WEEKLY FINANCIAL SNIPPETS—09/03/2019

  1. SBI TO JOIN SWIFT’S GLOBAL PAYMENT SYSTEM: State Bank of India (SBI) will soon join the Society for Worldwide Interbank Financial Transactions (SWIFT). Eleven Indian Banks have already subscribed to SWIFT’s new payment interface- Global Payment Interface (GPI) which is set to make cross-border transactions much more secure and transparent. The GPI enabled banks can also opt for an additional feature called Payment Control Service (PCS) where if any irregularities are found in the payment transaction such as higher than usual fund size or uncommon transaction timeframe, the channel can block the transaction and notify the bank.

 

  1. PRIVATE BANKS CONTINUE TO TAKE AWAY PSB MARKET SHARE: As per a report by Kotak Institutional Equities based on RBI data, private banks have continued to wrest away both deposit and credit market share from Public Sector Banks. Private Sector Banks have increased their Deposit market share by 24% year-on year. Their growth rate is more in urban areas as compared to semi urban and rural areas. In credit also they have continued to grow at a rate of 40% in rural areas and 20% in urban areas year-on-year.

 

  1. NBFCs WITH Rs 1,000 CRORE ASSETS WANT PUBLIC DEPOSIT ACCESS: Non-Banking Finance Companies (NBFCs) with assets exceeding Rs. 1,000 crore want the RBI to allow them to accept deposits from the public. For large NBFCs the industry wants a separate classification. The sector leaders want “Systemically Large” NBFCs to be treated differently than the other 10,000 NBFCs that are there in the sector.

 

  1. RBI FINES 19 BANKS FOR NON-COMPIANCE ON SWIFT SYSTEM USE: The Reserve Bank of India (RBI) has fined as many as 19 banks, including ICICI Bank and State Bank of India for failing to comply with its guidelines on the use of global payments network SWIFT. Most notable among those guidelines was requirement for banks to connect the SWIFT interbank messaging system with their core banking software. The penalties totalled to more than Rs. 40 crore and ranged from Rs 1 crore to Rs 4 crore for each bank. The series of fines imposed is a stern warning from RBI to banks to strengthen their internal systems and minimise frauds after the PNB fraud case last year.

 

  1. PAN NUMBER TO BE LINKED TO BANK ACCOUNT FOR GETTING INCOME TAX REFUNDS: From March 1, 2019 the Income Tax Department has started issuing refunds via e-mode in to the bank accounts of the tax payers. For this, linking PAN number to the bank account is mandatory to get the tax refund directly to the bank account.

 

  1. BANKS SEEK EXTENSION FOR THE ROLL-OUT OF INDIAN ACCOUNTING STANDARDS: Banks are seeking extension for the roll-out of the Indian Accounting Standards (IndAS) which will come in to effect from April 1st Banks are citing higher capital for bad-loans provisioning, pending legislative amendments and delay in finalising rules as some of the reasons for deferring the implementation of IndAS. Banks are in great pressure to improve their financials but implementation of IndAS will further add to banks’ compliance burden.

 

  1. BANKS RECOVER ALMOST HALF OF 1.43 LAKH DEFAULTING ADVANCES THROUGH IBC: Banks have so far recovered almost half of 1.44 lakh crore defaulting advances stuck in 82 cases that have been resolved in the past two years through Insolvency & Bankruptcy Code (IBC). IBC has become increasingly effective in recovering bad loans as it has injected an element of fear in to the minds of defaulting promoters. IBC is yielding definite results but there is still vast scope for further evolving and improvement.

 

  1. GOVERNMENT TO ROLL OUT Rs.20 COIN FOR THE FIRST TIME: The Finance Ministry has announced in a gazette notification about the roll-out of Rs. 20 coin for the first time in the country. The new Rs 20 coin will be shaped like a “dodecagon” (12 edged polygon) just to differentiate it from the Rs 10 coin which is in circulation.
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WEEKLY FINANCIAL SNIPPETS- 02/03/2019

  1. RBI EXTENDS KYC DEADLINE FOR e-WALLETS BY 6 MONTHS: Reserve Bank of India has extended the deadline of Know Your Customer (KYC) compliance for e-Wallet companies by 6 months. Earlier the deadline was supposed to end on 28TH The extension comes after intense follow-up and requests by mobile wallet companies and domestic internet groups over the past few months. This comes as a big relief to consumers as well as mobile wallet companies.

 

  1. PSU BANKS STEP UP TAKEOVER OF MORTGAGE LOANS FROM NBFCs: Public sector banks are launching new schemes to takeover housing loans from Non-Banking Finance Companies (NBFCs) and home finance companies that are facing liquidity crunch. State Bank of India and Bank of Baroda have already initiated these special schemes to attract takeover of loans. Bank of Baroda has initiated a special scheme “ Switch Karo, Save Karo” which allows customers to switch their home loans without any income proof provided a minimum of 12 monthly instalments have been paid regularly and their credit score is at or above 725. The rate of interest offered by Bank of Baroda for such takeover loans is 9% which is much lower than the rates offered by NBFCs and Home Finance Companies. In our opinion more PSU banks should come out with such schemes to garner more business.

 

  1. CANARA BANK TO GIVE LOAN TO BANK OF INDIA AND UNION BANK EMPLOYEES: Bank of India and Union Bank of India have made arrangements with Canara Bank to provide Collateral-free loans to their respective employees to fund purchase of shares of their respective banks under Employee Stock Purchase Scheme ( ESPS). Canara Bank loan is priced at 8.7% and the size of the loan will be 10 months gross salary of respective employee subject to a maximum of Rs 5 lakh. Regulations do not allow banks to offer loans to their own employees for purchasing shares under ESPS. Bank of India is looking to raise up to Rs 800 crore while Union Bank looks to raise Rs. 600 crore.

 

  1. BANK LOCKER PROTECTION POLICY LAUNCHED: IFFCO Tokio General Insurance Company has announced the launch of Bank Locker Protection policy to protect the contents of a Bank locker. The policy offers a cover against various risks including fire, earthquake, burglary, holdup, infidelity by bank staff or act of terrorism. Apart from jewellery and valuables one can insure important documents as an add-on cover. The bank locker hire agreement does not cover compensation in case of such untoward incidents.

 

  1. LOANS TO NBFCs BECOME COSTLIER AS RBI TIGHTENS NORMS: Reserve Bank of India has stepped in to slow down the flow of credit to Non-Banking Finance Companies (NBFCs) by making it more expensive  for banks to lend to these NBFCs. A loan to an NBFC which owes banks Rs 200 crore or more and is un-rated, will now attract a risk weight of 150%. Any NBFC to which banks have an exposure of 100 crore and more which was rated earlier but subsequently un-rated then it will attract 150% risk weight.

 

  1. MERGER OF REGIONAL RURAL BANKS WITHIN THE SAME STATE LIKELY: The government is looking at the possibility of merging Regional Rural Banks (RRBs) operating within the same state and has urged the Public Sector Banks to explore such options, as it wants further consolidation among RRBs. At present the central government holds 50% stake in RRBs while the Sponsor Bank holds 35% and rest 15% is held by respective state governments. The government eventually wants to bring them down to a more manageable number of 10 to 15 RRBs. Presently there are 56 RRBs functioning in the country.

 

  1. GOVERNMENT TO CREATE GLOBALLY COMPETITIVE LARGE BANKS VIA MERGERS: Finance Minister Mr Arun Jaitley has said that the situation of bad loan scenario in Public Sector Banks has improved in the last three quarters and now the government will amalgamate banks to create healthy large lenders that are globally competitive. In order to make the banks sound and globally competitive, the government is gradually following the policy of amalgamation. Mr Jaitley further said that the government has lived up to its promise by funding the troubled banks in terms of capital.

 

  1. SBI HAS FOUND FRAUD WORTH Rs 7,951 CRORE DURING APRIL-DECEMBER 2018 PERIOD: In an RTI reply, State Bank of India has revealed that there were frauds amounting to Rs 7,951 crore during the first nine months of the current fiscal. The first quarter reported 669 cases of fraudulent activities amounting to Rs 723.06 crore, the second quarter saw 660 cases involving an amount of Rs 4,832.42 crore and the third quarter reported 556 cases amounting to Rs 2,395.81 crore.

 

 

 

 

 

 

 

WEEKLY FINANCIAL SNIPPETS- 23/02/2019

  1. SBI TO WAIVE LOANS TAKEN BY MARTYRED CRPF PERSONNEL, ALSO TO RELEASE INSURANCE PAYMENTS: State Bank of India has said that it would waive all outstanding loans availed by the 23 CRPF personnel who were killed in the Pulwama terror attack. All the 44 CRPF personnel were customers of State Bank of India under Defence Salary Package where the bank provides insurance of Rs. 30 lakh to each of the defence personnel. Bank is taking steps to expedite release of insurance amount to the next of kin of the martyred soldiers.

 

  1. RBI SEEKS INFORMATION FROM NBFCs ON MORATORIUM GIVEN TO BORROWERS: Amid the recent controversy on loans against shares, Reserve Bank of India has asked Non-Banking Finance Companies (NBFCs) to disclose the moratorium (grace period for repayment) given to borrowers. Besides Mutual Funds, NBFCs are large lenders against pledge of shares. If the borrowers pledging the shares to raise money fail to bring in additional collateral when the stocks fall, lenders should sell the stock to protect their exposure. And if the shares are not sold then the credit rating agencies should downgrade the instruments issued by the borrower to raise funds. RBI may look in to the rules on loans against shares for NBFCs and banks and this would include raising the risk weightage on loans against stocks.

 

  1. GOVERNMENT TO INFUSE Rs. 48,239 CRORE IN 12 PSU BANKS: The Finance Ministry on Wednesday announced that it would pump in Rs. 48,239 Crore in 12 Public Sector banks (PSBs) in this fiscal to help them maintain regulatory capital requirements and finance growth plans. The biggest gainers in this are Corporation Bank (Rs. 9,086 crore) and Allahabad Bank (Rs. 6,896 Crore). With this funding, the total amount of capital infusion to all the PSBs would increase to Rs. 1,00,958 crore out of the planned recapitalisation of Rs. 1.06 lakh crore in the current fiscal.

 

  1. ONLY 6 BANKS CROSS DESIRABLE LEVEL OF 70% PROVISION COVERAGE RATIO: Provision Coverage Ratio (PCR) is the ratio of provisioning to gross Non-Performing Asset which indicates the extent of funds a bank has earmarked or kept aside to cover loan losses. The Public Sector Banks (PSBs) have substantially increased their Loan-loss provision and have strengthened their respective balance sheets in the first 9 months of the current fiscal but only 6 out of 21 PSBs  have crossed the desirable level of 70% of PCR.

 

  1. SBI TAKES WORK-LIFE BALANCE TO A NEW HEIGHT: State Bank of India has taken a new initiative to ensure Work-Life balance of its massive employee workforce. The programme called “Nayi Disha”, focuses on work-life balance and also involves the staffs’ immediate family members, also gives them the ability to inform the bank if an employee is not able to leave work on time. The programme is evolved in such a way that its 2.6 lakh strong work force does not work mechanically and is sufficiently motivated to take on newer challenges that the future will throw up. The programme will also boost the morale of its staff which will have a positive impact on customer service. The bank has hired external hand to design the programme.

 

  1. SOON BANKS WILL TAKE BACK HEFTY PAYOUTS FROM ERRANTS CEOs: The Reserve bank of India is tightening the CEO compensation norms in the wake of instances of large Non-Performing Assets and sharp practices adopted by the top executives to dodge the regulators. RBI is working on a set of rules that would link remuneration of banks CEOs to parameters like balance sheet size of the bank, loan delinquencies, profit and governance. The proposed framework is expected to provide a broad template to the Board of Directors while approving increase in salary, performance bonus and stock options.

 

  1. GOVERNMENT PASSES UNREGULATED DEPOSIT SCHEME ORDINANCE: The President Mr Ram Nath Kovind promulgated the Banning of Unregulated Deposit Scheme Ordinance. This will help to put a check on illicit deposit-taking activities that dupe the poor and financially illiterate of their hard-earned savings. The Ordinance makes it mandatory for everyone to register before taking a deposit. This ordinance will also help create a central repository of all the registered entities that can take deposits.

WEEKLY FINANCIAL SNIPPETS- 16/02/2019

  1. FINANCE MINISTRY ASKS 6 PSU BANKS TO PERFORM BETTER TO COME OUT OF PCA: The Finance Ministry has asked six  banks who are under Prompt Corrective Action (PCA) to improve on seven parameters to get the government’s support  for coming out of PCA framework. These six banks have been told to improve upon Net Interest Margins (NIMs), CASA (Current & Savings Accounts) Risk Weighted Assets (RWAs), NPA Recognition, Divergence (disparity in loan recognition), Operating Profit and Non-Core asset selling to be able to come out of PCA framework.

 

  1. FINNACE MINISTRY IS WITHIN REACH OF ACHIEVING NPA RECOVERY TARGET: The Finance Ministry is on course to meet the NPA recovery target of Rs 1.80 Lakh crore by March 31, 2019 with the recoveries already touching Rs. 1.08 lakh crore. The bigger ticket loan recoveries are due and will be recovered by March end from Essar Steel and Bhushan Power Steel which together may fetch Rs. 60,000/- crore.

 

  1. INDIVIDUAL INSOLVENCY CODE MAY SOON COME IN TO FORCE: The Chairman of The Insolvency & Bankruptcy Board of India Mr. M S Sahoo has said that individual insolvency code will be introduced soon. Three sets of individuals will fall under the Individual Insolvency Code. They would include personal guarantor to corporate debtors, proprietary firms and individual borrowers. The government is in the process of putting in place a broad framework on individual insolvency code and once this is introduced, failure to repay home loans might drag future defaulters to dedicated bankruptcy courts in future.

 

  1. GOVERNMENT RAISES LIMIT FOR DISCLOSURE OF STOCK/MUTUAL FUND INVESTMENTS FOR EMPLOYEES: Group A and B government officers were to disclose such details if the total investments in shares and mutual funds etc exceeded Rs. 50,000/- during a calendar year. This limit has been increased to six months of their basic pay. This is in accordance with an order issued by Personnel Ministry.

 

  1. REAL ESTATE SECTOR IS LIKELY TO GET MUCH AWAITED GST RELIEF: A group of State Finance Ministers have decided to recommend a GST rate cut for under-construction projects to 5% from the current 12% and slashing of GST rate to 3% from the present 8% for affordable Housing Projects. However the proposed change in GST rates structure would be accompanied by denial of Input Tax Credit (ITC) to the builders.

 

  1. IICA LAUNCHES GRADUATE PROGRAMME FOR INSOLVENCY PROFESSIONALS: The Indian Institute of Corporate Affairs (IICA) has launched the Graduate Insolvency Programme (GIP) for individuals aspiring to join the insolvency profession in India and abroad. This is among the first of its courses in the world for professionals dealing with insolvent companies and helping them achieve debt resolution. This programme is approved by the Insolvency Bankruptcy Board of India. It is a two year programme comprising of one year of residential classroom and another year of internship. An individual is eligible to do the programme if he has 10 years of post-membership experience as a Chartered Accountant, Company Secretary, Cost Accountant, Advocate or 15 years of management experience after completion of his graduation.

 

  1. PUNJAB NATIONAL BANK TO e-AUCTION 4,000 PROPERTIES TO RECOVER BAD LOANS: Punjab National Bank said that it has decided to place more than 4,000 properties all over India on e-auction as part of its loan recovery effort. According to the bank, the e-auction under the Securitisation and Reconstruction of Financial Assets & Enforcement of Securities Interest Act (SARFAESI) will help achieving the recovery of Rs 26,000 crore during the current Financial Year.

 

 

WEEKLY FINANCIAL SNIPPETS- 09/02/2019

  1. CRITERIA FOR BULK DEPOSIT FOR BANKS RAISED TO 2 CRORE: The Reserve Bank of India in its latest monetary policy has decided to raise the criteria of bulk deposits for banks from the existing Rs. 1 crore to Rs. 2 crore. This is done to provide more operational freedom to lenders to raise funds. Banks have been given discretion to offer differential rate of interest on the bulk deposits as per their requirements and Asset Liability Management (ALM) projections. Interest rates on bulk deposits are marginally higher than the smaller amount of deposits for similar maturity period.

 

  1. RBI RAISES THE LIMIT FOR COLLATERAL-FREE FARM LOANS: The Reserve Bank of India has raised the loan limit for collateral-free farm loans to Rs. 1,60,000/- from the existing limit of Rs. 1,00,000/- in view of the overall inflation and also considering the rise in agricultural input costs. RBI also said that it would set up an internal working group to examine issues pertaining to agricultural loans.

 

  1. SEBI COMES OUT WITH RULES TO REVIEW PERFORMANCE OF PUBLIC INTEREST DIRECTORS: Securities and Exchange Board of India (SEBI) has come out with a strict framework for Public Interest Directors (PIDs) serving at Stock exchanges, Clearing Corporations and Depositories. Now the PIDs will be nominated for a period of three years to be extendable by another term of three years. This will be subject to a performance review.

 

  1. BANKS NEED Rs 20 LAKH CRORE DEPOSITS FOR HEALTHY CREDIT GROWTH: As per a report by credit rating agency CRISIL, banks need to raise an amount of nearly 20 lakh crore in deposits by March 2020 for a healthy credit growth. The report further says that the healthier private sector banks will account for about 60% of the incremental deposit mobilisation. In the last few years the deposit growth rate has dropped due to lower rate of interest offered by the banks as compared to other financial avenues. This additional deposit mobilisation drive will put pressure on the interest rates and as a result the interest rates may go up.

 

  1. RBI PLANS “UMBRELLA ORGANISATION” FOR URBAN COOPERATIVE BANKS: The Reserve Bank of India plans to set up an “Umbrella Organisation” for Urban Cooperative Banks (UCBs) to improve their operational and financial health as per best global practices. Reserve Bank of India further said that to make UCB sector financially stronger and to enhance depositors’ confidence, it is decided to set up the Umbrella Organisation   as prevalent in many countries. The Umbrella Organisation thus formed will extend liquidity and capital support besides setting up an information and technology infrastructure to enable these UCBs to widen their services at a relatively lower cost.

 

  1. RBI TO REGULATE PAYMENT GATEWAY PROVIDERS: Reserve Bank of India proposes to regulate payment gateway service providers and payment aggregators. This is another move to make digital payments safer. This would mean that payment gateways such as Paytm, Mobikwik etc would have to adhere to RBI guidelines just as any other financial entities. Consequently these gateways will become more transparent, accountable in their workings, thereby benefitting the common man using these digital payments.

 

  1. RBI TO ASSIGN RISK WEIGHTS FOR BANK EXPOSURES TO NBFCs: The Reserve Bank of India will now assign risk weighted rating exposures of banks to all Non-Banking Finance Companies. RBI said that the guidelines for this would be issued by the end of February. With a view to facilitate flow of credit to well-rated NBFCs, it has now been decided that rated exposures of banks to all NBFCs would be risk weighted. This will be as per the rating assigned by the accredited rating agencies, in a manner similar to that for Corporates which is being followed now by all banks.

 

  1. PUBLIC SECTOR BANKS TO BE RANKED ON THE BASIS OF PERFORMANCE: The government will start surveying Public Sector banks annually to rank them on their performance parameters ranging from profitability to customer satisfaction. The parameters include customer responsiveness, financial inclusion, digital platforms and security. Further financial performance will be assessed on the basis of recoveries made, return on asset and differentiated banking strategy.

Blog – INTERIM BUDET – 2019 IN NUTSHELL

DIRECT TAX

** 99.54% of Income tax Returns thus filed have been accepted as having been filed without any scrutiny.

** Standard Deduction limit raised to Rs. 50,000/- from the existing Rs. 40,000/- {Section 16(IA)}

** Tax on deemed rent from 2ND house abolished. This means that the benefit of self-occupied property has

been increased from one house property to two house properties. The income tax on notional rental

income will not be taxed on the second house property {section 23(4)}.

** The limit for tax rebate under section 87A increased from Rs. 3,50,000/- to Rs. 5,00,000/- , thereby the

tax savings would be Rs 12,500/- instead of earlier Rs. 2,500/-. This means that for a taxable income up

to Rs. 5,00,000/- there would be “ZERO” tax. Around 3 crore Tax Payers would be benefitted by this

** TDS on bank deposits/Post office Savings deposit increased to Rs 40,000/- from Rs. 10,000/- {Section

      194A}.

** TDS limit for rent from properties has been increased to Rs. 2,40,000/- from Rs. 1,80,000/- {Section 194I}.

** Within next 2 years almost all verification/assessments of the tax returns selected for scrutiny will be done

electronically manned by tax experts/officials without any manual intervention and without any interface

between   tax payers and tax officials

** It is proposed that within next 2 years income tax returns will be processed in 24 hours and refund will be

issued simultaneously.

** Exemption under Section 54 will be available on the purchase of two house properties provided the capital

gain is  up to  Rs 2.00 crore. The benefit can be availed only once in a lifetime.

 

AGRICULTURE

** Farmers owning land up to 2 hectares to get Rs. 6,000/- per anum under Pradhan Mantri Kissan Yojna 12

      crore Farmers to be benefitted under the scheme.

** Farmers affected by natural calamities to get 2% interest subvention and additional 3% interest

subvention for timely repayment of loan

** Farmers pursuing the activities of animal husbandry and fisheries, who avail loan through Kisan Credit Card

to get 2% interest subvention and further 3% interest subvention in case of timely repayment.

 

OTHERS

**Proposed Pension scheme under Pradhan Mantri Shram-Yogi Maandhan.  Pradhan Mantri Shram-Yogi

Maandhan that offers a pension of Rs. 3000/- per month after the age of 60 to unorganised sector workers

with monthly income of up to Rs. 15000/-. Under the scheme, an unorganised sector worker joining pension

Yojana at the age of 29 years will contribute Rs 100/- per month till the age of 60 while a worker joining at

the age of 18 will have to contribute Rs. 55/- per month. This would be matched by an equal contribution by

the government to the pension account. This is being termed as the World’s biggest pension scheme.

Around 42 Crore unorganised sector workers would be benefitted by this.

**Time limit for attachment of property under Prevention of Money Laundering Act 2002, to be hiked from 90

days to 365 days.

**To promote “ Make in India” concept , the Customs duty to be abolished on 36 capital goods.

                                                                            

MSME SECTOR

**GST registered SME enterprises will get 2% rebate on interest charged to them on their loans up to Rs. 1

crore.

**SME with a turnover of up to Rs. 5 crore to file GST returns on quarterly basis as against the monthly returns

as of now.

 

DEFENCE

** Defence Budget to cross Rs. 3,00,000 lakh crore for the first time ever.

 

In our opinion this interim budget is populist and election oriented budget for the benefit of lower and lower middle class. These provisions will put a stress on the fiscal deficit of the country.

WEEKLY FINANCIAL SNIPPETS- 02/02/2019

  1. DIRECT TAX COLLECTION EXCEEDS THE TARGET IN FINANCIAL YEAR 2019: The government had originally budgeted the Direct Tax collections at Rs 11.50 Lakh crore in current financial year 2018-19 which includes Corporate Tax and Personal Income Tax. The government has estimated to collect Rs 12.00 lakh crore this fiscal which is Rs. 50,000 crore more than the estimated target. Out of this, Rs. 6.71 Lakh crore is from corporate tax and Rs. 5.29 Lakh crore is from Personal Income Tax. For the Financial year 2019-20 the budget estimated target is Rs 13.80 lakh crore.

 

  1. GOVERNMENT ANNOUNCES PENSION SCHEME IN BUDGET 2019: Interim Finance Minister Mr. Piyush Goyal has announced Pradhan Mantri Shram-Yogi Maandhan that offers a pension of Rs. 3000/- per month after the age of 60 to unorganised sector workers with monthly income of up to Rs. 15000/-. Under the scheme, an unorganised sector worker joining pension Yojana at the age of 29 years will contribute Rs 100/- per month till the age of 60 while a worker joining at the age of 18 will have to contribute Rs. 55/- per month. This would be matched by an equal contribution by the government to the pension account. This is being termed as the World’s biggest pension scheme.

 

  1. GST COLLECTIONS TO MISS THE BUDGETED TARGET FOR FINANCIAL YEAR 2018-19: GST collections by the Centre will miss the budgeted target set for current financial year by Rs 1 lakh crore. The government had estimated to collect over Rs. 7.43 lakh crore from GST in the current financial year but however the collections would be Rs 6.43 lakh crore. The total indirect tax collection for financial year 2019-20 has been estimated at Rs 7.61 lakh crore.

 

  1. THREE PSU BANKS COME OUT OF PCA: As per Reserve Bank of India statement, Bank of India, Bank of Maharashtra and Oriental Bank of Commerce are out of the Prompt Corrective Action (PCA). Reserve Bank of India has eased operational curbs on these three banks on account of the marked improvements in the capital positions and asset quality. Now these banks would be allowed to open branches and extend loans freely.

 

  1. IRDAI ASKS INSURERS TO MAKE PROVISIONS FOR IL&FS EXPOSURE: Industry Regulator IRDAI has instructed Insurance Companies to make provisions for their exposure to the crippled infra lender IL&FS. The IL&FS group with a debt of over Rs. 94,000 crore has been defaulting on its financial obligations  since August 2018 and has also borrowed from insurance companies but the exact amount of exposure to the industry is not yet immediately known. These exposures cannot be written off and these insurance companies will have to make provisions for the said exposures.

 

  1. SENIOR MANAGEMENT AT ICICI BANK TO HAVE NO TITLES: ICICI Bank has decided to scrap designations at senior management level to inspire more efficient teamwork by making processes less hierarchical. Designations at the bank will now be indicative of the function or the job that a person is expected to perform. Executives at the senior management level will now have the job title of “Head” followed by their function or department as it will be a role based designation aligned with appropriate decision-making powers so that the bank can respond to market opportunities in a faster manner.

 

  1. ICICI BANK ASKS CHANDA KOCHHAR TO RETURN BACK ALL PERFORMANCE BONUSES: ICICI Bank’s internal inquiry has found that former Chief Executive Chanda Kochhar violated disclosure norms on conflict of interest and her exit from the bank will not be treated as normal resignation but as dismissal. Now the bank has asked her to return back all the bonuses awarded to her during her tenure and she stands to lose all dues along with all the stock options that would have accrued to her.

WEEKLY FINANCIAL SNIPPETS—26.01.2019

1. COMPANIES TOLD TO DISCLOSE DUES TO MSME SECTOR: In its latest attempt to improve the liquidity crunch faced by Micro, Small & Medium Enterprises (MSMEs) and to bring in more transparency, the government is mandating all companies to disclose arrears (payables) of more than 45 days to MSMEs. Corporate Affairs Ministry is expected to notify the rules within a few days. In future every company will have to make half yearly disclosures regarding the unpaid bills to MSMEs. The government has clarified that the rules are in line with what is prescribed in the law governing MSME sector and the same is being implemented now.

2. YES BANK PARTNERS WITH MAHARASHTRA GOVERNMENT FOR ELECTRONIC PDS: Yes Bank has partnered with Maharashtra Government for the state government’s e-PDS State Programme to enrol Fair Price Shops as Business Correspondent Agents. Yes bank will enrol around 40% Fair Price Shops across the state and this will cover more than 20,000 ration shops and over 70 lakh citizen. This facility will enable Fair Price Shops to provide banking services such as small value deposits and withdrawals from any bank account via Aadhaar-enabled payment system. These shops will also be able to collect digital payments through Aadhaar enabled payment for ration and also will provide value added services like bill payments and mobile recharge.

3. NON-ITR FILERS TO SUBMIT INCOME TAX RETURN OR REPLY TO TAX QUERY WITHIN 21 DAYS: The Finance Ministry has identified several individuals as potential non-filers who have carried out high value transactions in the Financial Year 2017-18 (Assessment Year 2018-19) but have still not filed their Income Tax Returns (ITRs)for FY 2017-18. These Non-Filers have been asked to assess their tax liability for F Y 2017-18 and file their tax returns or submit online response within 21 days.

4. GOVERNMENT TO SEEK SPECIAL DISPENSATION FROM RBI FOR IL&FS CRISIS: Following the crisis at IL&FS late last year, some of the companies of the diversified IL&FS group, which has a debt of over Rs. 91,000 crore, have failed to repay loans. This has raised concerns over liquidity in the system and hence the Corporate Affairs Ministry has superseded its board by deciding to approach the RBI for seeking a special dispensation for deferment of provisioning requirements for bank loans extended to IL&FS since the group is expected to come out of the trouble as it is planning to monetise some of its assets.

5. NO e-WAY BILLS FOR NON-FILERS OF GST RETURNS: Non-filers of GST returns for consecutive six months will be barred from generating e-way bills for movement of goods. The Service Tax Network is developing a new IT system wherein such businesses that have not filed GST Returns for consecutive six months will not be able to generate e-way bills. The new rules will be notified and will bring in to force once the new IT system is ready.

6. RBI ANNOUNCES Rs. 10,000 CRORE BOND BUYBACK TO IMPROVE LIQUIDITY POSITION: The Reserve Bank of India has announced a Rs. 10,000 crore bond buyback under its Open Market Operations (OMO). RBI has committed to purchase an aggregate amount of Rs. 50,000 crore government securities under OMO and so far has purchased Rs. 30,000. The latest purchase of Rs. 10,000 crore is based on the assessment of prevailing liquidity conditions and it is a continuing effort by RBI to provide adequate liquidity.

7. CANARA BANK PROPOSES TO SELL ITS STAKE IN SIDBI AND NSDL: Canara Bank proposes to sell one crore shares in Small Industries Development Bank of India (SIDBI). It has invited bids at a floor price of Rs. 225/- per share. The bank also proposes to sell 4 lakh shares in NSDL at a floor price of Rs.850/- per share.

8. GOVERNMENT SACKS TWO PUNJAB NATIONAL BANK EXECUTIVES: The government has removed Mr. K Veera Brahmaji and Mr. Sanjeev Saran, two senior executives of Punjab National Bank from the office of Executive Director with immediate effect for failing to prevent the $2 billion Nirav Modi fraud.

WEEKLY FINANCIAL SNIPPETS—19.01.2019

  1. DEPOSITORS READY TO TAKE HAIRCUT TO SAVE KAPOL BANK: For the first of its kind in the history of Indian Banking, the Depositors of the troubled Kapol Co-operative Bank Ltd have drawn up a plan to revive the stressed bank. Around 2.5 lakh depositors, under the banner of Kapol Trustee (Public Interest Efforts), have submitted an 5 point plan to RBI which offers to convert 35% of their deposits in to Bank’s share capital, conversion of 25% of their deposits in to 3 year FDs, conversion of 37% of their deposits to reducing balance accounts and straight forfeiture of 3% of all savings. However this seems to be a long drawn process as the administrator appointed by RBI must approve the plan. This will be followed by the RBI physically scrutinizing whether the consent given by each depositor is valid or not.

 

  1. EDELWEISS PRIVATE CREDIT FUND RAISES Rs. 9,200 CRORE FOR INVESTMENT IN STRESSED ASSETS: Edelweiss Alternative Asset Advisors Ltd, a unit of Edelweiss Financial Services Ltd has raised Rs. 9,200 crore ( $ 1.3 billion) for investments in stressed assets through its India fund. The private credit fund is looking at making investments in stressed assets with an aim to turn around the Non-Performing Asset. These investments could be a combination of last- minute financing, financial restructuring and operational turnaround assistance.

 

  1. GOVERNMENT TO INFUSE Rs. 6,000 CRORE IN EXIM BANK: The government is infusing a sum of Rs. 6,000 crore in Exim Bank thereby doubling its share capital to Rs. 20,000 crore. The equity will be infused in two instalments. Rs. 4,500 crore in 2018-19 and Rs. 1,500 crore in 2019-20. The Cabinet has already approved the infusion of the said funds. The said infusion would help the bank to expand its business.

 

  1. GET INCOME TAX REFUND WITHIN A DAY FROM 2020: From the year 2020, the e-filing tax payers will get their refund orders within a day through a pre-filled tax return form. Currently the average time taken for tax return processing and giving a refund is 63 days and this will be reduced to just one day. The Cabinet has cleared this ambitious project of Rs. 4,242 crore for e-filing and centralised processing of income tax returns.

 

  1. NEW e-COMMERCE RULES MAY BOOST PROFITS OF SMALL RETAIL STORES: Tighter norms for  e-Commerce players may be a boon for small retail businesses as their profits are bound to grow by around Rs. 10,000-12,000 crores in 2020. This is as per a report by CRISIL. In December 2018 the government has introduced new regulations for e-Commerce players that would bar on-line marketplaces with foreign investments from selling products of companies where they have a stake and ban exclusive marketing arrangements.

 

  1. GOVERNMENT PLANS TO PREVENT COMPOSITION DEALERS FROM CHARGING GST FROM ITS BUYERS: The Revenue Department is planning to introduce a mandatory rule for Composition Dealers and Service Providers to declare their GST Registration Status in invoices to ensure that they do not charge GST from the buyers. The measure when implemented would check the practice of Composition Dealers of collecting GST from the buyers and not depositing the same with the government.

 

  1. PSU BANKS WITHDRAW AID TO GRAFT ACCUSED’S LEGAL BATTLE: In a setback to hundreds of bankers facing corruption related charges, the government has advised PSU Banks to withdraw any legal or financial support to fight cases, especially when the bank itself is a complainant. At present a committee within the bank decides the cases in which financial and legal support is provided. Now the Finance Ministry has said there is no question of providing support to bankers in cases that are filed by the lender itself. In the second category, where the case is filed by the investigating agency, the government has left it to lenders to take decisions based on the merits of the case.

WEEKLY FINANCIAL SNIPPETS – 12/01/2019

  1. RBI’S KYC DEADLINE MAY HAMPER WALLET COMPANIES PLANS: Prepaid Payment Instruments (PPIs) or Mobile Wallets were mandated by Reserve Bank of India in October 2017 to capture all information of its users as required under Know-Your-customer (KYC) guidelines. So far Wallet Companies have been able to verify only a fraction of their total user base, and are yet to complete the biometric or physical verification of majority of users. This means more than 95% of mobile wallets in the country could stop operating by March 2019 if they do not comply with the RBI mandate.

 

  1. AROUND 16% OF ASSESSEES DO NOT FILE MONTHLY GST RETURNS: The latest government data reveals that on an average 16% of GST return assessees are not filing their monthly GST returns. And under Composition scheme the percentage of non-filers as on November 2018 was 28.7%. As per the GST law every GST registered person will have to file GST returns in one form or the other. A registered person will have to file monthly returns (if he is a normal supplier) or on quarterly basis (supplier opting for composition scheme).

 

  1. CREDIT GROWTH OF PRIVATE AND COMMERCIAL BANKS SURGES: Credit growth of Scheduled Commercial banks (SCBs) improved across all bank groups between March and September 2018. According to the Reserve Bank of India’s latest Financial Stability Report the credit extended by all SCBs increased by 13.1% as on September 2018 and that of private sector banks grew by 22.5% during the same period.

 

  1. NO e-WAY BILL IF GST RETURNS NOT FILED FOR TWO MONTHS: The GST council has formulated a new rule according to which the Finance Ministry has barred e-way bill generation for transporting consignment if the supplier or the recipient of the cargo has not furnished returns for two consecutive tax periods under GST. The e-way bill is required to be generated from a common portal by a business unit for movement of consignment worth Rs. 50,000/-

 

  1. RBI LIKELY TO PAY INTERIM DIVIDEND OF Rs. 40,000 TO THE GOVDERNMENT: The Reserve Bank of India is likely to transfer an interim dividend of up to Rs. 30,000 crore to Rs. 40,000 crore to the government by March 2019. The said amount could help the government to bridge the widening gap in the budget deficit following a drop in tax collections.

 

  1. NBFCs AND HFCs RAISE FUNDS THROUGH SECURITISATION OF SME AND RETAIL LOANS: The cash starved Non-Banking Finance Companies (NBFCs) and Housing Finance Companies (HFCs) have sold their retail and SME portfolios worth Rs. 73,000 crore during October-December 2018 to banks through securitisation mode. These NBFCs and HFCs are facing lot of liquidity crunch in the aftermath of defaults by IL&FS and its group companies in the second quarter of this fiscal and have forced them to liquidate part of their loan portfolio to generate funds to meet redemption requirements and also to maintain their credit flow.

 

  1. NO LIABILTY IF e-WALLET USERS REPORT FRAUD WITHIN 3 DAYS: Prepaid instruments comprise of Mobile wallets, Prepaid Payment Cards and paper vouchers like Sodexo. Now the Reserve bank of India has absolved customers using these prepaid instruments, of liabilities arising out of a fraud if the same is reported within 3 days. This is now on par with the rules that are prevailing for banks.

 

  1. GST RELIEF TO MSMEs: The Micro Small and Medium Enterprises (MSMEs) who are registered under GST have now got the option of moving out of the GST ambit as the GST council has raised the aggregate turnover threshold for GST exemption to Rs. 40 lakh from the present Rs. 20 Lakh. Under the Composition Scheme the limit is increased to Rs.1.5 crore from present Rs.1 crore. The composition tax payer will pay tax quarterly but file the returns annually. Composition scheme is also newly started for services with a turnover up to Rs.50 lakhs and that will attract 6 % tax. These measures will come in to effect  from 1st April 2019.