WEEKLY FINANCIAL SNIPPETS-27/10/2018

  1. IDFC BANK TO BE RENAMED AS “IDFC FIRST BANK”: IDFC Bank has proposed to change its name to “IDFC First Bank Ltd” as it is in the process of amalgamating Non-Banking Finance Company- Capital First with itself. The amalgamation process is in the advanced stage as it has received approvals from Competition Commission of India, Stock Exchanges, RBI, shareholders and creditors. The Bank would further require approvals for this change of name from RBI, Registrar of Companies and all other statutory regulatory authorities including shareholders and creditors.

 

  1. FAKE BANK APPS MAY HAVE STOLEN DATA OF THOUSANDS OF CUSTOMERS: Fake Apps of SBI, ICICI Bank, Axis Bank and other leading banks are available on Google Play, and the deceptive malware in these Apps may have stolen thousands of customers’ account and other credit card details. This is as per a report published by IT Security firm Sophos Labs. These “fake Apps” have logo of respective banks which makes it very difficult for customers to differentiate between fake and original Apps. However many banks have told that they have not come across any such fake apps.

 

  1. APP BASED LENDING PLATFORM “EARLYSALARY” CLAIMS TO BE THE LARGEST LENDING APPLICATION: App based lending platform “EarlySalary” has claimed that it has crossed Rs. 550 crore online loan disbursals, making it the country’s largest consumer lending application. The company has so far provided loans to over 1,35,000 customers and cumulatively has disbursed 3,50,000 loans to young working Indians. On an average it is disbursing Rs. 80 crore loans, processes over 60,000 applications and disburses 35,000 loans every month. The company currently services customers across 17 cities in India.

 

  1. THE MERGED ENTITY OF BANK OF BARODA-VIJAYA-DENA TO GET GROWTH CAPITAL FROM GOVERNMENT: The government will provide an additional cushion by way of “Growth-Capital” to the proposed merged bank to be formed by amalgamation of Bank of Baroda, Vijay Bank and Dena Bank to start the new bank on a stronger note. The actual capital infusion in money terms will be clear only after the financials of July-September quarter of all the three banks are available.

 

  1. SYNDICATE BANK GETS Rs. 728 CRORE CAPITAL INFUSION FROM GOVERNMENT: Syndicate bank has received Rs. 728 crore capital infusion from the government. The Finance Ministry has conveyed to the bank regarding the release of capital infusion to the tune of Rs. 728 crore through preferential allotment of equity shares during 2018-19 as government’s investment. The bank will be taking the necessary approvals for allotment of requisite equity shares to the government in due course of time.

 

  1. RBI MAY AMEND PROMPT CORRECTIVE ACTION FRAMEWORK TO HELP BANKING SYSTEM: The Reserve Bank of India may make certain changes in the Prompt Corrective action (PCA) framework that put restrictions on financially weak banks. The changes could be made in the next couple of weeks after taking into account the various aspects and in the larger interest of the banking system. As many as 11 out of 21 banks are under RBI’s PCA watch list, of these Dena Bank and Allahabad bank are facing restrictions on expansion of business.

 

  1. INCOME TAX DEPARTMENT LAUNCHES MAJOR DRIVE AGAINST INDIANS WITH ILLEGAL FOREIGN ASSETS: The Income tax Department has launched massive operation to investigate cases of illegal funds and properties held outside India by Indians and is looking to invoke the new anti- black money law for strict criminal action in many such cases. The Department, in coordination with its foreign counterparts, is investigating offshore bank deposits and purchase of assets by Indians and the number may go into thousands of cases.

 

  1. GOVERNMENT DENIES ANY LIQUIDITY CRISIS: Defaults by IL&FS and its subsidiaries had led to concerns of grave repercussions on the credit market, leading to a liquidity crisis. But the government has assured that there is no such liquidity crisis in the market as there is surplus liquidity in the system. Banks are buying NBFC portfolios and there is no shortage of liquidity. But looking at the present market conditions, it is apparent that there is a liquidity crunch prevailing in the system.
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WEEKLY FINANCIAL SNIPPETS – 20/10/2018

  1. RBI COMES TO THE RESCUE OF NBFCs, ALLOWS BANKS TO LEND MORE: Reserve Bank of India relaxed liquidity norms to ease liquidity crunch prevailing in the financial market and allowed banks to lend more to Non-Banking Finance Companies (NBFCs), which are facing Asset-Liability mismatches. RBI said now banks are permitted to raise their exposure to a single NBFC borrower (Only to those NBFCs which do not finance infrastructure) to 15% of its capital. Earlier it was 10%. This move could free as much as Rs. 50,000 crore for lending to NBFC sector. The Asset-Liability mismatch refers to the imbalance between short-term borrowings and long-term investments (lending).

 

  1. NBFCs LIQUIDITY CRUNCH TO HIT HOME LOAN SALES: As per a report by Japanese brokerage firm- Nomura, the on-going liquidity crunch faced by Non-Banking Finance Companies (NBFCs) will slow down home loan disbursements by these NBFCs. Banks can utilise this opportunity to increase their market share in housing loans. The real estate developers, which are already reeling under the pressure due to the lack lustre market, will also face further troubles owing NBFCs inability to lend.

 

  1. FOREIGN INVESTORS LEAVING INDIAN MARKETS: After 2 years of good Foreign Portfolio Investments (FPI) inflows, the Indian Markets are now witnessing a reversal in the trend as this year the net foreign outflow is $13.7 billion so far as against a net foreign inflow of $ 15.3 billion a year ago. There are several factors that led to FPI outflows—from rising crude oil price to widening of current account deficit.

 

  1. MUTUAL FUND COLLECTION VIA SIP INCRESED BY 40%: As per a report by Association of Mutual Fund in India (AMFI), Systematic Investment Plan (SIP) continues to be the preferred route of retail investors to invest in Mutual Fund as it helps them to reduce market risks. Mutual Fund Industry has collected Rs. 7,727 Crore through SIPs in September 2018, as the SIP contribution for the first half of the current fiscal rose to Rs. 44,487 Crore compared to Rs 29,266 Crore in the corresponding period last year, which is a 40% increase.

 

  1. DEBIT CARD POS TRANSACTIONS OF AIRTEL, PAYTM AND FINO PAYMENTS BANKS BEAT THOSE OF MID SIZED BANKS: The Point-of-Sale (POS) based transactions reported by the three Payment banks – Airtel, Paytm and Fino has touched a whopping 2.1 million debit card transactions which is higher than those made by debit card holders of some of the mid-sized Public Sector banks. This is as per a data from Reserve bank of India.

 

  1. RBI ISSUES e-WALLET INTEROPERABILITY ADVICES: The Reserve Bank of India has issued guidelines for enabling all phases to prepare E-wallets for better interoperability. RBI has clarified that all types of wallet interoperability will happen through Unified Payments Interface (UPI) and cards  through interoperable card network. But for security reasons RBI has mandated PPI issuers to adhere to all security guidelines laid down by National Payments Corporation of India (NPCI) for UPI and card networks. However, interoperability will  be made available to fully KYC wallets only.

 

  1. PUNJAB NATIONAL BANK PLANS TO SELL NON-CORE ASSETS WORTH Rs. 8,600 CRORE: Punjab National Bank, the country’s second largest Public Sector bank has identified various non-bank core assets amounting to Rs. 8,600 crore which it plans to sell during this year. This includes its housing finance arm—PNB Housing Finance Co. The bank has already sold some assets worth Rs 400 crore.

 

  1. MAHARASHTRA STATE CO-OPERATIVE BANK TO ENTER FRETAIL BANKING: The Maharashtra State Co-operative Bank, the apex lender in the state’s three tier cooperative banking sector, plans to enter retail banking sector and compete with private sector banking. It has already submitted a proposal to merge Urban Co-operative Banks. The proposal is yet to be cleared by RBI.

 

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.

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.