WEEKLY FINANCIAL SNIPPETS- 29/07/2107

1. CORPORATE VENDORS UNDER I-T LENS: The Income Tax department has asked large corporate entities, including multinational firms to furnish details of employees not on the payrolls of the company who are being paid separately. This is to check whether they are filing tax returns after tax deductions at source (TDS). Many lawyers, chartered Accountants, Doctors, consultants and designers etc who are not on the payrolls of the company have not filed their I-T returns fearing they will have to disclose their full income.

2. BAD LOAN CRISIS—CRACKDOWN BY BANKS SENDS DEFAULTERSSCRAMBLING TO OFFER ONE TIME SETTLEMENT: The tough stance taken by the government and RBI to end the bad loan menace in the banking industry by instructing bankers to take extreme steps towards defaulters has caught many borrowers by surprise and they are scrambling to put together resolution plans to avoid harsher penalties including insolvency proceedings. This is a welcome change as seen by bankers as customers whose accounts are classified as Non-performing Assets are approaching bankers with proposals to resolve the issue in a time bound manner.

3. DIGITAL PAYMENTS—ONLY 7% INCREASE IN TRANSACTIONSTHROUGH DEBIT/CREDIT CARDS: Transactions through debit/credit cards rose merely by 7% post demonetization, as against a surge of  over 23% in overall cashless transactions. Bankers say that there is lot of scope for further improvement in such transactions.

4. NO GST ON HOUSING SOCIETY RWA WITH Rs 5,000/- MONTHLY SUBSCRIPTION: Services provided by housing societies resident welfare associations ( RWA) will be required to pay GST on monthly subscription/contribution charged from its members if such payment is more than Rs.5,000 per member and the annual turnover of RWA is more than Rs. 20 lakh. However, the contribution of Rs. 5,000 is exclusive of any municipal taxes.

5. AADHAAR ENROLMENT FACILITY IN BANKS TO START SOON:The Unique Identification Authority of India ( UIDAI)  has asked private as well as public sector banks to set Aadhaar enrolment facility in at least one out of 10 branches in  the coming weeks.  Suitable changes have been made recently in Aadhaar regulations to facilitate this.  There are around 1,20,000 bank branches spread across the country  and by this move 12,000 Aadhaar enrolment and updation centres will be set up.

6. 10 PUBLIC SECTOR BANKS HAVE SUBMITTED TURNAROUND PLANS: As many as 10 public sector banks have submitted their turnaround plans to the government. It is decided by the government that any future capital infusion to the banks shall be subject to achievement of select agreed upon milestones as per the turnaround plans submitted. Banks that will not be able to deliver on the agreed upon turnaround plan for a period of two years will be identified as banks eligible for alternative recourse.

7. AS COST OF EDUCATION RISES , UNPAID STUDENT LOAN SURGE: The cost of education in recent times has escalated but at the same time Non-performing assets (NPAs) within education loan book of the system as a whole has ballooned 21 % in the reporting year. Despite this increasing NPAs, banks continue to lend for higher education

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WEEKLY FINANCIAL SNIPPETS- 22/07/2017

1. FOR THE 12 BANKRUPTCY CASES BANKS WILL HAVE TO TAKE A HIT OF 18,000 CRORE: According to India Ratings Research report, Banks need to provide an additional Rs. 18,000 crore in Financial Year 2017-18 towards the 12 accounts identified by Reserve Bank of India for reference to the National Company law Tribunal ( NCLT) under the Insolvency & Bankruptcy code. Banks have been given 6 more months to finalise the resolution plans for other NPA accounts   (around 500 more accounts). If no resolution plans emerge then banks will have to begin insolvency proceedings on these accounts as well, which in turn would mean huge provisions in Financial year 2018-19, which will impact badly on the profitability of banks.

2. BANKS TO FACE Rs. 2 LAKH CRORE HIT FROM TOP 50 STRESSED ACCOUNTS:As per CRISIL Ratings Agency estimation Banks may have to write off 60% of the value of bad loans from their 50 large stressed asset accounts or take a hit of Rs. 2.4 lakh crore. The 50 top stressed companies, which account for Rs. 4 lakh crore in stressed loans and account for nearly half of the total NPAs in the banking industry.

3. RBI NOT REVIEWING 90 DAY BAD LOANS CLASSIFICATION NORMS: The Finance Ministry has said the Reserve Bank of India is not examining any proposal to extend the 90-day period for classification of Non-Performing Assets. The prudential norms are one of the building blocks for financial soundness of Indian Banks and any deviation would render the banking system weaker.Further, any delay in recognition of deterioration in asset quality removes the pressure on banks to deal promptly with the problem.

4. RBI ALLOWS NBFCs TO OFFER NEW PENSION SCHEME: The Reserve Bank of India has allowed Non-Banking Finance Companies (NBFCs) to sell and market the new pension scheme(NPS). NBFCs with an asset size of Rs. 500 crore and above that have made a net profit in the preceding financial year will be permitted to sell NPS to their clients after registration with pension regulator.

5. RBI TO SET UP PUBLIC CREDIT REGISTRY TO IMPROVE CREDIT CULTURE: The Reserve Bank of India is planning to set up a high level Public Credit Registry (PCR) to help control loan defaults, improve credit culture and promote financial inclusion. RBI said such a registry is the need of the hour which will help the efficiency of financialmarket,  improve ease of doing business and help control delinquencies.

6. IDFC-SHRIRAM GROUP AGREE TO MERGE: IDFC Ltd, a domestic infrastructure lender and Primal group financial services major Shriram Group have agreed to merge and thus create the largest retail- focussed bank in the country. Aformal merger will take place in 12 months if all goes well as per the proposed plan. IDFC Ltd will be the holding company of the merged entity.

7. GST IMPACT—DISMANTLING OF CHECK POSTS SAVE 24-36 HOURS OF TRUCKING TIME: The Goods and Service Tax (GST) is saving fleet owners between 24 to 36 trucking hours  after dismantling of check posts of VAT, Octroi and other local taxes. Besides this it also ended huge amount of corruption which was taking place at each of the check posts.

WEEKLY FINANCIAL SNIPPETS- 15/07/2017

1. NEW ACCOUNTING STANDARDS MAY HIT BANKS’ LENDING TO INFRA/REALTY FIRMS: The adoption of new Indian Accounting Standards (IndAS) might compel banks to cut down on the quantum of loans they normally sanction to firms involved in Real estate and Infra Sectors. IndAS will result in a change in Debt-to Equity ratios of such firms as capital structures and financial instruments get reclassified. This will in turn increase the debts of the companies thus compelling banks’ to reassess the way they lend to these companies.

2. SBI URGES THE GOVERNMENT TO EASE PROVISIONING NORMS: State Bank of India has written to the finance Ministry raising concerns over stringent provisioning norms for companies under the Bankruptcy code, which will eat into its profit margins. Banks are reluctant to meet these norms and hence SBI has sought the ministry’s intervention on the matter.

3. AXIS BANK LAUNCHES “SUPER BIKE LOANS” : As the Higher Engine Displacement- High End models in bikes is catching the fancy of Indian consumer, AXIS Bank has introduced a special loan product – “ Super Bike Loan” which offers  funding of 95% of the bike cost. This includes the cost of the bike and the accessories also. The rate of interest will be between 10 to 11% per annum. These bikes come with a price tag of Rs. 5 to Rs 50 Lakh. The segment had witnessed a sale of over 3,000 units last year.

4. SBI HAS STARTED TO OFFER GST-READY SOLUTIONS TO ITS CUSTOMERS:State Bank of India has announced its Goods &Services Tax ready solutions, including the introduction of online payment through internet banking and debit cards. SBI customers can deposit GST upto Rs.10,000/- in cash, cheque or draft from  any of the SBI branches across the country.

5. GOOGLE COMPLETES UPI TESTING, AWAITS RBI NOD TO LAUNCH SERVICE: Technology giant Google has completed the testing of its Unified Payments Interface (UPI) payment service and is awaiting RBI’s approval. The National Payments Corporation of India ( NPCI), the umbrella organization for all retail payments system in India also said that Facebook and Whatsapp too were in discussion with it regarding rolling out their own UPI  payment services. Very soon these three big technology giants will start their UPI operations.

6. DIRECT SELLING AGENTS UNDER WATCH IN HOME LOAN TRANSFER CASES: To check possible instances of mis-selling, the housing finance regulator- NHB is examining data on home loan transfers from one bank to the other and may issue guidelines for direct selling agents ( DSAs) in the interest of the borrowers. NHB wants to check whether the balance transfers are genuine transactions or the agents are playing a game on it. The ultimate goal of NHB is to bring in a very well trained set of Agents in the interest of the borrowers.

7. CURRENCY BAN IS NOT A GROUND FOR BANKING OMBURDSMAN TO HANDLE COMPLAINTS: The Reserve Bank of India has clarified that customer complaints regarding the problems like cash withdrawal and exchange of notes faced during demonetization period cannot be entertained under the Banking Ombudsman scheme. Banking Ombudsman Scheme 2006 specifies 27 grounds of complaints under which complaints can be lodged and complaints related to demonetization is not a ground of complaint specified under the scheme.

WEEKLY FINANCIAL SNIPPETS- 08/07/2017

1. CUSTOMERS SHOULD REPORT FRAUDULANT TRANSACTIONS WITHIN 3 DAYS TO AVOID LOSSES: The Reserve Bank of India had earlier capped the customer liability at Rs.25,000 if they reported the unauthorised transactions within 7 working days. Now further modifying this clause, RBI said that customers can’t be made liable at all if they notify the unauthorised transactions within 3 working days. These rules will be applicable for third party breach, where deficiency lies neither with the bank nor with the customer but lies elsewhere in the system.

2. RBI MAKES MOBILE PHONE MANDATORY FOR DOING ELECTRONIS BANKING TRANSACTIONS: The Reserve Bank of India has said that owning a mobile phone is mandatory for customers wishing to do electronic banking transactions and has instructed banks to make SMS alerts mandatory in such cases. It has instructed banks not to offer electronic banking facility to customers who do not provide mobile numbers to the bank.

3. OVER 90% INDIAN CUSTOMERS STILL PREFER BRANCH BANKING OVER ONLINE BANKING:While the government has been pushing for cashless transactions and asking the public to go online when it comes to banking, a new study has revealed that 94% of retail banking customers have visited the bank branches at least once in the past 12 months. Most banking relations still begin and continue at the branch. However, there is great potential for banks to move more into digital space.

4. IT IS NOT MANDATORY TO LINK YOUR BANK ACCOUNT WITH AADHAAR CARD: There is no notification from RBI to link a bank account with Aadhaar number. By collecting Aadhaar details from their customers the banks are trying to pre-empt the possibility of it becoming compulsory in future. Another reason why banks are linking Aadhaar with the bank accounts is to promote Aadhaar enabled transactions without the use of debit or credit cards.

5. CREDIT CARD BILL PAYMENT EXEMPT FROM CASH DEALING LIMIT: The Finance Act 2017 has banned cash transaction of Rs. 2 lakh or above with effect from April 1, 2017. However restrictions on cash dealings of Rs. 2 lakh or more will not apply to credit card bill payments, business correspondents appointed by banks and issuers of prepaid instruments. This has been clarified by the revenue department.

6. HOW “BHIM APP” IS TRYING TO CATCH UP WITH OTHER MOBILE WALLETS: The Bharat Interface for Money ( BHIM) has seen a great many downloads of around 19.16 million since its launch but only 5.1 million users are able to link their bank accounts with the App. In contrast other payment apps like Oxigen wallet currently has 30 million active users and Mobikwik has 55 million active users. Recently BHIM has come up with additional features like Aadhaar Pay, Referral bonus and cash back offers to make it more popular.

7. BANKING STAFF THREATENS STRIKE ON AUGUST 22 OVER MERGERS AND NPA ISSUES:Employees of PSU banks are going on one day strike on August 22nd against the governmentproposal to merge state-owned banks. Besides, they want the government and RBI to declare wilful default as a criminal offence and desist from writing off the corporate Non-Performing Assets (NPAs) or bad loans. They also have urged the government to look into the GST rates on bank service charges because of which the service charges have increased, which in turn has burdened the customers.

WEEKLY FINANCIAL SNIPPETS- 01/07/2017

1. RBI STARTS THE PROCESS OF PRINTING Rs. 200 CURRENCY NOTES: Reserve Bank of India has started the process of printing new Rs.200 currency notes. This appears to be the last exercise under the re-monetization steps taken by the government and this step is taken to help ease consumer transactions. For day-to-day transaction purposes, the introduction of Rs.200 notes will add to the comfort of the public at large.

2. RBI SAYS- BANKS NOT RESPONSIBLE FOR THEFT FROM BANK LOCKERS:Banks are not liable to compensate its customers in case of theft or burglary in safe deposit lockers. This is revealed in an RTI response by RBI and 19 PSU banks. Some banks, in their locker hiring agreements, have made it clear that any item stored in the locker is at the customer’s own risk and he/she may insure the same in his/her own interest.

3. BANKS FACE 60% “HAIRCUT” ON TOP 12 BAD LOANS: Dragging defaulters to the National Company Law Tribunal ( NCLT) and initiating insolvency proceedings will take heavy toll on bank finances. According to CRISIL, banks will have to sacrifice nearly 60% of the value of the loans extended to 12 indebted companies which the banks have referred to the NCLT at the instance of RBI.

4. RBI PROVISIONING “DIKTAT” SHOCKS THE BANKS: The Reserve Bank of India shocked the banks this week by demanding a steep hike in provisioning requirements for loans being referred to the bankruptcy courts, a move likely to take a Rs. 50,000 crore toll on their earnings this fiscal. RBI has instructed banks to set aside 50% of the loan amount as likely losses for all cases referred to the insolvency process. RBI also said that provisioning should be 100% in those cases that do not get resolved in the initial mandatory period for restructuring and instead are forced into liquidation. But banks have been given time of three quarters to spread the provisioning requirements from June 2017 till March 2018.

5. RBI ASKS BANKS TO RESOLVE 55 DEFAULT CASES IN 6 MONTHS OR FACE IBC: The Reserve Bank of India has asked banks to resolve 55 high value cases of bad loans within 6 months or face the prospect of being directed to go in for the new insolvency resolution mechanism as a part of the strategy to tackle the bad loans scenario on a war footing basis.

6. FINANCIAL YEAR LIKELY TO BE CHANGED FROM 2018: The financial year in India could commence from January instead of April from the year 2018. The government appears set to make the historic transition to end the 150 year old tradition. Accordingly, the next budget could be presented by the centre in November this year.

7. AADHAAR-PAN LINKING MANDATORY FROM JULY 1st: Finance Ministry has made itmandatory to link Aadhaar with PAN Number. Individuals having PAN No. will have to link it to their existing Aadhaar Number from July 1st Every person who has been allotted PAN shall intimate his Aadhaar number to the tax department.