WEEKLY FINANCIAL SNIPPETS-30/09/2017

1. LENDING RATE CUTS IS THE KEY TO ECONOMIC RECOVERY:Lending rate cuts are the only way to economic recovery as it would perk up demand and push investments. This is as per one economic survey report. The report said that structural reforms take longer time of 5-10 years to reflect in growth rate. Lending rate cuts would push demand, put idle factories to work and spark off investment.

2. SBI SAYS FINE FROM MINIMUM BALANCE DEFAULTS TO AMOUNT TO Rs 2,000 CRORE: SBI expects to realise over Rs 2,000 crore from Savings Bank account holders as penalty for not maintaining minimum balance in their account. Till June quarter end the Bank has recovered Rs 235 crore. The sum thus collected will be used to partly cover the costs incurred on linking of accounts with Aadhaar which is a very costly affair. Other than this, the cost of maintaining ATMs and business correspondents is also very high.

3. BANKING SECTOR’S CREDIT DEMAND TO GET BOOST FROM GOVERNMENT PROJECTS: State bank of India Chairperson Ms Arundhati Bhattacharya said that the banking industry is poised for a recovery in the credit demand as it stands to gain from the number of projects announced by the government. We just saw the declaration of bullet trains and various other corridors which are expected to come up soon and these projects will give a boost to the credit and investment cycle.

4. NPA RESOLUTION- BANK UNIONS ARE SCEPTICAL OF BANKRUPTCY CODE: Bank unions have claimed the bankruptcy process initiated by various lenders for NPA resolution will not help in bringing the money back. The Union press releasesaid the bankruptcy process is not going to yield desired results in terms of NPA recoveryas the recovery process is going to be very slow and there is no guarantee of banks getting back the entire dues. Banks will incur further loss on account of these accounts.

5. CARD PAYMENTS DRIVE MAY LAND BANKS WITH Rs.3,800 CRORE ANNUAL HOLE: As per a SBI research report, The government’s digital payments push, mainly online card payments through PoS machines may bleed the banks by a whopping Rs 3,800crore annually. The number of PoS terminals post –demonetization has increased from 13.8 lakh in March 2016 to 28.4 lakh as of July 2017.There is a huge cost involved in maintaining these PoS machines and the net loss would be a whopping Rs 3,800 crore annually. (This is all banks put together).

6. ALLAHABAD BANK TO INTRODUCE 2-TIER SAVINGS BANK INTEREST RATE FROM OCTOBER 1st: Following in the footsteps of some of the PSU banks which have already reduced the interest rate on Savings bank deposit, Allahabad Bank is going to introduce 2-tier savings interest rate from October 1st. It will be 3.5% interest for accounts having less than Rs.40 lakhs balance and 4% for accounts having balance of Rs.40 lakh and above.

7. NO COUNTING MACHINES BUT SOPHISTICATED CURRENCY VERIFICATION UNITS BEING USED FOR SCRAPPED NOTES: The Reserve Bank of India is not using counting machines for tallying the scrapped demonetized notes but it is using sophisticated Currency verification and Processing Machines (CVPS) for checking the numerical accuracy and geniuses of currency notes in all its offices.

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WEEKLY FINANCIAL SNIPPETS – 23/09/2017

1. PEER-TO-PEER LENDING TO BE TREATED AS NBFCs: After a year or more of due diligence and analysis, RBI has notified that peer-to-peer (P2P) lending platforms need to be regulated and treated on par with Non-Banking Financial Companies (NBFCs).While final guidelines are awaited, the P2P lenders have welcomed this move as they feel these regulations would help bring credibility and trust in to the business. This will also bring in a lot of legal clarity as the P2P lenders will have the rights to take legal action against the defaulters.

2. YES BANK TRIMS ITS STAFF STTRENGTH BY NEARLY 2,500: Yes Bank Ltd has gone in for “Rationalisation” of workforce as it has reduced its workforce by nearly 2,500. YesBank report said that digital transformation has created certain redundancies which require rationalisation of the workforce.

3. PRIVATE BANKS’ SHARE IN CREDIT WILL TOUCH 40% BY 2020: As per a report from credit rating agency ICRA, Indian Banking is going through a transition, with both Private and public sector banks ( PSBs) facing different challenges. PSBs are plagued with poor asset quality issues, leading to higher credit costs and losses. Due to this fact the share of private sector banks in banking sector advances will reach a level of around 40% by 2020. As of March 2017 private sector banks’ share in total advances was 27.5%.

4. CHEQUE BOOKS, IFS CODES OF 6 MERGED SUBSIDIARY BANKS WILL BE INVALID FROM SEPTEMBER 30th :State Bank of India has notified its customers that cheque books and IFS codes of six of its merged subsidiary banks would be invalid from September 30th and has asked them to submit new applications for fresh cheque books.

5. AIRTEL PAYMENT BANK ROLLS OUTUPI-ENABLED DIGITAL PAYMENTS: Airtel Payments Bank has become the first payments bank in India to integrate Unified Payments Interface (UPI) on its digital platform. This will enable Airtel Payments Bank customer to make secure digital payments to online/offline merchants and making instant money transfers to any bank account in India. They will also be able to link their accounts on BHIM app and make UPI payments.

6. INDIAN BANKS NEED $ 65 BILLION CAPITAL TO MEET BASEL-III NORMS BY MARCH 2019: As per a report from Fitch Ratings, Indian Banks will need an additional capital of $ 65 billion       (approximately Rs 4,16,000 crores) to meet global Basel-III banking norms by March 2019. Whereas the government has budgetedan $ 11 billion (Rs 70,000 crores) capital infusion into state-run lenders till March 2019, the state-run banks have limited options to raise the required capital.

7. CENTRE CLEARS BILL TO INCREASE TAX FREE GRATUITY LIMIT TO Rs 20 LAKH: The Centre has approved an amendment Bill that increases the limit of tax free gratuity up to Rs 20 lakh for employees belonging to public as well as private sector. Once this bill is passed, all employees that are not covered under the Central Civil Service (Pension) Rules will be able to avail the tax free gratuity of up to Rs.20 lakh.

WEEKLY FINANCIAL SNIPPETS- 16/09/2017

1. CREDIT GROWTH OF BANKS SLOWED DOWN TO 8.1% IN 2016-17: As per Bradstreet Report, the credit growth of all banks slowed down to 8.1% in 2016-17, down from 10.9% in the previous year. Aggregate deposits improved to 15.9% in the same period compared to 9.3% in the previous year. The deposit growth can be attributed to the massive inflow of funds in to the banking system after demonetization. Nevertheless the banks’rising NPAs(Non-Performing Assets) is a big headache for the PSU Banks.

2. IT MAY TAKE ATMs 3 MONTHS TO DISPENSE Rs.200/- NOTES: While RBI has already launched Rs. 200 currency notes in the system a week ago, it may take up to 3 months for ATMs to dispense the new currency as it will involve huge exercise of recalibration. The banks have not yet got the supply of Rs. 200 currency but some banks have asked the ATM companies to begin testing the new note for the recalibration. It is yet to be seen whether all the 2.2 lakh ATM machines across the country would be recalibrated for dispensing the new note.

3. SBI CARDS TO START CONTACTLESS PAYMENTS SOON: SBI Cards has doubled its base in three years to over 50 lakhs cards. SBI Cards is updating its mobile application and all its customers could soon make payments merely by tapping their smartphone on a swipe machine. Some card holders are already using this cardless payment facility on the Samsung Pay Platform. The bank plans to launch its own proprietary application which enables virtualisation of the card and any smartphone subscriber can pay by just tapping his mobile phone if he is a SBI card holder.

4. NBFCs’ SHARE IN LOANS REACH AN ALL TIME HIGH:Non-BankingFinance Companies (NBFCs) are on a roll as their share in retails lending in India has reached an all-time high of 36% at the end of March 2017. They continue to grow faster than both private and public sector banks. NBFCs have shown a growth of 17% over the previous yearas against a growth of 15% as reported by private sector banks and 2.5% decline in retail loans by PSU banks.

5. GOVERNMENT MUST PUMP IN MORE CAPITAL IN TO PSU BANKS FOR EFFECTIVE NPA RESOLUTION: Fitch Ratings has said that weak capital position of PSU banks have a major negative influence on Indian Banks viability reports and these banks will come under more pressure if the problem is not addressed. The report says the government has to pump in additional capital in to PSU banks to make them tackle the NPA menace effectively and raise their loan growth.

6. HDFC BANK’S “EVA” BECOMES INDIA’S SMARTEST CHATBOT: HDFC Bank, in collaboration with Bangaluru based company Senseforth has launched “EVA”( Electronic Virtual Assistant) in March this year on its website. Since then EVA has interacted with over 5, 30,000 unique users, holding 1.2 million conversations and has addressed 2.7 million customer queries to become India’s largest banking “Chatbot”.

7. BANKS WITHOUT AADHAAR ENROLLMENT CENTRES TO FACE FINE FROM OCTOBER: The UIDAI has given banks one month time to open Aadhaar enrolment centres in a stipulated 10% of branches and if this is not implemented, a fine of Rs. 20,000 per uncovered branch will be imposed after September 30th.

8. SBI TOO LAUNCHES ITS OWN AI-POWERED “CHATBOT”: State Bank of India too has launched its own chatbot to handle customer queries and guide them through range of retail products and services. The chatbot is named “SBI Intelligent Assistant” (SIA) and is currently undergoing beta testing.

WEEKLY FINANCIAL SNIPPETS- 09/09/2017

1. GOVERNMENT EXPLORING MORE WAYS TO MAKE INDIA ADIGITAL ECONOMY: Central Government, with the help from consulting agency Price waterhouse Coopers (PWC)has identified many ways to increase the people’s proactivity to digital payments. The government is trying to digitise payments at government hospitals, canteens, unreserved railway ticket counters, fertilizer subsidy payments and school fees. The government’s immediate goal is to reach 25 billion transactions for the current fiscal.

2. PSU BANK HEADS PUT SOME CONDITIONS FOR MERGERS TO HAPPEN: Top brass of prominent state-run banks like PNB, Canara Bank and Bank of Baroda which are positioned as acquiring banks, haveset certain pre-conditions to acquire smaller banks.Some of the key terms set by these acquiring banks are that the target bank be a profit making one and the current management is given at least a three year term after the merger to ensure smooth transition. Besides this, the acquiring banks have also demanded capital from the government even if the target bank is well-capitalised.

3. RBI INCLUDES HDFC BANK LTD IN “TOO BIG TO FAIL” LENDERS LIST: Private sector lender HDFC Bank Ltd has been declared a Domestic-Systematically Important Bank ( D-SIB). With this, the bank has joined State Bank of Indiaand ICICI Bank Ltd, which have been tagged as D-SIB or “Too-Big-to Fail” banks. Such classification means the collapse of these bankscould lead to cascading effect on the entire economy of the country. Such banks are also mandated to maintain a higher share of risk-weighted assets as tier-I equity.

4. CAIT SUGGESTS TAX REBATES TO CONSUMERS & TRADERS TO PROMOTE DIGITAL /CASHLESS MOVEMENT: The Confederation of All India Traders (CAIT) has suggested several measures to the government to achieve the goals of cashless economy and reaching 2500 crore digital transactions this fiscal. The confederation says that certain tax rebates to consumers for some types of digital payments and similar rebates to be extended to the traders as well.

5. ITR FILING DATE EXTENDED TO OCTOBER 31ST: The Ministry of Finance has announced that the “Due-Date” for filing Income tax Returns and various reports of audit prescribed under the IT Act, 1961 has been extended from September 30th to October 31st

6. FINTECH-BANK COLLABORATION YEILDS SMARTER OUTCOMES:RBI Deputy Governor Mr. B P Kanungo has said that Fintech companies need to collaborate with Banks for providing better service to the customers. This kind of collaboration will lead to smart solutions for better customer satisfaction.

7. RBI DEPUTY GOVERNOR SUGGESTS SELLING OFF PSU BANK LAGGARDS: The Deputy Governor of RBI Mr. Viral Acharya in one of his speech has suggested that the state run banks which are not doing well and are in “Intensive care unit”, be sold off to private sector banks as the time may be running out for state-run banks to clean-up and recapitalise.We feel that such a statement from the highest authority at this juncture is not justified, considering the fact that some of the Bank heads of acquiring banks have put some conditions to the government for mergers to happen. And selling off sick state-run banks to private sector will not solve the NPA menace that is eating up the economy.

WEEKLY FINANCIAL SNIPPETS- 02/09/2017

1. GDP GROWTH SLOWS TO 3-YEAR LOW: India’s GDP growth has slumped to a three year low in the June’17 quarter. GDP slowed down to 5.7% in April- June quarter from 6.1% in the preceding quarter. This is mainly because of the slowdown of manufacturing sector as the production was the lowest.The manufacturers were busy to get rid of old stocks rather than producing new ahead of July 1st rollout of GST. Along with manufacturing, slowdown in construction and mining sectors too pulled down the GDP. Experts fear full year growth to be below 7%.

2. FAKE NOTES MAY BE MORE THAN DOUBLE OF ESTIMATES:The amount of fake (counterfeit) notes in the system is more than double of what the Reserve Bank of India had estimated.The likely quantum of fake notes in the system is estimated to be as high as Rs. 23,235 crores. Immediately after the note ban, RBI conducted a survey of 1,000 currency chests across the country and the survey has revealed 7.1 pieces per million for Rs. 500 notes and 19.1 pieces per million for Rs. 1,000 notes. Going by the number of Rs. 500 and Rs. 1,000 notes in circulation as of March 2016, the amount of fake currency in the system could be a staggering Rs.23,235 crores. Considering the amount involved, the government, RBI and the banks have to decide how to share the liability. And given the estimates of fake notes, there could be severe impact on banks’ balance sheet.

3. PSB MERGERS WILL RAISE BANK RATINGS: As per Moody’s Investors Service report, merging India’s public sector banks will improve their rating because it will provide efficiencies of scale and enhance quality of corporate governance. However, infusion of funds by the government will be a key factorfor these banks as many of the banks have weak capital adequacy.

4. BUYERS’ INTEREST WILL BE PROTECTED IN THE STALLED PROJECTS THROUGH “RERA”:The government has assured home buyers that their interest will be protected in the stalled projects through newly implemented Real Estate Regulation Act (RERA). It says buyers’ interest is the government’s top priority.

5. BANKS UNDER RBI’S “PROMPT CORRECTIVE ACTION”(PCA) FACE PROBLEMS: Banks which have been placed under restrictions through PCA by RBI to improve their financials are feeling the heat, as their deposit growth have fallen below industry level.Their customers under panic are withdrawing deposits or closing their accounts with such banks.

6. BOOST FOR THE GOVERNMENT—GST REVENUE HITS Rs 93,000 CRORE MARK: The government has collected Rs 92,283 crores from GST and this is just 64% of the tax payers who have filed the returns for July 2017. So the final amount will be even more.

7. NATIONALISED BANKS EXEMPTED FROM CCI APPTROVAL FOR MERGERS: Mergers and acquisitions beyond a certain threshold compulsorily require clearance from Competition Commission of India (CCI). Now paving the way for fast-tracking consolidation amongst the PSU banks, the government has exempted mergers of nationalised banks from seeking permission/approval from CCI.