WEEKLY FINANCIAL SNIPPETS – 29/09/2018

  1. BAD NEWS FOR RENEWABLE ENERGY COMPANIES: The government has ruled out the possibility of giving priority status for renewable energy sector for limit less borrowing. At a time when Banks are reluctant to grant loans to renewable projects, it has been a long standing demand of this sector to give it priority status to trigger easy cash flow. Banks have been reluctant to fund renewable energy projects due to low tariffs, power evacuation issues and NPAs in the thermal sector.

 

  1. NO MORE COMMISSION FOR PSB STAFF FOR CROSS SELLING PRODUCTS: The government has asked the Public Sector Banks (PSBs) not to pay any commission to its employees for cross-selling of products. This could discourage PSB employees from cross-selling products like retail loans, insurance and mutual funds as now banks will stop paying cash incentives, rewards and recognition. On the other hand this would mean Public Sector banks like SBI and Bank of Baroda who were till now giving commission to its staff, are at a disadvantage over Private banks who have such schemes of rewarding its staff for cross selling.

 

  1. GOVERNMENT BEGINS CONSOLIDATION OF REGIONAL RURAL BANKS: The government has initiated the process of consolidation of Regional Rural Banks (RRBs) along with the Public Sector Banks and intends to bring down their numbers to 36 from the present 56. In this regard, the Centre has begun consultations with States as respective States are one of the sponsors of RRBs. The Sponsor banks have also been informed to formulate a road map for the amalgamation of RRBs within a State. The proposed amalgamation of RRBs will bring in better efficiency, higher productivity, improved Financial Inclusion and greater flow of credit to rural areas.

 

  1. RBI SETS THE RULE FOR JOINT PRIORITY SECTOR LENDING: The Reserve Bank of India has directed Public Sector banks to jointly lend to priority sector along with Non-Banking Finance Companies (NBFCs). RBI has now allowed this joint lending along with NBFCs to push priority sector loans and to reap the benefit of the strengths of two sets of lenders. The Priority sector will have the benefit of low cost funds from the banks and lower cost of operations of NBFCs which would be passed on to the ultimate beneficiary through blended rate and weighted average rate. A single blended fixed rate of interest will be offered to the ultimate borrower based on respective interest rates and proportion of risk sharing.

 

  1. GOVERNMENT TO TAKE ALL MEASURES TO ENSURE LIQUIDITY IN NBFCs: In the backdrop of the default on a series of its coupon payments by one of the biggest names in the Non-Banking Finance Companies (NBFCs)- Infrastructure Leasing & Financial Services (IL&FS) due to which there was panic selling in the equity market which pulled the markets down, the Finance Minister Mr. Arun Jaitley said that  the government is ready to ensure credit is available to Non-Banking Financial Companies and adequate liquidity is maintained/provided to the NBFCs.

 

  1. CURRENCY CIRCULATION SLOWS DOWN: Currency In Circulation (CIC), which increased substantially since the note ban in November 2016 has seen some slow down since May 2018. The Currency In Circulation increased from Rs. 9 trillion in January 2017 to Rs 19.5 trillion in May 2018. And the same is being maintained till September 2018. This may be because of a possible reason that people have cut down on their spending with the recent hike in petrol and Diesel prices particularly in rural areas.

 

  1. THREE STATES- MAHARASHTRA, KARNATAKA & TAMILNADU ACCOUNT FOR 40% OF TOTAL RETAIL LOANS: Maharashtra, Karnataka and Tamil Nadu together account for 40% of the total retail loans in the country as on June 30, 2018. This is despite having only 20% of the total population of the country. The growth in retail advances is driven by robust economic development and urbanisation.

 

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WEEKLY FINANCIAL SNIPPETS – 22/09/2018

  1. INDIA POST INVITES PROPOSAL FOR CONSULTANCY FOR SETTING UP INSURANCE ARM : India post has invited bids to appoint consultant for setting up separate insurance service arm. The consultant thus appointed will prepare project report on setting up of Postal Life Insurance (PLI), Strategic Business Unit (SBU), Impact assessment and overseeing the implementation thereof. The pre-bid in this regard was held on September 18Th.

 

  1. SBI TO INSTALL SOLAR PANELS OVER 10,000 ATMs IN 2 YEARS: State Bank of India is planning to install solar panels over around 10,000 ATMS across country in the next two years. Currently nearly 1,200 of the Bank’s ATMs are running on solar power.  The bank has already installed rooftop solar panels on 150 of its buildings across country and is in the process of identifying more such locations. The bank is also planning to replace all its bank vehicles with electric vehicles by 2030. The route map is to turn totally carbon neutral by 2030.

 

  1. BANK OF BARODA, VIJAYA BANK AND DENA BANK TO BE MERGED: The government has proposed the merger of Bank of Baroda, Dena Bank and Vijaya Bank and once the merger is through then this will be the country’s third largest bank. The combined entity will have a strong presence across nation with more than 34% of low-cost deposits (Savings + Current), a capital buffer of around 12%, and a total  business of around 15 lakh crore. Bank of Baroda is the biggest of the three with a total business chunk of Rs.10.29 lakh crore, followed by Vijaya Bank at Rs. 2.70 lakh crore and Dena Bank at Rs. 1.72 lakh crore. Shortly all the three bank boards will meet and after adequate consultation, will take a decision.

 

  1. GOVERNMENT DOUBLES NPA RECOVERY FOR PSBs FOR THIS FISCAL: The government expects the state-run banks to recover Rs 1.5 lakh crore of bad debts during the current financial year. This is double the amount that banks had managed to recover last year. Total NPA recovery during 2017-18 was Rs 74,000 crore. NPAs have been a major concern for public sector banks as almost all banks have been under losses because of this.

 

  1. E-COMMERCE FIRMS TO COLLECT 1% TAX AT SOURCE FROM OCTOBER 1st : The Finance Ministry has notified that from 1St October 2018, all E-Commerce firms shall collect an amount of 1% as Tax Collected at Source (TCS) under the Goods and Services Tax (GST) on the supplies made by them. Out of this, half will go to the state where the supply takes place and half to the Centre.

 

  1. SMALLER PSBs ASKED TO CONSOLIDATE OPERATIONS, AVOID COMPETING WITH LARGER BANKS: The government has asked smaller public sector banks to consolidate their banking operations in the same geographic area, close overlapping branches and avoid competing with larger banks and instead has asked them to focus on niche areas. The move comes close on the heels of government’s proposal to merge Bank of Baroda, Vijaya Bank and Dena Bank to create country’s third largest bank. Smaller banks should not be competing for large corporate loans or for sectors where they don’t have strength or capacity to lend. The government is planning National banks and Regional banks and existing lenders have to make plans for reorganising their organisational resources, human resource and Information technology systems. Finally the government is looking at trimming the number of banks to around 10 from the existing 21.

 

  1. BANKS UNDER PCA HAVE BEEN TOLD TO PRESENT THEIR TURN AROUND PLANS: Banks that are under Reserve Bank of India’s Prompt Corrective Actions (PCA) framework have been asked to present their turn-around plans and look at leveraging their competitive advantage for regional market business. Finance Minister will hold a quarterly review of the performance of these banks which are under PCA.

 

 

 

 

WEEKLY FINANCIAL SNIPPETS- 15/09/2018

1. BANK CREDIT ROSE BY 13.49% AND DEPOSITS BY 8.9%: Bank credit grew by 13.49% in the fortnight ended August 31, 2018. The total bank credit as on 31 St August 2018 stood at Rs. 87,89,259 crore. The credit during the same period a year ago stood at Rs. 77,44,237 crore. In the fortnight ended 31 St August 2018, deposits grew by a mere 8.8% to Rs 116,45,870 crore from Rs. 106,96,099 crore in the same period last year. Loans to Agriculture and allied activities rose by 6.6% during the same period.
2. RAHURAM RAJAN CAUTIONS ON MSME LENDING: Mr. Raghuram Rajan, former governor of RBI has warned that the next build-up of Non-Performing Assets (NPAs) could be in the loans to Medium Small and Marginal Enterprises (MSMEs) under the credit guarantee schemes. Mr. Rajan said that the government should now concentrate on sources of the next crises and should refrain from setting ambitious targets. He said that credit targets were sometimes achieved by abandoning appropriate due-diligence, thereby creating the environment for future NPAs. Both Mudra and Kisan Credit cards have to be examined more closely for potential credit risk. He also pointed out that the Credit Guarantee Scheme for MSME (CGTMSE) run by SIDBI is a growing contingent liability and needs to be examined with urgency.
3. MUTUAL FUND ASSETS SURPASS Rs. 25 TRILLION: The assets managed by domestic Mutual Funds Industry have crossed the Rs 25 trillion mark at the end of August 2018, marking a year-on-year growth rate of 25%. Out of this, Rs. 4.6 trillion was added in the last one year. This feat has been achieved by the industry in 25 years after it was opened for private investors. The Industry now has aimed to achieve the next 25 trillion in five years.
4. GOVERNMENT MAY END EPFO REGULATORY: The government is considering relieving the Employees’ Provident Fund Organisation (EFPO) of its regulatory duties and plans to create a separate entity to handle such regulatory functions. The idea and rationale behind the proposal is to avoid conflict of interest as now the EFPO is India’s largest provident fund provider and as well a regulatory.
5. NOW PAY TAX ON PROVIDENT FUND WITHDRAWAL: Provident Fund withdrawal consists of principal portion and interest earned on it portion. The taxability of the two differs based on the time of withdrawal. If the withdrawal is made before 5 years of continuous service then the entire contribution made by the employer is taxable and the tax would be deducted if the amount exceeds Rs. 50,000/-. And if the deduction has been claimed under section 80C while making such investment over the tenure of the service, then the entire contribution will be taxed.
6. INDIANS ARE MORE ADHERED TO PERSONAL LOANS: According to RBI data, in May 2010, the total outstanding personal loan amount with banks was Rs. 5.89 lakh crore. This amount as on June 2018 was Rs. 19.33 lakh crore. Consumer durable loans as on May 2010 were Rs. 8,010 crore, and on June 2018 it was Rs. 20,300 crore. Outstanding credit cards amount as on May 2010 was Rs. 19,579 crore, and on June 2018 it was Rs 74,400 crore. Sine 2010 banks have changed their strategies and have started focussing on these un-secured loans. A large proportion of customers taking personal and consumer durable loans are working class in
the age group of 25-45 years.

WEEKLY FINANCIAL SNIPPETS – 08/09/2018

1. BANKS WITH MORE THAN 10 BRANCHES TO HAVE INTERNAL OMBUDSMAN: The Reserve Bank of
India has instructed all the Scheduled Commercial Banks with more than 10 branches to appoint an
Internal Ombudsman (IO). Regional Rural Banks are excluded from this. The Internal Ombudsman
scheme is introduced by RBI to strengthen the internal grievances of the bank and to ensure that
the complaints of the customer are redressed at the earliest. The bank shall escalate all such
complaints which are not fully redressed to their respective IOs before conveying the final decision to
the complainant. The customer need not approach the IO directly.
2. RBI SLAPS Rs. 1 CRORE FINE ON SOME BANKS: Reserve Bank of India has imposed a fine of Rs 1 crore
each on Union Bank of India, Bank of Maharashtra and Bank of India. The penalty has been imposed
taking into account the delay on the part of the banks to detect and report fraud in an account. The
penalty has been imposed in exercise of powers vested in RBI under Banking Regulation Act.
3. PAYTM BUILDING NEW TECHNOLOGY TO CHECK “CREDIBILITY SCORE” OF BORROWER: Paytm is
evolving a mechanism to determine the “Credibility Score” of a person seeking loan from banks. The
company’s team in Toronto is actively working on a reliable system that can be relied upon by banks
to ascertain the credibility of a loan seeker. Paytm’s Toronto team is working on an algorithm based
on a person’s digital transactions to present a solution. If reliable system is evolved, it can predict with
sufficient accuracy about the capacity and willingness of an individual to repay his loan.
4. AIRTEL PAYMENTS BANK OFFERS CARD-LESS CASH WITHDRAWAL AT SELECT ATMs: Airtel Payments
Bank has tied up with Empays Payment systems to enable its savings account holders to withdraw
cash using their mobile phones through the card-less cash technology of Empays which is called
Instant Money Transfer (IMT). So now Airtel Payment Bank customers can make card-less cash
withdrawals at select ATMs across the country using IMT technology. IMT is the largest interoperable
card-less cash ATM network in the world, built and run by Empays Payment Systems India Pvt Ltd.
5. BANKS ASK RBI TO EASE ATM CASH MANAGEMENT RULES: Banks have approached RBI to relax rules
on how cash is carted to ATMs on the grounds that the revised rules are very hard to follow. Banks
were expected to put in place a host of measures from July 2018 with respect to cash movement.
These were aimed at preventing various kinds of frauds. In an attempt to prevent such frauds, the RBI
had come out with some stringent steps which included refilling ATMs using the “cassette-swap
method”, under which cash would be filled inside locked cassettes which would then be inserted in
ATMs by service providers.
6. TAX RETURNS FILED BEFORE DEADLINE SURGES BY 70%: With the government introducing fine for
delayed filing of income tax returns after 31 St august 2018, the number of I-T returns filed before
deadline touched to 5.42 crore which is 70% more than last year. Last year 3.17 returns were filed
before deadline. The improvement is on account of the gentle and sustained persuasion by the tax
department by way of SMS messages and Emails.
7. MONETARY LIMIT FOR FILING CASES IN DRT INCREASED TO Rs 20 LAKH: The government has
increased the monetary limit to Rs. 20 lakh for filing loan recovery application in the Debt Recovery
Tribunals (DRTs) by banks and financial institutions. As a result any bank or financial institution cannot
approach DRTs if the claim amount is less than Rs. 20 lakh. This amount is enhanced to help reduce
pendency.
8. IDEA-VODAFONE MERGER TO BECOME LARGEST TELECOM SUBSCRIBER: Vodafone India & Idea
Cellular announced completion of their merger, creating the country’s largest telecom subscriber with
a subscriber base of over 408 million, revenue market share of 32.2% and subscriber market share of
41.1%. The combined entity also has largest spectrum holding around 1850 MHz across bands.

WEEKLY FINANCIAL SNIPPETS – 01/09/2018

1. ICICI BANK REPORTS FIRST QUARTER LOSS: ICICI Bank reported a historic loss in the first quarter ended June 2018 due to the rise in its provisions. The bank reported a loss of Rs.120 crore as against a profit of Rs 2,049 crore during the same period last year. The provisions were more than doubled to 5,971 crore from 2,609 crore last year.

2. BANKS SERVING SUMMONS TO DEFAULTERS THROUGH WhatsApp AND EMAILS: Banks are using WhatsApp and Email to pin down those defaulters who slip through the banks grip when more traditional mode of correspondence is used. Banks are issuing court summons through WhatsApp and Email. This digital means of correspondence is being followed after a judgement earlier this year. A letter through post can get unduly delayed and addresses keep on changing but phone numbers and Email addresses can remain constant, making these digital modes of correspondence handier to the lenders. HDFC Bank has already issued 214 court summonses through WhatsApp and Email.

3. BANKS WILL HAVE TO STOP LENDING TO INFRA PROJECTS: State Bank of India has said that banks will have to stop lending to infrastructure projects, especially to Power sector because of the bad experiences of the past as most of the loans given in the last decade have turned bad. Due to the changes in Non-Performing Assets recognition after February 12, 2018 RBI circular, wherein RBI had given August 27TH as the deadline, as many as 30 power projects with accumulative exposure of Rs. 1.7 trillion ( Rs 1.7 lakh crore) are now facing bankruptcy proceedings. If the banks fail to resolve the issues within the next 15 days, then they will have to be sent to National Company Law Tribunal (NCLT).

4. UIDAI CRACKS DOWN ON BANKS MISSING TO MEET AADHAAR UPDATE DATA TARGET: The Unique Identification Authority of India (UIDAI) has withdrawn electronic Know-Your-Customer (KYC) facilities for 13 Indian Banks and many authentication agencies for failing to meet targets on enrolment and updating citizen information for its Aadhaar biometric database. For these banks, the suspension of electronic KYC facility means they will not be able to offer several financial services linked to the authentication facility.

5. IBA ASKS BANKS TO GET CYBER SECURITY INSURANCE: The Indian Banks Association (IBA) has asked member banks to buy Cyber Insurance covers in the wake of several incidents of digital attacks on banks. Such a policy has turned into a basic need for the banks now. While large banks have cyber insurance covers ranging from Rs. 350 to Rs. 500 crore, many of the smaller banks have not yet opted for the same. Usually these smaller banks have only the Banker’s Blanket Policy which does not cover cyber heists.

6. RBI MAY SOON DO AWAY WITH MCLR: The Reserve Bank of India, in its annual report of 2017-18 has indicated that it would review the Marginal Cost of Lending Rate (MCLR) guidelines. The review is imminent because MCLR system has not reflected the changes in interest rates. And moreover, World-wide the bank rates have moved to an external benchmark which leads to uniform pricing. From April 2018 onwards RBI has asked all banks to link all old loan interest rates to MCLR, which most of the banks are yet to implement.

7. INCOME TAX SCRUTINY TO GO ELECTRONIC: The Central Board of Direct Taxes (CBDT) has mandated “e-proceedings” for all income-tax scrutiny in 2018-19. E-proceeding refers to the communication of date and documents between the Income-Tax department and the assessees through electronic mode and where the assessments are done electronically. It has also specified situations where e-proceeding will not be mandatory.