WEEKLY FINANCIAL SNIPPETS- 30/12/2017

1. RBI WILL NOT EXTEND DEADLINE FOR 2nd LIST OF DEFAULTERS: In the month of August 2017 Reserve Bank of India had announced a list of 28 large defaulting companies and had instructed the banks to find a resolution plan before 31st December 2017 in accordance with a formula prescribed by it. If the banks failed to do so, the companies had to be referred to the National Company Law Tribunal (NCLT). Now the RBI has turned down the request from banks to extend the deadline for restructuring these defaulting company accounts. This means the companies like Videocon, Jaiprakash Industries, Uttam Galva Steel, Essar Projects etc will have to be referred to NCLT.

2. COMPLAINTS AGAINST PRIVATE BANKS GROWING AT A FASTER PACE THAN PSBs: The Office of the Banking Ombudsman (OBO) has received 35,080 complaints against private banks, registering a 30.2% increase over last year. In contrast, complaints against Public Sector banks grew at about 28% over the last year.

3. RISING NPAs IN EDUCATION LOAN ADD TO BANKS’ STRESS: Education loans have started becoming NPA in large numbers with defaults in repayments rising to 7.67% of the total outstanding education loans. As per the IBA data, the total outstanding education loan in the banking sector in 2016-17 was Rs. 67,678 Crore, of which Rs. 5,191 crore was NPA. This is despite certain changes made in the education loan scheme such as extension of the repayment period to 15 years and the launch of Credit Guarantee Fund Scheme for education loans. In our opinion this means that there is very low growth as far as the employment opportunities are concerned.

4. RBI’S MANDATE FOR PROVIDING DOORSTEP BANKING SPURS BANK HIRING: with the recent mandate issued by RBI for providing doorstep banking service to the senior citizen above the age of 70 years and the differently –abled, many banks are reviving their hiring plans to meet the new norms.

5. BANKS LOST NEARLY Rs.17,000 CRORE TO FRAUDS LAST FISCAL: The Reserve Bank of India has informed that as per the fraud monitoring reports submitted by scheduled commercial banks, the amount lost on account of frauds during 2016-17 was Rs. 16,789 crore. Now RBI has formed an inter-disciplinary standing committee on cyber security comprising of Information Security Audit, forensic and cyber security experts.

6. INDIA ONE AMONGST THE MAJOR NATIONS TO HAVE HIGHER BAD LOANS RATIO: The 9.85% ratio of bad loans or NPAs in banks has put India in the group of those nations that have very high Non-Performing Assets. The only major countries with similar ratios are the troubled EU nations namely Portugal, Italy, Ireland Greece and Spain. According to a research survey done by rating agency CARE, India’s NPA ratio (Excluding Restructured assets) is one of the highest in the group of “ High-NPA” nations.

7. SIX STRESSED BANKS TO GET Rs 7,500 CRORE CAPITAL INFUSION: Bank of India, IDBI Bank, UCO bank, Bank of Maharashtra, Dena bank and Central Bank of India are the 6 most stressed banks who will get fresh equity infusion of over Rs 7,500 crore from the government. This is provided immediately to meet the prescribed regulatory capital requirement. But the government officials said that it will monitor their functioning to ensure that they undertake clean, responsible and prudent business to enhance stakeholder value.

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WEEKLY FINANCIAL SNIPPETS- 23/12/2017

  1. FINANCE MINISTER SAYS STRENGTHENING PUBLIC SECTOR BANKS IS TOP PRIORITY: Finance Minister Arun Jaitley has said that strengthening the Public sector banks is the top most agenda of the government. The government has already announced the detailed recapitalisation move and this will ensure to some extent that banks are able to support their lending capacity. Mr. Jaitley gave more emphasis on MSME sector lending as he said that MSME sector has been on receiving end in last few years particularly with lending capacity of banks being depleted as a result of NPAs.

 

  1. RBI PLACES RESTRICTIONS ON BANK OF INDIA: Reserve Bank of India has triggered Prompt corrective Action (PCA) on Bank of India in view of high Non-Performing Assets and negative return on assets for two consecutive years. This makes Bank of India 9th bank to face PCA in a span of 10 months.

 

  1. CONSUMER CONSENT MUST FOR CHANGING SUBSIDY- RECEIVING BANK ACCOUNT: The government has issued notification directing banks and National payment Corporation of India (NPCI) to change the process of mapping Aadhaar linked bank accounts for receiving government subsidies. Further the government has also temporarily halted the existing provision of overwriting existing subsidy-linked bank accounts with freshly opened /mapped Aadhaar accounts. NPCI will now allow override of account request only if it is accompanied by name of his current bank on Aadhaar Payment Bridge (APB) mapper and a confirmation from the requesting bank that it has obtained the requisite consent of the account holder for switching to the requesting bank.

 

  1. GOVERNMENT TO BEAR MDR CHARGES ON DIGITAL PAYMENT TRANSACTIONS UPTO Rs. 2,000: The government will bear the Merchant discount Rate (MDR) on digital transactions up to Rs. 2,000. Such MDR will be borne by the government for two years with effect from January 1, 2018 by reimbursing the same to the banks.

 

  1. CABINET CLEARS AMENDMENT TO LAW FOR PAYMENT OF INTERIM COMPENSATION IN CHEQUE BOUNCE CASES: The Cabinet has approved an amendment to the Negotiable Instrument Act to allow for payment of an interim compensation in cheque dishonour cases with a view not to allow unscrupulous elements by holding payments and pending long trials.

 

  1. RBI BLAMES I-BANKERS FOR RISE IN NPAs: RBI has blamed conflicts of interest among merchant bankers as one of the prime reasons for faulty project appraisals of big corporate/consortium advances that has led to piling up of huge non-performing assets in the system which has crossed a whopping 10 trillion mark as on September 2017. RBI in its Financial Stability Report (FSR) has pointed out certain basic deficiencies with regard to the appraisal of long-term projects with a significant gestation time.

 

  1. AIRTEL PAYMENT BANK PENALISED FOR OPENING PAYMENT BANK ACCOUNTS WITHOUT THE USER CONSENT: Airtel Payments Bank has been penalised with Rs 2.5 crores as an interim penalty by Aadhaar-issuing body UIDAI for allegedly opening payments bank accounts of its mobile subscribers without their informed consent.

WEEKLY FINANCIAL SNIPPETS-16/12/2017

  1. ATMs NOT TO BE REPLENISHED WITH CASH AFTER 9 PM: The government has proposed some changes for replenishment of cash in ATMs. Cash Transportation agencies must collect cash from the bank in the first half of the day and NO cash loading of the ATMs or any cash movement should be done after 9 pm. These Standard Operating Procedures (SOPs) have been prepared after a spurt in attacks, hijacking and looting of cash vans.

 

  1. RBI INVOKES PROMPT CORRECTIVE ACTION ON CORPORATION BANK: Reserve Bank of India has invoked Prompt Corrective Action (PCA) on Corporation Bank as the Bank’s bad loans have increased sharply. This makes Corporation bank 8th bank to face restriction in a span of 10 months. A statement issued by Corporation Bank said, this action will not have any material impact on the performance of the bank and will contribute to the improvement in internal control of the bank in its activities.

 

  1. INSOLVENCY AND BANKRUPTCY BOARD TO DECIDE ON THE FATE OF THE LOAN GUARANTORS: The governing body of Insolvency & Bankruptcy Board of India (IBBI) is expected to finalise broad guidelines for dealing with personal guarantors & third party guarantors of defaulting loan accounts. This is seen as an additional tool to punish truant promoters and a strong recovery mode.

 

  1. YOUR SOCIAL MEDIA POSTS MAY DECIDE WHETHER YOU WILL GET A LOAN OR NOT: Many Private Sector Banks are spending more time in reading your ( the prospective customer’s) Facebook posts, SMS’s and payment data available on Mobile phone to decide whether to sanction a loan , rather than relying solely on credit ratings. As banks sharpen their internal assessment of risk before lending, they are investing in Data Analytics ( which is gathering data of social media) which captures the borrowing behaviour of a customer.

 

  1. BANKS HIRE EX-RBI MEN TO AVOID SLIP-UPS: Tighter regulations, closer scrutiny and higher possibility of fines by RBI has increased the importance of compliance for banks in recent years. As a result, former officials from RBI’s Banking Supervision Department are being hired by banks and are in charge of this key functioning department. Many Private banks, small banks and recently launched Paytm Payments Bank have former RBI officials heading their compliance department.

 

  1. CENTRE EXTENDS DEADLINE FOR LINKING OF AADHAAR TO BANK ACCOUNTS: The government has extended the deadline for mandatory quoting of Aadhaar number for certain financial transactions (like bank accounts, mutual funds) and linking of Aadhaar to Mobile numbers. Earlier the deadline was December 31st 2017, but now as per the gazette notification the extended date is till 31st march 2018.

 

  1. ICICI BANK LAUNCHES “SMART VAULT”: ICICI bank has launched its technology driven “Smart Vault”, most advanced and first-of-its-kind locker service in India. The Smart Vault is powered by revolutionary robotic technology which minimises human intervention while operating the bank locker. The advanced Radio Frequency Identification (RFID) enabled mechanism scans your request and retrieves your locker using robotic arm and your locker is made available to you conveniently at a kiosk. After your work with locker is over, the robotic arm retracts your locker back to the locker room. Smart Vault is equipped with the most evolved and intelligent security system.

WEEKLY FINANCIAL SNIPPETS- 09/12/2017

  1. SBI TO REDESIGN ENVELOPS FOR DISPATCHING INCOME TAX CHEQUES: State Bank of India will “redesign” the envelops which it uses to dispatch tax refund cheques of customers. This is to conceal their PAN No and contact numbers after an active customer raised objection that the crucial information like PAN No and contact numbers are visible in the earlier envelops which may result in misuse by some miscreants. The customer had complained to both RBI and SBI stating that SBI is violating RBI’s directions on protection of customer information. Accordingly now SBI has responded positively by agreeing to redesign the envelops.

 

  1. SEBI CLARIFIES NORMS FOR NEW MUTUAL FUND CLASSIFICATION: The Securities and Exchange Board of India (SEBI) has amended its October 6, 2017 circular and has modified certain norms for mutual fund classification that will make compliance easier for asset managers. In the reworked circular the SEBI has clarified on market capitalization norms for equity funds, while allowing certain other fund categories to invest in a wider range of securities.

 

  1. PUBLIC SECTOR BANKS LOOK TO FRAME COMMON RULES TO VALUE STRESSED ASSETS: The Finance ministry along with the state run banks is working to frame a common set of rules for valuation of stressed assets for faster resolution of loans extended by consortia of banks. It is observed that under cases of joint lending, banks are unable to arrive at a common valuation, which stalls the resolution process. Further individual banks also fear that if they agree to a certain haircut, it may not stand the scrutiny of vigilance agencies. The new norms will address such problems.

 

  1. PAYTM BANK AIMS FOR OVER 1 LAKH ATM BANKING OUTLETS: The newly launched Paytm Payments Bank is all set to add over I lakh ATMs pan India. These are called “Paytm Ka ATM”. The Paytm Ka ATM outlets  is a step by Paytm  towards ensuring that every Indian  has access to banking facilities. These ATMs will be neighbourhood shops, which would act as business correspondents for Paytm and offer services like opening of SB accounts, Cash Deposits and withdrawals.

 

  1. RBI RINGS ALARM ON BITCOINS, CAUTIONS CUSTOMERS : Bitcoin is a cryptocurrency which    can be purchased and stored online in a digital wallet from any of the Bitcoin exchange service provider that is active in India. You can later convert them into local currency. Reserve Bank of India is not impressed with the cryptocurrency— Bitcoin. Bitcoin is all set to touch a record $12,000 but RBI has cautioned Bitcoin players that they face potential risks, including financial, legal and those related to customer protection. In a statement RBI has clarified that it has not given any licence or authorisation to any entity to operate schemes or deal with Bitcoin or any other cryptocurrency.

 

  1. RBI REDUCES FEES ON DEBIT CARD PAYMENT FOR SMALL SHOPS : RBI has decided to reduce the Merchant Discount Rate (MDR) for debit card transactions. Under the new rules there are different slabs depending on the turnover of the business. For small business (with a turnover of Rs 20 lakh or less), the MDR cap would be @ 0.4% or Rs 200/- whichever is lower. For other merchants, the MDR cap would be 0.9% or Rs. 1,000 per transaction whichever is lower. But payment gateways are crying foul stating that with no equitable distribution of MDR, the slashing of rates will only add to their pain.

WEEKLY FINANCIAL SNIPPETS – 02/12/2017

  1. GOVERNMENT PLANS GST SOPS FOR DIGITAL PAYMENTS: The Centre has proposed a 2% discount in the GST for consumers who make digital payments. The proposal is likely to be taken up in the next GST council meeting in January. The move if approved will boost the government’s efforts for cashless economy.

 

  1. CRISIL SAYS NBFCs WILL EAT INTO BANKS’ CORPORATE CREDIT SHARE: Non-Banking Financial Companies have become aggressive in lending to mid-sized companies linked in real estate and infrastructure. The share of NBFCs in such loans in Indian credit market has increased by 3% and presently it is 19%. CRISIL has predicted that the next three years also the NBFCs will continue aggressive lending and this would eat up Banks’ share.

 

  1. I-T NOTICES TO 1.16 LAKH INDIVIDUALS FOR CASH DEPOSIT OF OVER Rs 25 LAKH: The Income Tax Department has issued notices to 1.16 lakh individuals and firms who made cash deposits of more than Rs.25 lakhs in bank accounts post note ban but have failed to file tax returns by the due date. Besides this the I-T Department is scrutinising those individuals and firms who have deposited large sum of cash but have filed their tax returns in time.

 

  1. AFTER GST CHANGES ROLLLED OUT, CENTRE ALLOWS FIRMS TO PASTE NEW MRP STICKERS: Following the changes being put in effect on GST rates for about 200 items, Government is allowing firms to paste stickers on packed products to reflect the new MRP. This will be allowed till December 31, 2017.

 

  1. I-T DEPARTMENT MAY TAX UNSOLD REALTY INVENTORIES TO CURB HOARDERS: The Income Tax Department may levy fresh tax on the unsold inventories in the real estate sector from the next financial year. This is to check hoarding. Unsold flats have been lying with many developers for more than a year and this may be taxed from next year. This is a move to curb strategy of hoarding constructed property by developers in anticipation of price escalation in future.

 

  1. INDIA BECOMES 8TH BIGGEST EQUITY MARKET IN THE WORLD: India has surpassed Canada to become the 8th biggest equity market in the world. India’s market cap has swelled by 46.4% in 2017, faster than most of its emerging market peers.

 

  1. GOVERNMENT’S NEW PROPOSAL “BAIL-IN” FACES LOT OF OPPOSITION FROM ALL QUARTERS: The Centre’s proposed Financial Resolution & Deposit Insurance Bill ( FRDI) , which is aimed at plugging bankruptcies in the financial service sector, includes a special provision (“BAIL-IN”) which by definition allows the affected banks to use depositors’ money to absolve some of the losses. The bill has suggested the use of “Bail-in” provision, which may result in cancellation of a liability, which could include bank deposits or could lead to modification of the terms of contract or changing the form of asset class (SB amount converting to FD for a fixed term). The provision would be last in the line for payments in case of liquidation. The present Deposit Insurance Scheme will be subsumed by the new bill, but the Rs 1 lakh deposit insurance will not change. But the plan has generated lot of heat and opposition from all quarters like political parties and bank unions who have criticised the move. Now the government has hinted at reworking the provision. It says no commercial bank has been allowed to sink in the last 70 years and that implicit sovereign guarantee continues even with this new bill. So in our opinion the question arises as to  how safe is our Bank Deposits?

WEEKLY FINANCIAL SNIPPETS-25/11/2017

  • SPENDING ON INFORMATION-TECHNOLOGY BY BANKS AND SECURITY FIRMS TO TOUCH $9 BILLION: Information Technology (IT) spending in Indian Banking and Securities firms is expected to touch USD $ 9.1 Billion, an increase of around 11.7% over last year. This is because the transition of Indian Banking sector to a cashless society is creating many opportunities of technology investments into digital payments infrastructure.

 

  • SBI TO USE BLOCKCHAIN FOR SMART CONTRACTS AND KYC BY NEXT MONTH: . State Bank of India will roll out beta launches of Blockchain – enabled smart contracts. By next month SBI will also launch Blockchain enabled Know Your Customer (KYC) application. These two applications are part of BankChain, a community of 27 banks, which have joined hands to explore and build Blockchain solutions in India. The Blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.

 

  • NOW GET REWARED FOR PAYING INCOME TAX PROMPTLY: The Income Tax Department has proposed monetary rewards for honest taxpayers depending on the tax paid. The reward will be for taxpayers who are consistent in filing returns and have no outstanding tax liabilities. However if a tax payer defaults in the future, the tax department will deduct the monetary reward thus paid from his refund with interest.

 

  • GST RATE ON RESTAURANTS SLASHED TO 5%: The GST council has slashed the tax on restaurants to 5% for all restaurants, both AC and Non AC. Earlier a 12% and 18% GST was levied on Non AC and AC restaurants respectively.

 

  • CBDT DIRECTS IT DEPARTMENT TO REDRESS TAXPAYERS GRIEVENCES ON PRIORITY: Central Board of Direct taxes (CBDT) has asked the Income Tax department to take prompt steps and address the taxpayers’ grievances, especially those related to refunds and PAN related issues. The CBDT chairman has written to all the principal chief commissioners of the department in the country, underlying the high pendency of such complaints and has asked them to resolve them at the earliest.

 

  • GOVERNMENT SEEKS SPECIAL DIVIDEND FROM RBI FOR BANK RECAPITALISATION: The government has sought a special dividend from the RBI to fund a part of its Rs 2.11 lakh crore plan to recapitalise the public sector banks. The RBI has been asked to pay a

special dividend apart from the yearly surplus that it pays to the government. This dividend if agreed by the RBI will be used only for bank recapitalisation.

 

  • MOODY’S UPGRADES INDIA’S CREDIT RATING FOR FIRST TIME IN 13 YEARS: US based Moody’s has upgraded India’s sovereign credit rating by a notch to “ Baa2” with a stable outlook citing improved growth prospects driven by economic and institutional reforms. The rating upgrade comes after a gap of 13 years.

 

  • PRESIDENT APPROVES ORDINANCE TO AMEND BANKRUPTCY CODE: The government has amended the Insolvency and Bankruptcy Code to prevent wilful defaulters from bidding for stressed assets. The President has given approval for the said amendment which will be followed by cabinet approval.

WEEKLY FINANCIAL SNIPPETS- 18/11/2017

  • RBI INSTRUCTS BANKS TO PROVIDE DOORSTEP BANKING TO SENIOR CITIZEN ABOVE 70 YEARS & DIFFERENTLY –ABLED : Reserve Bank of India has instructed all banks to provide doorstep banking facilities to senior citizens of more than 70 years of age and differently-abled persons by December 2017. This is a very positive move by RBI and senior citizens and differently-abled persons can look forward to availing basic banking services right from the comfort of their homes.

 

  • HDFC BANK LAUNCHES SMART-UP ZONE IN ODISHA: HDFC Bank has rolled out SmartUp zone in Odisha at its Bhubaneswar Branch. The first SmartUp zone was launched by HDFC Bank in Delhi in October. SmartUp zone is an exclusive area of the branch dedicated to start ups. Through this zone, specially trained bank staff will offer tailor made banking and advisory solutions to entrepreneurs.

 

  • WILFUL DEFAULTERS WILL NOT BE ALLOWED TO BID FOR STRESSED ASSETS: SBI chairman Mr. Rajnish Kumar has said that banks will block efforts by wilful defaulters to bid for distressed assets in insolvency proceedings. He said that there is no place for wilful defaulters or people who have diverted funds as proved in the forensic audit. However he said that legally even the promoters were within their rights to bid for the stressed assets but banks would put some pre-conditions so that the wilful defaulters/promoters will not be able to bid for the said stressed assets.

 

  • BANKS RECAPITALISATION TIED TO REFORMS: The government which has announced the recapitalisation of state owned banks has said that the recapitalisation does not come on its own as it is followed and preceded by a whole lot of plans and reforms. Everything is linked to the reforms which each bank board will consider within a time frame and have to come out with plan of action. The reforms also include bank boards taking a stand and coming up with a clear plan on consolidation.

 

  • RBI REJECTS ISLAMIC BANKING IN INDIA: In a major move, the Reserve Bank of India has decided not to pursue a proposal for introduction of Islamic banking in India. The Reserve Bank said the decision was taken after considering the wider and equal opportunities available to all citizens to access banking facilities.

 

  • GOOGLE LAUNCHES “TEZ” APP: Google has officially launched a free mobile wallet in India and has named it “TEZ”. TEZ is a free mobile wallet that will let its users to link up their phones to their bank accounts for making online payments. TEZ App comes with a new technology- Audio QR ( AQR) which uses ultrasonic sounds to let you exchange money.

 

  • DEBIT/CREDIT CARDS AND ATMs WILL BE REDUNDANT IN FOUR YEARS : Niti Aayog CEO Mr.Amitabh Kant has said that debit cards, credit cards and ATMs will be redundant in next 4 years of time. People will start using their mobile phones for doing their financial transactions. He said that 72% of Indian population is averaging below 32 years of age and this young generation will prefer to use mobiles in future for all their financial transactions.

WEEKLY FINANCIAL SNIPPETS-11/11/2017

1. LINKING AADHAAR WITH INSURANCE POLICY MANDATORY: Insurance Regulatory & Development authority (IRDAI) has said that linkage of Aadhaar number with insurance policies is mandatory and asked insurers to comply with the statutory norms. The linkage of Aadhaar to Insurance policies is made mandatory under the prevention of Money-laundering Amendment Rules, 2017. Hence IRDAI has communicated to all Life and general Insurance companies to implement the linkage without waiting for further instructions.

2. SBI NET PROFIT DOWN BY 38% ON HIGHER PROVISIONING: State Bank of India’s standalone net profit declined by 37.9% to Rs. 1,581 Crores in the second quarter of FY 2018. This is because of higher provisioning. There was robust growth in other incomes and hence the Bank’s operating profit grew by 11.4% but due to higher provisioning the net profit was down by 38%.

3. HDFC BANK MAKES RTGS/NEFT TRANSACTIONS FREE: Private sector lender HDFC Bank has made online RTGS/NEFT transactions  free of cost from November 1, with an aim to promote digital economy. However, any RTGS/NEFT transactions carried out at the branch level will be chargeable. On the other hand, various charges like cheque–related transactions as well as request for additional cheque leaves will get costlier.

4. SBI EXPECTS MOST CASES FROM RBI SECOND LIST OF NPAs TO GO TO NCLT: State Bank of India expects most of the cases from RBI’s second list of large Non-Performing Assets (NPAs) to be referred to the National Company Law Tribunal (NCLT) for resolution under the Insolvency and bankruptcy Code (IBC). The country’s largest bank has an exposure of Rs. 26,636 crore to 27 of 30 such accounts listed by RBI.

5. DEMONETIZATION IMPACTS PEOPLE’S CURRENCY HOLDING HABITS : One year after the note ban, there is a significant drop in demand for currency due to a sharp rise in payments through digital means, digitization and changes in currency holding habits, according to a study by RBI. It is estimated that the total Currency In Circulation (CIC) has declined by around Rs 9 lakh crore between November 4, 2016 and January 6, 2017.

6. RBI INSTRUCTS BANKS’ TO HAVE IT EXPERTISE AT BANKS’ BOARD LEVEL: With cyber threats emerging as a major risk for the financial sector, the Reserve Bank of India has said banks need to have a an IT expert on board to ensure speedy implementation of measures to address this challenge. Reserve Bank’s Executive Director Meena Hemachandra said that with banking becoming more technology driven, IT expertise at the board level has become a necessity.