WEEKLY FINANCIAL SNIPPETS- 13.10.2018

  1. RBI COULD CANCEL LICENCES OF 1,500 NBFCs : Infrastructure Financing & Leasing Services Ltd (IL&FS), a major infrastructure and financing and construction company sent shock waves through the Non-Banking Finance Company (NBFC) sector when it defaulted on some of its debt obligations in recent weeks. Because of this, many Industry experts have opined that the RBI may cancel licences of as many as 1,500 NBFCs because they do not have adequate capital, and also the RBI may make it more difficult for new entrants to get approval. The way things are moving, there is certainly cause for concern and according to a statement made by former Deputy Governor Mr. Harun Rashid Khan, this sector also could see consolidation.

 

  1. CASH MANAGEMENT COMPANIES TO FORM SELF REGULATORY ORGANISATION TO ADDRESS INDUSTRY RISKS: Cash Management Companies, providing cash transport and logistics support at ATMs as well as bank branches, have come together to form Self-Regulatory Organisation (SRO). In April this year, the Reserve Bank of India had come out with certain regulations by setting standards for engaging service providers in cash management activities. Among other things, the RBI had directed banks that the staff associated with cash handling should be adequately trained and duly certified through an accreditation method. By forming this SRO, all the above concerns will be taken care of, which will mitigate the risks to the banking industry and ultimately facilitate the regulation of this sector.

 

  1. SBI TO PURCHASE LOAN ASSETS WORTH Rs. 45,000 CRORE FROM NBFCs: State Bank of India will increase its portfolio purchase of loans from Non-Banking Finance Companies (NBFCs) Initially SBI had planned for a growth of Rs. 15,000 crore through portfolio purchase this year, which is being enhanced to around Rs. 45,000 crore. This will provide the much needed liquidity to the funds starved NBFC sector, and simultaneously fulfil SBI’s priority sector lending obligations. As per RBI rules, banks must lend 40% of their deposits to small businesses, agriculture and home loans which come under priority sector and SBI plans to buy these kind of loans from NBFCs.

 

  1. CHALLENGES GROW FOR NBFCs AS BANKS STOP LENDING TO THEM: Banks have stopped fresh lending to Non-Banking Finance Companies due to which NBFCs are facing greater challenges at a time when everyone is trying to preserve liquidity and avoid loan defaults. There are wide scale complaints from many NBFCs that some banks are even refusing to release funds against their sanctioned limits.

 

  1. SBI REPORTS 1,329 FRAUD CASES WORTH Rs.5,555 CRORE: In response to a query of RTI, State Bank of India has revealed as many as 1,329 cases of fraud, involving an amount of Rs. 5,555 crore in the first 6 months of the current fiscal year. In the first quarter (April to June), 669 cases worth Rs. 723. 06 crore were reported, whereas in the second quarter (July to September), 660 cases involving an amount of Rs 4,832 crores have been reported.

 

  1. CBDT EXTENDS DEADLINE FOR FILING ITRs WITH AUDIT REPORTS TO OCTOBER 31st: The Central Board for Direct Taxes (CBDT) has now  extended the deadline till October 31st  for filing Income Tax Return and Audit Report for financial year 2107-18. The deadline was earlier extended from September 30th  to October 15th for tax payers whose accounts have to be audited.

 

  1. RBI TO INFUSE Rs.120 BILLION INTO THE SYSTEM TO MANAGE  LIQUIDITY: Reserve Bank of India has decided to inject Rs. 12,000 crore into the system through purchase of government bonds  to arrest the liquidity crunch  and meet the festival season demand for funds. The government will purchase bonds with maturity ranging between   2020 to 2030. The auction to purchase government bond is a part of the Open Market Operations (OPO)  to manage liquidity in the economy.
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WEEKLY FINANCIAL SNIPPETS – 06/10/2018

  1. RBI GIVES NOD TO SET UP KERALA BANK: The Reserve bank of India has accorded an in principle sanction to Kerala State Government to set up “Kerala Bank”. This bank would be formed by merging District Co-operative Banks with State Co-operative Banks. RBI has given instructions to the Kerala State government to complete the entire process of merger by March 2019.The Kerala government announced that the much awaited project “Kerala Bank” is expected to become a reality by August 2019.

 

  1. NORTH KOREAN HACKERS LINKED TO RECENT COSMOS BANK HEIST: California based cyber security company FireEye has indicated that the recent Cosmos Bank cyber heist in August 2018 may have been planned and executed by a financial crime syndicate backed by North Korea. Cosmos Bank had lost Rs. 80.50 crore in one of the largest banking heists in the country through 14,849 fraudulent ATM withdrawals in a two and half hour period in August 2018.

 

  1. RBI ADVISES NBFCs TO RELY ON EQUITY FUND FOR LONG TERM FINANCING: After a series of defaults by IL&FS which led to a near seizure of short-term money markets, Non-banking Finance Companies (NBFCs) received lessons on Asset-Liability Management from RBI. Reserve Bank of India has advised NBFCs to raise more equity and long-term debt instead of relying on short-term funds. Mr. Viral Acharya, RBI Deputy Governor has advised NBFCs to place greater reliance on equity and other long-term modes of finance for funding their long-term assets.

 

  1. FEDERAL BANK FINED Rs 5 CRORE FOR NON-COMPLIANCE OF RBI NORMS: Federal Bank has been penalised Rs. 5 crore for non-compliance on reporting of large borrower exposures and non-payment of customer compensations. The bank was found to have not complied with RBI directions on reporting of data on Central Repository of Information on Large Credits (CRILC) and reporting to RBI for assessment under risk-based supervision.

 

  1. BANK OF MAHARASHTRA SHUTS DOWN 51 BFRANCHES: Bank of Maharashtra has shut down 51 non-viable branches across India. These branches were incurring huge losses and declared as non-viable. These identified branches after closing have been merged with the nearest neighbouring Branches. This is first such instance by any Public Sector Bank in Maharashtra. Bank of Maharashtra has around 1,900 branches all over India.

 

  1. GROSS DIRECT TAX COLLECTION GROWS BY 16.7%: Gross Direct Tax collection in the first 6 months of the financial year grew by 16.7% to Rs 5.47 lakh crore. Refunds amounting to Rs. 1.03 lakh crore have been issued between April 2018 to September 2018, which is 30% higher than refunds issued during the same period in last financial year.

 

  1. GOVERNMENT NOTIFIES 10% LONG TERM CAPITAL GAIN TAX ON IPO/FPO GAINS: The Income Tax Department has notified norms for 10% Long-Term Capital Gain (LTCG) tax for gains from investments made in Initial Public Offer (IPO) and Follow-on Public Offer (FPO). The new norms will come into effect from 1ST April 2019 and will apply in relation to assessment year 2019-20 and then for subsequent assessment years.

 

  1. COMPANIES PAY UP THEIR DUES FOR FEAR OF INSOLVENCY ACTION: Banks are seen to be the biggest beneficiaries of Insolvency & Bankruptcy Code (IBC), enacted to bring rogue borrowers to book. The fear of insolvency action has helped the bankers to recover Rs. 1.1 lakh crore from loan defaulters who were earlier reluctant to clear their dues. So far 977 cases have been admitted by National Company Law Tribunal (NCLT). The number of cases filed is actually high but many are withdrawn before they are admitted as the borrower agrees to settle the dues.