presently there are 241 million RuPay debit cards in circulation in India comprising 35% of the card base in India.

5. RBI EXAMINING RELAXING BAD LOAN CLASSIFICATION LIMIT OF BEYOND 90 DAYS FOR SMEs: Currently an account turns into a Non-Performing Asset (NPA) or bad loan if it is not serviced for 90 days. In case of Small Businesses and SMEs, their receivables usually come late(absence of vibrant factoring or trade receivable market) and once this cycle is delayed, they miss the 90 day period of repayment, they fall into NPA category and coming out of NPA category is very difficult for these SMEs. Some people have made a true representation in this matter to the Ministry of Finance and hence RBI is looking into it, to extend the classification norm of 90 days period for Non-Performing Assets to help Small and Medium Enterprises ( SMEs).

6. BHARAT FINANCIAL TO ROLL OUT 2 LAKH “KIRANA POINTS” IN 16 STATES: Bharat Financial Inclusion(Earlier known as SKS Microfinance) is planning to launch 2 lakh “Kirana Points” across its networkin 16 states in partnership with leading banks. With introduction of Kirana Points, the company’s borrowers can walk into the nearest kirana point store and make basic financial transactions like repaying loan, deposits and withdrawals from savings account and make bill payments. For this the company will appoint agents to set up kirana points.

7. PE FIRMS, NBFCs FIND INVESTMENT OPPORTUNITY IN AFFORDABLE HOUSING: Private Equity and Non-Banking Financial Companies (NBFCs) are looking at affordable housing projects.  A few Institutions have already invested money in affordable housing projects, bringing in the much needed liquidity. This is the result of the government’s thrust on the segment and recently accorded infrastructure status.

WEEKLY FINANCIAL SNIPPETS- 10/06/2017

1. RBI DIRECTS BANK BRANCHES TO COMPLY WITH PPO ORDER: The Reserve Bank of India has directed all the bank branches to record Pension Payment Order number (PPO) in the passbooks of pensioners to avoid any hassle in case the PPO is lost. This is affected to nullify the difficulties reported by pensioners or their family pensioners to get duplicate PPO.

2. SBI SNAPS “LINE OF CREDIT” TO STRESSED TELECOM COMPANIES: State Bank of India has cancelled existing but unused credit lines to some financially weak telecom companies, following the banking regulator’s direction to make immediate provisions against the credit given to telecom sector including their standard assets. As per the line of credit, a borrower can draw from the credit as per his requirements. By scrapping the facility, bank will be able to bring down its requirement of capital that otherwise needs to be set aside as provisions. SBI is also waiving the commitment charges.

3. BANKS NEED Rs.95,000 CRORE ADDITIONAL CAPITAL OVER NEXT TWO YEARS: As per Moody’s Investors Service report, new stressed assets of Indian Banks will increase through 2019 and capitalisation will remain a key credit weakness for state owned banks. The asset quality outlook for banking sector will remain weak as Gross Non Performing Assets (NPAs) or bad loans will increase to around Rs. 8.5 lakh crores by the end of financial year 2017-18. Since Public Sector Banks (PSBs) have limited ability to raise external capital, infusion by the government remains the only viable source for shoring up capital base. Asper the plan, the PSBs need to raise Rs.1.10 lakh crores from markets to meet Basel III capital adequacy norms.

4. IDBI BANK TO SET UP SEPARATE DEPARTMENT TO MANAGE BAD LOANS: IDBI Bank has created a special department for managing bad loans and monitoring credit after taking a serious hit as RBI has put the bank under PCA (Prompt Corrective Action) and ICRA has downgraded the bank’s credit rating. This department will have experienced officials who will give focussed attention to each case. Besides this, the bank also aims to raisearound Rs. 5,000 crores by selling its non-core assets in the current fiscal.

5. EQUITY MUTUAL FUNDS INVESTMENTS ACHIEVE 2 YEAR HIGH: Equity Mutual Funds saw an inflow of Rs.10,790 crore in May 2017, making it the highest  in nearly two years. This is the 14th straight month of inflows into equity schemes. The strong inflows have pushed the asset base of equity mutual funds by 2.6 % in May 2017 from the preceding month.

6. BANK NPAs ARE ROADBLOCKS TO GROWTH: As per the trade body ASSOCHEM, Non-Performing Assets of Indian Banking sector are one of the biggest roadblocks for the growth of the economy. It has urged the RBI to make NPA norms more flexible and take pragmatic approach while resolving the complex issue of NPAs of banks so that the banks can be nursed back to health.

7. SBI OFFERS FREE CREDIT CARDS TO THOSE WITH NO CREDIT HISTORY: If you don’t have a credit history, banks are generally reluctant to offer you a credit card. But to help such customers and increase the card penetration in India, SBI has come out with a credit card    “ UNNATI”  which will be available to its customers even if they do not have a credit history provided they have a minimum deposit of Rs 25,000 with the bank. Any SBI customer with or without a credit history can apply for the card. The card will be available free of cost for the first four years.

WEEKLY FINANCIAL SNIPPETS – 03/06/2017

1. SBI WANTS DEPARTMENT OF TELECOM TO PROTECT BANKING SECTOR’S Rs.4 LAKH CRORE EXPOSURE TO TELECOM SECTOR: Indian Banking sector has a huge exposure of nearly Rs.4 lakh Crore to the telecom sector. This could come under stressdue to declining telecom revenues. Hence State Bank of India has written to the Department of Telecom to work out a bailout plan for the telecom operators, including deferred payment for spectrum and rationalising spectrum fees.

2. SOON YOU MAY SWITCH YOUR BANK ACCOUNT AND RETAIN YOUR ACCOUNT NUMBER: Every time you change your Bank, you will change your bank account number too as you will be allotted with a new number in the bank where you open an account. But very soon, like your mobile number portability you will be able to retain your old bank account number even if you change your bank. With the technological advancements in the payment system, account number portability will be a reality in near future.

3. SENSEX WILL TOUCH 32,200 MARK BY MARCH 2018: As per Citigroup Global Markets, Sensex will touch 32,200 by March 2018. The firm said that implementation of Goods and Service Tax (GST), strong flows from domestic mutual funds and foreign investors will push the share market index to 32,200 by March 2018. The firm believes that in this, the foreign investors are likely to impact the market’s direction considering their contribution of over 20%.

4. BANKS CAN CHECK 3 YEARS RECORD OF BORROWERS: Banks are now armed with more information than before on card holders. They can now tell which card holder is likely to default, and which defaulter’s case is worth to pursue and recover funds. A next generation algorithm enables banks to check customer transactions for the past three years across multiple banks and financial institutions and figure out which customer is undergoing a downturn as far as finances are concerned and who is improving.

5. BANKS WRITE OFF Rs.2.25 lakh CRORE IN FIVE YEARS:All scheduled commercial banks ( SCBs) wrote off Rs 2,25,180 crore of bad loans cumulatively in the last five years period till March 2016. SCBs represent all public and private sector banks, foreign banks, regional rural banks and some co-operative banks. These represent over 95% of total bank credit given.

6. RBI MAY HAVE A DEPUTY GOVERNOR FROM PRIVATE SECTOR FOR THE FIRST TIME: The government for the first time has advertised to choose a deputy governor for the country’s central bank. The government intends to include directors and consultants with significant experience in banking and financial markets. RBI has sought applications from candidates with over 15 years of experience in banking and financial market operations and they must also have been whole time directors or board members. This means potentially RBI may appoint a Deputy Governor from the private sector for the first time.

7. BANKS RECOVERED ONLY Rs.47,000 CRORE OF LOANS IN FY-2016-17: Gross NPAs of 37 listed banks were at a level of Rs 7.1 lakh crore as on March 2017. An analysis of the top banks of the country has revealed that these banks have managed to recover only Rs 47,240 crore in the financial year 2016-17 out of which Rs.16,000crore was recovered in the last quarter of FY 2016-17. Among the PSU banks only Punjab National Bank and Canara Bank managed to deliver by reaching their targets. PNB recovered Rs.10,677 crore and Canara Bank recovered Rs.10,017 crore.