WEEKLY FINANCIAL SNIPPETS – 18/05/2018

  1. PNB POSTS BIGGEST EVER QUARTERLY LOSS: Punjab National Bank (PNB) reported Rs 13,416 crore loss in the fourth quarter of 2017-18 as against a profit of Rs 262 crore in the same period last year. As a result of this, PNB posted a consolidated net loss of Rs 12,282.82 crores against a profit of Rs 1.324 crores last year. The significant reason for this huge loss was the rise in provisions to Rs. 20,353.51 crore in quarter ended March 2018. PNB’s Non-Performing Assets grew to a whopping 86,620 crore in the quarter and the gross NPA ratio rose to 18.38%.

 

  1. RBI ISSUES FINAL NORMS ON NET STABLE FUNDING RATIO (NSFR): RBI has issued final guidelines on Net Stable Funding Ratio (NSFR). The concept of NSFR emerged in the aftermath of global financial crisis proposed by Basel Committee on Banking Supervision to make banks more resilient. NSFR ensures banks have sufficient stable sources of funding to finance their activities over long run. The ratio can be defined as the amount of available stable funding (ASF) in relation to the amount of required stable funding (RSF). ASF is the portion of capital and liabilities expected to be realisable over a year.

 

  1. SBI CARD BASE GROWS 20% IN 6 MONTHS: SBI card has been increasing its card numbers at a compounded annual growth rate of 40%. Small cities are driving the growth rate for SBI Card. It took SBI cards one year to increase the card base from 4 million in September 2016 to 5 million in September 2017. But since then, the card base has grown to 6.3 million in March 2018, an increase of 1.3 million cards in 6 months. The market share of SBI cards in number of cards is now 16%.

 

  1. COMBINED FOURTH QUARTER LOSS OF 4 PSU BANKS IS $1.74 BILLION: Four Public Sector Banks reported huge losses in the fourth quarter of FY 2017-18 which amounts to  a combined net loss of       $ 1.74 billion ( Rupees 117.29 billion). This is due to a jump in bad loan provisioning following tightening of the RBI rules in respect of NPAs. Out of the four banks, Canara Bank posted a net loss of Rs.48.6 billion, Allahabad Bank reported a net loss of Rs. 35.10 billion, UCO Bank Rs. 21.34 billion and Dena Bank Rs.  25 billion Net loss.

 

  1. NO GST FOR FREE BANKING SERVICES, INCLUDING ATM WITHDRAWAL: Free banking services like cheque book issuance, ATM withdrawals are likely to remain out of the ambit of GST. The revenue department is likely to instruct the financial services department that GST will not be levied on free banking services. The Indian Banks Association (IBA) on behalf of the management of all banks too had made representation to tax authorities.

 

  1. ALLAHABAD BANK BOARD DIVESTS ITS CEO FROM FUNCTIONAL POWERS: After the government initiated removal of Allahabad Bank Chief Executive Officer (CEO) Ms Usha Ananthasubramaninan following a CBI charge sheet in Nirav Modi scam, the bank’s board divested her of all her functional responsibilities. After similar government action against 2 Executives of PNB, K V Brahmaji Rao and Sanjiv Sharan, the PNB board too has divested them of their financial and executive powers.

 

  1. RBI PUTS FRESH LENDING RESTRICTIONS ON ALLAHABAD BANK: Reserve bank of India has placed additional restrictions on Allahabad Bank, which is already under Prompt Corrective Action (PCA) since January this year. RBI has debarred the bank from high risk lending and raising high cost deposits. The RBI has also restricted the bank from creation of non-banking assets and has advised it to restrict from accessing or renewing wholesale or costly deposits. The bank’s board has already taken note of the same.

 

  1. CENTRE MAY ASK RBI TO EASE PCA FRAMEWORK: The government may ask RBI to ease the Prompt Corrective Action (PCA) framework so that a complete restriction on fresh lending does not affect credit flow to business, particularly to Small and Medium Enterprises. This was decided after the Ministry held a review meeting with 11 PSU banks which are under PCA.
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WEEKLY FINANCIAL SNIPPETS – 12/05/2018

  1. HDFC BANK POSTS RECORD PROFIT OF Rs 4,799 CRORE FOR Q4: HDFC Bank Ltd posted a record 4Th quarter net profit of Rs. 4,799 .28 crores, a 20.27% year-on-year growth. This is also driven by stable asset quality. Net Interest Income (NII) increased to 17.70% and Asset Quality remained stable, as percentage of gross Non-Performing assets (NPAs) were at 1.30% against 1.29% as compared to last year. The consolidated net profit for the year ended March 2018 was Rs. 18,510 crores, up by 21.4% as compared to last year. When most of the banks (both public and private sector) are reeling under the bad loans scenario, HDFC Bank has come out successfully in these difficult times as well because of its business mantra of “Retail Banking” all along.

 

  1. BANKS UNDER TAXMAN SCANNER FOR GST REFUND ON ATM TRANSACTIONS: The Indirect Tax Department is scrutinising the 100% input GST credit availed by most of the banks on taxes paid by their ATM vendors. The scrutiny started when banks started claiming 100% input tax credit on the amount paid to ATM vendors who are responsible for maintenance and cash supply to the machines. These vendors charge per transaction and add GST to the bills. The tax officials believe that since banks don’t charge on many ATM transactions which are free to customers, 100% input credit cannot be claimed by them.

 

  1. LENDERS FIND RESCUE PLAN FOR STRESSED POWER ASSETS: Lenders to the power sector led by SBI have decided to float a fund to take over 14 stressed power plants. The decision is aimed to prevent power generation plants from going in to liquidation, receiving better valuations and securing speedy resolution. It was decided that lenders will have to make investments according to their share of exposure in each power plant.

 

  1. GOVERNMENT LIKELY TO WITHDRAW TAX NOTICE ON FREE BANKING SERVICES: The tax department is likely to withdraw the show-cause notice issued to several banks asking them to pay service tax on “free services” provided to the customer. Following the Finance Ministry’s instructions, the Department of Financial Services (DFS) has presented its views and is likely to withdraw the notice.

 

  1. GST DIGITAL DISCOUNTS MAY COST Rs. 15,000 CRORES TO THE GOVERNMENT: The government has estimated that the centre and states may lose up to Rs. 15,000 crores by offering discounts of up to Rs.100 on GST for every digital transaction, including those done using credit and debit cards or mobile wallets. This figure is arrived at, based on the average ticket size of each transaction being Rs. 1,400 and a 2% discount being proposed on it.

 

  1. PNB BANKS ON ARTIFICIAL INTELLIGENCE TO CHECK FRAUDS: Punjab National Bank has said it plans to rely on Artificial Intelligence (AI) for reconciliation of accounts and incorporate analytics for improving audit systems as it seeks to clean up the process. The bank has also discussed its road map with a target of reaching a total business of Rs. 12,000 lakh crore.

 

  1. MONTHLY GST RETURN SYSTEM TO BE IMPLEMENTED: The GST council has finally approved the single monthly return with an aim to boost collections and compliance. The new system is scheduled to be implemented in next six months. Though the council has approved the new system but the software will take six months to get fully operationalized. However the new system will be implemented in 3 phases.

        8. NBFCs HIRE TALENT FROM BANKING INDUSTRY AMID RISING GROWTH:                     Non- Banking Financial Companies (NBFCs) are recruiting candidates from                           banking industry. According to industry estimates, 60 to 70-% of the NBFCs hiring               pertains to the candidates from banking industry. While banks are struggling to                 come out of bad loan mess, NBFCs are in a comfortable position. By hiring these                 candidates from banking industry they tend to get experienced hands.

WEEKLY FINANCIAL SNIPPETS-05/05/2018

  1. TCS IS THE FIRST INDIAN IT COMPANY TO TOUCH 100 BILLION DOLLAR MARKET VALUE: Tata Consultancy Service (TCS) is the first Indian IT Company to touch 100 billion dollar (Rs 6.49 lakh crores) in market capitalization. Reliance Industries (Energy-Telecom) is the only other Indian Company to reach $100 billion mark in the year 2007. It is also heartening to note that TCS gave its employees 120% payout of target variable pay (bonus).

 

  1. GROWTH IN BANK DEPOSITS FALLS TO FIVE DECADE LOW: Bank Deposit growth fell to a five decade low in fiscal year ended March 2018. Data from RBI website shows aggregate deposits in the banking system grew a mere 6.7% in 2017-18, the lowest since fiscal year 1963. There was huge influx of bank deposits during demonetization but now due to low interest rates, people have started saving in mutual funds and insurance which has eroded banking competitiveness.

 

  1. NPAs HIT MONETARY POLICY TRANSMISSION IN INDIA: Bad loans have impaired Monetary Policy transmission in India as Banks were unable to increase  their lending rates  and protect Net Interest Margin (NIM—means the difference between the yield the bank earns on loans and that it pays on deposits). This is as per a research report by RBI. The report says that as gross NPAs of banks rose, they were unable to increase interest rates due to competitive pressures. Gross NPAs in banks rose from 3.4% in 2013 to 9.9% in 2017.

 

  1. PNB TIGHTENS OFF-SITE CREDIT MONITORING RULES TO AVOID FURTHER FRAUDS: Punjab National Bank has tightened bank’s credit underwriting norms and has put in place an off-site monitoring to identify risks. The process has been divided into four components with different employees focussed on sourcing, appraisal, processing, documentation, disbursal and recovery. Internal Audit process has been strengthened to give higher weightage to off-site credit  monitoring mechanism.

 

  1. REGIONAL RURAL BANK EMPLOYEES TO GET PENSION AT PAR WITH NATIONALISED BANKS: A Supreme Court verdict has paved way for Regional Rural Bank (RRB) employees to draw pension at par with nationalised banks. About 27,000 RRB employees are set to gain from this verdict. Currently there are 56 RRBs spread across the country with a work force of 95,000.

 

  1. GST MONTHLY REVENUE TOUCHES Rs. 1 LAKH CRORE: The GST revenue for the month of April 2018 has crossed Rs. 1 lakh crore. This is for the first time that GST collections are crossing the Rs. 1 lakh crore mark since GST was rolled out. The Finance Ministry has announced that the total Gross GST revenue collected in April 2018 is Rs. 1,03,458 Crore.

 

  1. NBFCs TOOK 40% OF ALL NEW CORPORATE LOANS BY BANKS: Loans to Non-Banking Financial Companies (NBFCs) accounted for nearly 40% of the total new corporate loans disbursed by banks in financial year 2018. The quantum of increase of loans to corporate sector was Rs. 2.68 Lakh Crore of which Rs. 1.05 lakh Crore (around 39.3%) was availed by NBFCs.

 

  1. GST COUNCIL MAY SOON ANNOUNCE CASH BACKS TO BUSINESSES FOR DIGITAL TRANSACTIONS: The GST council may soon announce cash backs to businesses and price benefits to consumers who are paying through digital mode. Consumers paying through digital mode would be offered a discount over maximum retail price. Businesses will get cash back based on the quantum of turnover through digital mode.

WEEKLY FINANCIAL SNIPPETS-28/04/2018

  1. TAX DEMAND AGAINST FREE SERVICES PROVIDED BY BANKS: The Director General of Goods & Services Tax Intelligence has sent notices to many banks to pay taxes on free or bundled services (free services provided to customers who maintain balance in the account) provided by the banks to the account holders. The total demand as per ET report could exceed Rs. 6,000 crore. The demand is retrospective with a 12% service tax claimed since 2012, 18% interest on the amount and a 100% penalty. The notice has shocked the banking industry which is already reeling under an enormous amount of bad loans. The Indian Banks’ Association is planning to appeal against the arbitrary tax notice.

 

  1. DEPOSITS IN JAN-DHAN ACCOUNTS CROSS Rs. 80,000 CRORE: Total deposits in Jan Dhan accounts crossed Rs. 80,000 crore mark with more people joining the flagship financial inclusion programme. The latest report of the World Bank titled “Global-Findex Report 2017” released last week cited the success story of the Jan Dhan Yojana. Deposits under these accounts are on the rise after the demonetization exercise.

 

  1. SBI TO SAVE Rs. 30 CRORE EVERY YEAR FROM WIND, SOLAR POWER INSTALLATIONS: State Bank of India has announced that it has saved Rs. 125 crore in the last 8 years by installing windmills and many solar power units and expects to save Rs. 30 crore annually through its “renewable energy” investments. The bank has installed 10 windmills with a capacity of 1.5 MW each, of which three are in Tamil Nadu, six in Maharashtra and one in Gujarat. It has also invested in solar power and now possesses a capacity of 21.23 MW in renewable power sources. Energy generated through these renewable sources is solely for captive use by the bank’s various offices and branches across the country, making them free of any carbon emission.

 

  1. PNB TO HIRE DETECTIVE AGENCIES TO LOCATE UNTRACEABLE BORROWERS: Fraud hit Punjab National bank has invited applications for empanelment of detective agencies to locate its untraceable borrowers as it looks to strengthen and supplement its efforts to recover bad loans which surged to Rs. 57,519 crore as on 31/12/2017. All NPA accounts (Sub-standard, Doubtful and loss assets category) would be allocated to detective agencies thus appointed for gathering information.

 

  1. CREDIT GROWTH OUTSTRIPS DEPOSITS IN FY’18: Banks have ended Financial Year 2018 (FY’18) with more credit growth than the deposits. During this period credit growth was at Rs. 8,29,187 crore, while the Deposit growth was Rs. 7,28,765 crore. The incremental credit-deposit (CD) ratio for FY’18 works out to 114%. But what is alarming is during the last fortnight of FY’18, banks seem to have gone all out to disburse loans in a hurry. Credit disbursal during this last fortnight jumped by Rs. 2,79,361 crore, which almost amounts to 34% of the total credit disbursed in FY’18. In our opinion, this kind of last minute disbursals just to meet the year end targets may further lead to more  deterioration in quality of credit.

 

  1. I-T DEPARTMENT SAVES Rs. 977 CRORE IN 5 YEARS ON POSTAGE AFTER RISE IN ONLINE COMMUNICATION: The Income Tax Department has said that it has saved up to Rs. 977 crore over the last 5 years due to the rise in online communications or E-mails. The department has saved on postage cost due to the increase in online communications. Online communication of the department has more than doubled since 2013-14.

WEEKLY FINANCIAL SNIPPETS-21/04/2018

  1. KOTAK MAHINDRA BANK BECOMES SECOND MOST VALUED BANK: Kotak Mahindra Bank Ltd pipped State Bank of India to become India’s second most valued bank after HDFC Bank in terms of market capitalisation. Data from BSE shows that Kotak Mahindra Bank now has a market capitalisation of Rs. 2,22,970 crores where as SBI’s Market cap is Rs. 2,22,043 crores. HDFC remains the country’s most valued bank with a market cap of Rs. 5.04 lakh crore.

 

  1. LIC PROFIT BOOKING RISES TO Rs. 25,000 CRORE IN FINANCIAL YEAR 2018: Life Insurance Corporation of India (LIC) has booked record equity trading profits of Rs. 25,000 crore in 2017-18, up from Rs. 19,000 crore during 2016-17. LIC’s record profit booking is a positive sign for market and this means the insurer now will be able to announce better bonus to its policy holders and pay better dividends to the government. LIC will also be in a better position to pump in more funds in to the market.

 

  1. AS BANKS SHY AWAY FROM EDUCATION LOANS, NBFC’s SEE A LUCRATIVE OPPORTUNITY: While public sector banks are facing high accretion levels of Non-Performing Assets (NPAs) in the education loans, leading to a slowdown in education loans in PSBs, Non- Banking Finance Companies (NBFCs) are expanding their education loan books. Over the last few years many standalone education loan NBFCs have come up, and many of them are experimenting new products as well, by adopting student-led approach which includes an overall screening of students, these NBFCs are redefining the norms of education loan lending.

 

  1. E-WAY BILLS HIT TRUCK DISPATCHES, INTER-STATE GOODS MOVEMENT DOWN BY 15%: By introducing the E-way Bill concept in GST, truck movement is becoming more difficult. Because of this, dispatches by Road transport under GST were almost down by 15% in the first 15 days of E-way bill mechanism. In our opinion these are initial teething problems which will become normal in days to come.

 

  1. PSBs FAILING TO RECOVER BAD LOANS: Public Sector Banks are having lot of difficulty in recovering bad loans. The recovery rate in NPAs which were written off is declining. As per a RBI report, 90% of written off loans could not be recovered during the period 2014-15 to 2017-18. The worst performer is UCO bank, which had written off Rs. 6,087 crore during the above mentioned period, has failed to recover a single rupee.

 

  1. ICICI BANK LAUNCHES DIGITAL FORM FOR OPENING CURRENT ACCOUNT: ICICI Bank has introduced a “Digital form” which will help open current account in a few hours. The bank captures the information about the customer and the business digitally and verifies KYC documents in real-time at the premise of the customer. This is for the first time that any bank has introduced digital format for opening current account and as per the bank it will help in “ease of doing business” and help increase the bank’s market share.

 

  1. INCOME TAX DEPARTMENT WARNS AGAINST TAX EVASION BY SALRAIED EMPLOYEES: The I-T Department has cautioned salaried tax payers against under-reporting their income or inflating their deductions in assessment year 2018-19. It has also warned intermediaries like chartered accountants and other consultants against abetting such tax evasion. Any infractions will invite action under various provisions of Income Tax Act. The I-T Department will also ask their employer to take action against such erring employees.

WEEKLY FINANCIAL SNIPPETS- 14/04/2018

  1. BANK OF BARODA SLAPPED WITH Rs. 9 CRORE FINE OVER REMITTANCE SCAM: The Financial Intelligence Unit (FIU) has slapped Rs. 9 crore penalty on Bank of Baroda for failing to adhere to Anti-money Laundering norms and not having an effective system of reporting suspicious transactions linked to the Rs. 6,000 crore scam in Delhi based branch.

 

  1. REGIONAL RURAL BANKS COME UNDER PROMPT CORRECTIVE ACTION PLANS: Prompt Corrective Action (PCA) framework will also be applicable to Regional rural Banks (RRBs). The National Bank for Agriculture & Rural Development (NABARD), which supervises RRBs, has directed them to initiate self-corrective action plans based on parameters such as capital adequacy, asset quality and profitability which largely is based on the framework for bigger commercial banks. Accordingly, RRBs will also slow down their business if their capital adequacy falls below 9%, net non-performing assets rises over 10% of total advances and return on assets falls below 0.25%.

 

  1. SBI AND PNB PUT 15 NON-PERFORMING ASSETS WORTH Rs. 1,063 CRORE FOR SALE: Leading public sector banks, State Bank of India and Punjab National Bank have put their 15 Non-Performing Assets worth Rs. 1,063 crores for sale. They will be conducting the E-Auction of the said assets on 20Th

 

  1. START-UP INVESTORS MUST DISCLOSE DEAL VALUATIONS IN TAX RETURNS: Promoters and Investors in new age start-ups can no longer expect to make easy profits from any exits without paying taxes on them. The Income Tax Department has introduced new disclosure norms in the latest edition of I-T Return forms which requires the Individual tax payer to provide the fair value of the unlisted shares and disclose the full value of the consideration received or receivable in respect of unquoted shares sold by them during the year. This norm is included to ensure that promoters and investors disclose the information correctly.

 

  1. 5 STATES ACCOUNT FOR 61% OF E-WAY BILL GENERATION : The 5 states, Gujarat, Uttar Pradesh, Telangana, Kerala and Andhra Pradesh have accounted for 61% of the inter-state E-way bill generation. The Electronic Bill or E-bill has become mandatory for movement of goods valued over Rs. 50,000 from one state to the other from 1ST These 5 states have emerged as the leaders in generating E-way bills and is an example for other states to follow.

 

  1. BANKS CANNOT DENY PENSION PAYMENT FOR LACK OF AADHAAR: There is good news for senior citizen who are drawing their monthly pension. In a major relief to pensioners, Employees Provident Fund Organization (EPFO) has asked all the pension-disbursing banks not to turn away pensioners for want of Aadhaar. EPFO has issued circular to heads of all pension disbursing banks, instructing them to provide with alternate options of identification in cases where the pensioner is unable to provide Aadhaar proof.

 

  1. CANTEEN SERVIVCES TO EMPLOYEES WILL ATTRACT GST: Henceforth providing canteen meals to its staff for a price will attract GST. According to a decision of the Authority for Advance Taxes, Recovery of food expenses from the employees for canteen services provided by the employer would come under the definition of outward supply as defined under the GST Act 2017.

WEEKLY FINANCIAL SNIPPETS- 31/03/2018

  1. BUSINESSES WITH “NIL” TAX LIABILITY MAY GET TO FILE GST RETURNS BI-ANNUALLY: Business entities having zero tax liability for 6 consecutive months under GST may get relief of filing “NIL” GST returns twice a year. The said proposal is being sanctioned by GST council and the same will be implemented soon. According to a recent data, nearly 40% of GST return files have “NIL” tax liability and henceforth these entities need not file monthly tax returns.

 

  1. GUARANTEES OFFERED BY BANKS OUTSIDE INDIA TOUCH 1.95 LAKH CRORE: The Non-Fund exposure (Guarantees, LOUs, and Foreign Exchange Contracts) of banks which fall under the category of Contingent liability has drawn ample attention after the Nirav Modi LOU Scam in PNB. As per the RBI data, out of the total contingent liabilities, Guarantees outside India by all scheduled commercial banks have grown at an annual growth rate of 21% since 2004-05. The total guarantees outside India stood at 1.95 lakh crore in 2016-17.

 

  1. IBC PANEL EASES INSOLVENCY RULES FOR MSMEs: The Insolvency & Bankruptcy Code (IBC) review panel has called for sweeping changes in the law aimed at easing insolvency rules for Micro Small and Medium Enterprises (MSMEs). The committee has proposed that the promoters of MSMEs who are not termed as wilful defaulters should be allowed to bid for the assets of their companies during insolvency process.

 

  1. WORRIED BY IDBI BANK’S POOR HEALTH, RBI WRITES TO FINANCE MINISTRY: The Reserve Bank of India has written to the Finance Ministry expressing concerns over the poor financial position of IDBI Bank and has called on the government to take remedial steps. The letter points out several shortcomings, including the recognition of non-performing assets. RBI says that it has found out during their inspection that the bank’s mechanism for identifying bad loans is also deficient. And having said that, RBI also adds that the Bank’s Non-performing assets could be higher than what has been reported so far.

 

  1. PNB APPROVES PAYMENT TO 7 BANKS OVER FRAUDULENT LOUs: Punjab National bank has announced that it will make payments of around Rs. 6,500 crore to 7 banks against the Letter of Undertaking (LOUs), and Foreign Letters of Credit (FLCs) it issued in the fraud allegedly committed by jewellers Nirav Modi and Mehul Choksi and their companies. Around 350 such LOUs and FLCs are maturing on 31ST March 2018.

 

  1. ARUNDHATI BHATTACHARYA AMONG THE NAMES WHO COULD LEAD BBB: The government has initiated the process of selecting the next Chairman for the Banks Board Bureau (BBB). State Bank of India’s former Chairperson Mrs. Arundhati Bhattacharya, is considered to be one of the frontrunners for the post. But the government officials said they are open to get someone from the private sector also to head the advisory body. The government is not inclined to expand the role of the BBB and is of the opinion that the advisory body should continue to make holistic recommendations.

 

  1. IDBI BANK DISCLOSES Rs. 770 CRORE FRAUD: IDBI Bank has said that it has identified fraudulent loans of Rs.770 crore disbursed from 5 of its branches in Andhra Pradesh and Telangana. The loans were sanctioned and disbursed during fiscal years 2009-2013 for fish farming businesses. These loans were obtained against non-existent fish ponds and by inflating the value of collaterals. It has found major lapses in processing and disbursing the loans by two of its officials. The case has been handed over to CBI.

WEEKLY FINANCIAL SNIPPETS- 24/03/2018

  1. SBI CLOSES 41.16 LAKH SAVINGS BANK ACCOUNTS: State Bank of India has closed as many as 41.16 lakh savings bank accounts from April 2017 to January 2018 for not maintaining the average monthly balance. In April’17 SBI had re-introduced penal charges on non-maintenance of average monthly balance. Later on in October’17 it had revised down the charges to some extent. SBI has 41 crore savings bank accounts of which 16 crores are under Pradhan Mantri Jan-Dhan Yojana, pensioners, minors and social security benefit holders which are exempted from the penalty for not maintaining minimum balance.

 

  1. NO DEADLINE FOR LINKING AADHAAR CARD TO SERVICES : Supreme court has extended the March 31ST  deadline for mandatory linking of Aadhaar to avail various services and welfare schemes run by the government till its constitution bench delivers its verdict on the validity of the 12 digit biometric number.

 

  1. SAVINGS FROM DIRECT BENEFIT TRANSFER PEGGED AT Rs. 83,000 CRORE: The government has estimated that the Direct Benefit Transfer (DBT) has helped it to save around Rs. 82,985 crore overall. The scheme, which entails transfer of subsidies directly to the beneficiary’s account, has helped to save around Rs. 25,956 Crore in the 10 months up to January 2018 in this fiscal. The DBT scheme initially launched by UPA government in 2013 has been significantly extended by the present government, with the number of beneficiaries rising to 118.3 crore. The 45% jump in the savings is the result of pruning of fake or duplicate beneficiaries and plugging leakages which the present government has achieved by linking Aadhaar to the bank accounts.

 

  1. FRAUDS TO COST PNB NEARLY Rs. 14,500 CRORE THIS YEAR: The Punjab National bank (PNB) expects Rs. 14,500 crore loss this year on account of frauds (including contingent liabilities) following the scam by diamond traders. PNB has appraised that the total loss reported by it due to frauds was Rs. 341.03 crore in FY 2015-6, Rs. 2,633.39 crore in FY 2016-17 and Rs. 14,506.39 in FY 2017-18 (including contingent liability).

 

  1. 11,300 CRORE LYING UNCLAIMED WITH 64 BANKS: As per RBI’s latest report, an amount of Rs. 11,302 crore belonging to over 3 crore account holders is lying unclaimed with 64 Indian Banks. The largest amount – Rs. 1,262 crore is lying with SBI, Rs. 1,250 crore with PNB, while the remaining Rs. 7,040 crore with all other nationalised banks. However all this unclaimed money is just a fraction of the total deposits of over Rs. 100 lakh crore handled by these banks. Most of the unclaimed deposits would be cases of deceased account holders or people with multiple bank accounts.

 

  1. 25% OVERSEAS BRANCHES OF PUBLIC SECTOR BANKS REPORTED LOSSES IN FY 17: The Union government has said that 25% (one fourth of all foreign branches of PSBs) have reported losses last financial year. As per the data available out of the 159 branches of PSBs operating overseas, 41 branches have incurred losses.

 

  1. HOME BUYERS TO GET FINANCIAL CREDITOR TAG: A 14 member panel set up to review the Insolvency & Bankruptcy Code (IBC) is likely to recommend an amendment by which all home buyers will get a status of “Creditor”. This means that the home buyer will get the status of a financial creditor like banks and accorded similar benefits, in case their builder goes through insolvency proceedings before giving rightful possession of the flats. Here Home buyers will be third in the preference of order to get the proceeds—after the clearance of the cost of resolution and workers’ dues.

WEEKLY FINANCIAL SNIPPETS-17/03/2018

  1. EFFECT OF PNB SCAM – IMF CALLS FOR REFORMS AT PSBs: With the recent Punjab National Bank LOUs fraud the International Monetary Fund (IMF) has commented on the status of Indian Banks. It said the Indian banking reforms like the insolvency code and recapitalization will be ineffective unless the governance standards are improved. IMFs Deputy Managing Director Mr. Tao Zhang has said that mere reforms are not enough and should be accompanied by governance reforms which improve the internal controls which in turn will be crucial for financial stability.

 

  1. PSU BANKS NEED GOVERNMENT APPROVAL FOR ISSUING AT1 BONDS: The government  has instructed Public Sector Banks to take its permission before floating Additional Tier-1 bonds (AT1 Bonds), which have turned out to be loss making for bankers and the government. AT1 bonds are perpetual bonds without fixed maturity. The decision was taken after the government had to step in for a troubled PSU bank that could not repay its AT1 bond investors because of a regulatory restriction. AT1 Bond has a clause that if a bank is loss making, it cannot pay AT1 coupon and then the bank would default on interest payments purely on regulatory reasons.

 

  1. PSBs PLAN TIGHTER LENDING NORMS FOR CORPORATE LOANS ABOVE Rs 250 CRORE: Public Sector Banks (PSBs) will discourage multiple banking arrangements for companies with exposure of more than 250 crore in the banking system and will move all such loans under the consortium of banks for better monitoring. Under consortium arrangement there will be more discipline and effective monitoring.

 

  1. IDBI BANK WITHDRAWS SANCTIONED LIMITS TO SEVERAL INDIAN COMPANIES: IDBI Bank has suddenly withdrawn and reduced the sanctioned credit limits to several of its corporate customers without stating any valid reasons. Since the bank has cut credit facilities like Cash credit, vendor financing etc., the affected companies are facing lot of problems in their working capital cycle. Corporates affected by this sudden and unexpected move have come together and approached the Finance Ministry seeking reprieve.

 

  1. RBI BARS BANKS FROM ISSUING LOUs: The Reserve Bank of India has discontinued issuance of Letters of Undertaking (LOUs) and Letters of Comfort (LOCs) with immediate effect. This is an attempt to prevent further fraudulent transactions. The immediate effect of this would be it will increase the import cost and the profitable business avenue of foreign Branches of Indian Banks would close down. And since the importers will now have to buy dollars from market, the rupee could come under pressure.

 

  1. PSBs TO LINK SWIFT WITH CORE BANKING SOULTION BY APRIL 30TH : As directed by Reserve Bank of India, all Public Sector banks (PSBs) will link their SWIFT Systems with their respective Core Banking Systems (CBS) by April 30Th as a measure to prevent  frauds like the recent one that happened in Punjab National Bank. Along with this, the State run banks also decided to speed up the process of taking out “Cyber Insurance” at the earliest.

 

  1. GOVERNMENT ASKS ALL BANKS TO “NAME & SHAME” WILFUL DEFAULTERS: Tightening the noose around “WILFUL DEFAULTERS”, the government has asked all banks to “name & shame” such borrowers by publishing their photographs and other details in newspapers. The number of wilful defaulters rose to 9,063 at the end of December 2017. Now Banks will formulate a policy with the approval of their Board of Directors which clearly sets out the criteria for publication of photographs of wilful defaulters.

WEEKLY FINANCIAL SNIPPETS- 10/03/2018

  1. GOVERNMENT TO REVIEW BAN ON SALE OF GUARANTOR’S PERSONAL ASSETS UNDER INSOLVENCY LAW: National Company Law Tribunal (NCLT) had recently ruled that the personal assets of guarantors cannot be seized during moratorium on the disposal of assets that is in place, while the insolvency process is underway in case of corporate debts. Now the government will review the issue of the bar on liquidating the assets of directors who have given their personal guarantees for corporate loans.

 

  1. GOVERNMENT INSTRUCTS PSB EMPLOYEES TO LEARN RISK MANAGEMENT: The Department of Financial Services (DFS) at the Finance Ministry has directed Public Sector Bank executives to attend a 3 day workshop at the SBI training Academy Gurgaon, to train and learn the latest topics on technology and risk management. The Ministry believes that it is important to have a session on the systems, controls and processes that are not being followed in banks.

 

  1. RBI SLAPS Rs. 5 CRORE PENALTY ON AIRTEL PAYMENTS BANK FOR VIOLATION OF NORMS: The Reserve Bank of India has imposed a penalty of Rs. 5 crore on Airtel Payments Bank for violating operating guidelines and Know Your Customer (KYC) norms. The fine was imposed by RBI after scrutinising bank’s documents relating to opening of bank accounts without any specific or clear consent from the customers.

 

  1. PUNJAB NATIONAL BANK SEEKS PROVISIONING RELIEF FROM RBI FOR Rs. 13,000 CRORE LOSSES: Punjab National Bank has requested RBI to allow it to provide for losses in the Rs. 13,000 crore Nirav Modi- Gitanjali Gems scam over four quarters instead of at one go as it expects to recover 40% of the defaulted loan amount. Further, bearing full provisioning loss of over Rs. 13,000 crore in March 2018 quarter alone could wipe out more than 25% of PNB’s net worth of Rs. 48,000 crore.

 

  1. RBI ASKS BANKS FOR DETAILS OF LOUs AS FAR BACK AS 2011: The Reserve Bank of India has asked all banks to provide details of LOUs (Letter of Undertaking) issued by them as far back from 2011 onwards including outstanding as on date and whether the banks had pre-approved credit limits or kept enough cash margins before issuing the LOUs. RBI has given a deadline of one week to respond.

 

  1. PSBs MAY BE TOLD TO TAKE PASSPORT DETAILS FOR LOANS ABOVE Rs. 50 CRORE: The Finance Ministry may ask Public Sector Banks to seek certified passport details of the borrowers with an exposure of Rs. 50 crore and above to help prevent them fleeing the country in case of default or wrong doing. The idea is under consideration and will be taken up for discussions.

 

  1. E-WAY BILL MAY NOT BE COMPULSORY FOR SMALL ORDERS: Small orders that are part of a large consignment out for multiple deliveries within the state may not require an electronic- way bill (E-way bill) in the Goods &Services Tax (GST) regime. The E-way bill requirement will be limited to items priced over Rs. 50,000 within the state.

 

  1. NBFCs’ SHARE IN CREDIT MARKET TO TOUCH 20% BY 2020: Non Banking Financial Companies (NBFCs) have been steadily growing their share in the credit market and will consolidate their position further in a couple of years. As per a report from CRISIL, the NBFC share in credit market will touch to 20% by the year 2020.