"FINANCIAL SNIPPETS IS A CONCEPT EVOLVED BY MAA CAPITAL SOLUTIONS TO GIVE A FAIR IDEA TO OUR PATRONS AND GENERAL PUBLIC REGARDING THE LATEST CHANGES/EVENTS HAPPENING IN THE FINANCIAL MARKET. IT IS A SMALL STEP TO KEEP EVERYONE UPDATED ABOUT THE LATEST FINANCIAL EVENTS."
1. MICROFINANCE INSTITUTIONS PORTFOLIO ROSE BY 8.4% IN FY 2021: According to a report by credit Bureau CRIF Highmark, Microfinance Portfolio is in double digits in Financial Year 2021 even as banks are struggling to lend to big ticket borrowers. Outstanding portfolio of Microfinance sector is at Rs 2.53 lakh crores, an increase of 8.4% in financial year 2021. Due to Pandemic scenario this sector was also badly hit as borrowers who are generally small sized loan holders were adversely impacted in their ability to repay loans.
2. BharatPe REVENUE JUMPS OVER SIX TIMES TO Rs 700 CRORES IN FINANCIAL YEAR 2021: Financial Technology firm BharatPe has seen its revenue and transaction volume jump manifold in the financial year 2020-21, as pandemic has forced people and businesses to adopt digital-transactions and fund-starved small businesses seeking more credit avenues. BharatPe gives small-ticket fully unsecured loans averaging at Rs 75,000/- to its merchant members. It disbursed Rs 1,600 crores in 2020-21 to 1.8 lakh merchant customers. The figure was only 150 crores in 2019-20. This has given a growth in revenue by over 700 crores, up from about Rs 110 crores in 2019-20.
3. SECOND COVID WAVE IMPACTS BANK DEPOSITS, CURRENCY HOLDING WITH PUBLIC: Bank Deposits and currency holding with the public have been adversely impacted during the second wave of Covid-19. This indicates heavy outflows towards medical expenditure/emergencies. This is as per a report by RBI in its monthly bulletin. The rate of decline in Bank deposits as against the bank credit has also been higher, indicating that this time the banking sector component of household savings has declined. This is in sharp contrast with the spike in savings witnessed during the first wave.
4. ICICI BANK LAUNCHES “ICICI STACK” FOR CORPORATES: With Corporate loan-demand stuttering amid difficulties on the economic front, ICICI Bank has initiated a solution, aimed at profiting by offering a wider set of services to high-value clients. Its newly launched “ICICI STACK” will provide digital banking solutions to corporates, their channel partners, employees and other stake holders.
5. INDUSIND BANK LAUNCHES “INDUSEASYCREDIT”: IndusInd Bank has launched a comprehensive digital lending platform “IndusEasyCredit” that enables customers and customers of other banks as well to meet their financial requirements from the comfort of their homes. With this, both customers of IndusInd Bank and non-customers can instantly avail personal loans and credit cards on a single platform in a completely paperless and digital manner.
6. PRIVATE ARCs MOVING TO RETAIL LOANS AS NATIONAL BAD BANK BECOMES A REALITY: With RBI’s restructuring and moratoriums which has lessened the tide of bad loans among corporates and also Banks are planning to transfer big ticket bad loans to Newly proposed National Bad Bank, private Asset Reconstruction Companies (ARCs) have been banking on retail loans to drive the business in the pandemic-hit phase. The Rs 1.5 lakh crore asset reconstruction market comprises of over a dozen players in the market.
7. EXPERTS SEE NEW SURGE IN BAD LOANS COULD RISE TO 13-15% IN THIS FISCAL: With a number of large banks and Non-Banking Finance Companies (NBFCs) facing fresh challenges due to the second wave of Covid-19, bad loans are projected to see a fresh spike as the rising stress across sectors is beginning to impact the repayment capacity of borrowers. Experts in the field estimate that Non-Performing Assets (NPAs) will jump from a little under 8% (in the previous year) to nearly 15% in FY 2021-22. NBFCs and Micro Finance Institutions (MFIs) are reporting sharp surges in stressed assets.
8. RBI EXTENDS RISK-BASED INTERNAL AUDIT SYSTEM TO HOUSING FINANCE COMPANIES: Reserve Bank of India has extended the Risk-Based Internal Audit (RBIA) system to select Housing Finance Companies (HFCs) to enhance the quality and effectiveness of their internal audit system. In February this year, the RBI had issued a circular mandating the RBIA framework for select Non-Banking Finance Companies (NBFCs) and Urban Co-operative Banks by March 31, 2022. This RBIA system will apply to all deposit taking HFCs, irrespective of their size, as well as non-Deposit taking HFCs with an asset base of Rs 5,000 crores and above. Such HFCs have been asked to put in place an RBIA framework by June 30, 2022.
1. DEMAND FOR RETAIL LOANS ON THE RISE FROM TIER-2/3 CITIES AMID COVID RAGE: As per a joint report by TransUnion Cibil and Google, Covid-19 has affected borrower behaviour patterns in the consumer segment, with a majority of loan requests coming from tier-2 cities and smaller towns. Even the ticket sizes have also shrunk. The report also points out at the increasing use of technology platforms to borrow in recent times. And an analysis of consumer loan patterns by Credit Bureau showed that 49% of new retail loan borrowers are below the age of 30. Personal loans have gone up from 10% in 2017 to 60% in 2020.
2. GOVERNMENT PLANS TO DRESS UP PSBs BEFORE SALE: The government plans to dress up some Public Sector Banks’ balance sheets through capital infusion and sale of non-core assets among other measures before putting them on the block for sale. The transformation plan also includes transfer of bad loans to the proposed bad bank and reducing the employee count by offering attractive voluntary retirement schemes. Bank of Maharashtra, Bank of India & Indian Overseas Bank are the frontrunners for being privatised. Central Bank of India can also be considered based on its financial recovery.
3. INDIA OFFERS HUGE POTENTIAL FOR DIGITAL BANKS: Lending Consultancy BCG has said in one of its reports that revenue opportunities in India, which has a population of more than 130 crores, is pegged at 10 times higher than that of rest of South East Asia. India offers huge potential for Digital Challenger Banks (DCBs) but the report also sees the currency depreciation and regulations as the big concerns for Foreign Investors. The report says that Indian Regulators place significant emphasis on financial inclusion and priority sectors, which can limit the potential model and opportunity.
4. SBI UNIONS AND OTHERS ASK RBI NOT TO PERMIT PAYMENT PLATFORM BY CORPORATES: The employee Union of State Bank of India in coalition with other labour unions and NGOs have demanded the Reserve Bank of India to reject Amazon’s application to set up a new payment system. The for-profit New Umbrella Entity (NUE) system proposed by the RBI intends to set a stage for competitors to the current non-profit system by promoting private players to operate alternate for-profit payment systems. This is being opposed by most of bank unions.
5. RBI ASKS BANKS NOT TO DESTROY CCTV FOOTAGE FROM DEMONETISATION PERIOD: Reserve Bank of India has directed banks to preserve the CCTV recordings of operations at bank branches and currency chests for the period from November 8 to December 30, 2016. During this period the government had demonetised high value currency notes with an aim to check black money. On the basis of various inputs, the investigative agencies started probing matters relating to illegal accumulation of new currency notes. In order to facilitate such investigations, RBI has asked banks not to destroy the CCTV recordings of demonetisation period.
6. ICICI BANKS’S “iMOBILEPAY” APP IS BEING USED BY 2 MILLION NON-CUSTOMERS: ICICI Bank has announced that over two million customers of other banks are now using the revamped version of its mobile banking app “IMobilePay”. The bank has achieved this milestone in a span of five months. ICICI Bank had opened its mobile banking app “iMobileApp” to customers of all banks in December 2020. The first-in-the -Industry initiative has provided the significant convenience of interoperability, as it has enabled users of any bank to link their account to the app and start making payments/transactions digitally.
7. RBI’s Rs 16,000 CRORES SPECIAL LIQUIDITY FACILITY TO SIDBI WILL HELP MFIs TO MITIGATE COVID-RELATED CHALLENGES: Reserve Bank of India has decided to provide a special liquidity facility of Rs 16,000 crores to Small Industries Development Bank (SIDBI) for on-lending and refinancing to Micro-Finance Institutions (MFIs). This will help the MFIs to mitigate challenges arising due to the pandemic. Small and Medium MFIs will be prominently covered under the on-lending and refinancing facilities by SIDBI as the industry is facing disruptions in collections due to the second wave of Covid-19.
8. EQUITY MUTUAL FUNDS SEE Rs 10,000 CRORE INFLOW IN MAY’21: Equity Mutual Funds witnessed a net inflow of over Rs 10,000 crores in May 2021, making it the third consecutive monthly infusion. In March 2021 there was an inflow of Rs 9,115 crores and Rs 3,347 crores in April 2021. Prior to this, equity schemes had consistently witnessed outflow for 8 straight months from July 2020 to February 2021. This is as per the data furnished by the Association of Mutual Funds in India.
1. BANKS CAN NOW SELL VIJAY MALLYA’S PROPERTIES WORTH Rs 5,646 CRORES TO RECOVER THEIR DUES: The State Bank of India-led consortium of banks can now move to sell certain real estate properties and securities belonging to Vijay Mallya to cover his unpaid bad loans, after a court lifted the claim of the Enforcement Directorate on the assets it had seized. The Assets included several floors of the UB City Commercial tower in Bengaluru and shares in United Breweries and United Spirits to be valued at around Rs 5,646 crores.
2. BANKS, ASSET MANAGERS WANT RBI TO ALLOW SALE OF FRAUD LOANS TO ARC: Increasing instances of bank frauds have led top banks and Asset Managers to seek Central bank (RBI) to permit the sale of such accounts to Asset Reconstruction Companies (ARCs), which, at present is prohibited by the banking regulator. These banks and Asset managers also want ARCs to be granted indemnity from any prosecution arising out of a fraudulent account. Now, banks must seek the resolution of fraudulent accounts with the bankruptcy courts or Debt Recovery Tribunal (DRT). Once the account is declared as a fraud, banks do not enter into a settlement with the borrower. Indian banks are saddled with frauds loans worth Rs 5 lakh crores, almost 4.5% of the total bank credit as of March 2021.
3. RBI CANCELS LICENCE OF PUNE BASED SHIVAJIRAO BHOSLE SAHAKARI BANKS LTD: RBI has cancelled the licence of Pune based Shivajirao Bhosle Sahakari Bank Ltd as the lender does not have adequate capital and earning prospects. As per the data available, more than 98% of the depositors will receive full amount of their deposits from Deposit Insurance & Credit Guarantee Corporation (DICGC) The bank also does not comply with certain provisions of the Banking Regulations Act, 1949 and as such the continuance of the bank licence is prejudicial to the interest of its depositors.
4. RBI’S LIQUIDITY AND GROWTH-SUPPORTING MEASURES CRUSCIAL FOR RECOVERY FROM THE SECOND COVID WAVE: The measures announced by RBI to maintain liquidity and support economic growth through lower interest rates will be crucial for economic recovery from the second wave of Covid-19 pandemic. RBI, in its latest monetary policy has kept interest unchanged at record low and is committed to maintain an accommodative policy stance to support growth. However, it has slashed its growth projection for the current fiscal year from the 10.5 % earlier to 9.5%.
5. FOREX RESERVES HIT A LIFETIME HIGH: India’s foreign exchange reserves rose by USD $ 2.865 billion to a record high of USD $ 592.894 billion for the week ended May 28, 2021. This spurt is boosted by gold and currency assets. This is as per the latest RBI data. The previous all time high was USD $ 590.10 billion for the week ended January 29, 2021.
6. NON-BANK FINANCIAL COMPANIES NPAs MAY RISE TO 4 TO 5% BY MARCH 2022: Restrictions in movements imposed by various states due to lockdown conditions are likely to impact collections of Non-Bank Finance Companies (NBFCs) and Housing Finance Companies (HFCs) which may see their NPAs rise to 4.5% to 5% by March’22. This is as per a report on NBFCs and HFCs by the rating agency ICRA. The report further states that this would adversely affect their earning by about 30% lower than of the pre-covid levels.
7. NITI AAYOG SUBMITS NAMES OF PSU BANKS TO BE PRIVATISED TO CORE GROUP OF SECRETARIES ON DISINVESTMENT: Government think-tank Niti Aayog has submitted the names of likely PSU banks to be privatised to the Core group of Secretaries on Disinvestment. Niti Aayog has been entrusted with the task of selecting two Public Sector Banks and one General Insurance Company for privatisation as announced in the annual Budget 2021-22.
8. PUBLIC SECTOR BANKS LIST Rs 82,500 CRORE NPAs FOR BAD BANK: Public Sector Banks have shortlisted 28 loan accounts to be transferred to the National Asset Reconstruction Company (NARCL). Lead banks have completed the process of obtaining approval from co-lenders in 22 accounts with Rs. 82,500 crores of loan dues. According to banking sources, work is progressing on multiple fronts to ensure that the Bad Bank starts operations at the earliest.
9. 50% RESTAURANTS MAY NOT OPEN ONCE RISTRICTIONS EASE: Though the lockdown restrictions are expected to ease gradually in many states, 50% of the restaurants may not open even when curbs are eased. Hotel Industry insiders do not foresee a full recovery for the sector till the time Indians are doubly vaccinated. The second wave was more devastating for families, which would have made people hesitant and fearful to venture out. They also see an exodus of employees to other sectors post lockdowns, which will have lot of labour issues for Hotel Industry as a whole.
1. USA PIPS MAURITIUS AS SECOND LARGEST SOURCE OF FDI IN INDIA: United States of America (USA) has replaced Mauritius as the second largest source of Foreign Direct Investment (FDI) into India during 2020-21with an inflow of USD 13.82 billion. Singapore remains the number 1 source of FDI into India with an inflow of USD 17.41 billion for the third consecutive year. Mauritius has contributed USD 5.64 billion during the same period. Overall FDI into the country grew by 19% to USD 59.64 billion during 2020-21. This is as per the data released by the Department for Promotion of Industry & Internal Trade (DPIIT), Government of India.
2. ICICI BANK TO USE SATELLITE DATA TO ASSESS CREDITWORTHINESS OF FARMERS: ICICI Bank has announced a unique way to assess the creditworthiness of farmers taking farm loans. The bank will use satellite data images to assess the creditworthiness of the farmers. With this, ICICI Bank has become the first bank in India to use satellite image to measure an array of parameters related to land, irrigation and crop patterns and use it in combination with demographic and financial parameters to make quicker lending decisions for farmers. The bank is already using this technique for the past few months in over 500 villages in Maharashtra, Madhya Pradesh and Gujarat. It plans to scale up the initiative to over 63,000 villages across the country very shortly.
3. CANARA BANK ANNOUNCES THREE COVID BASED LOAN SCHEMES: Canara Bank has announced 3 types of loan schemes for its customers to provide relief amid the coronavirus pandemic. Canara Suraksha Personal Loan Scheme will offer personal loans from Rs 25,000/- to Rs 5 lakhs for Covid-19 treatment to its customers. Canara Chikitsa Healthcare Credit Facility will offer Loans from Rs 10 lakhs to Rs 50 crores to registered hospitals, nursing homes, medical practitioners and diagnostic centres. Canara Jeevanrekha Healthcare scheme will offer loan up to Rs 2 crore for manufacture and supply of healthcare products at a concessional interest rate.
4. AGEING BAD LOANS, A BIG WORRY FOR SBI: Swelling aged (old carried forward) bad loans is a worrying factor for State Bank of India (SBI). These old bad loans are around 65% of the total bad loan portfolio of SBI in FY 2021. This is 5% more than the previous year. These old bad loans which increase every year require the banks to set aside higher sums of provisions which makes a dent in the profits. The increase signals the quantum of doubtful assets with lower chances of recovery. The figure of old bad loans in SBI stood at Rs 82,847 crores in FY 2020-21.
5. PAYTM VISA PHYSICAL DEBIT CARDS SOON: Paytm Payments Bank will soon launch physical debit cards issued by Visa. Currently, it offers physical debit cards by RuPay and virtual debit cards by Visa. It has already issued 45 lakh virtual Visa debit cards and plans to distribute over 10 lakh physical Visa Debit cards soon. Paytm is one of the largest issuers of RuPay debit cards to its customers in the country. The customers can apply for physical Visa Debit card through its Paytm App.
6. RBI ISSUES GUIDELINES FOR AMALGAMATION OF DISTRICT CENTRAL CO-OP BANKS WITH STATE CO-OP BANKS: RBI has come out with the guidelines for amalgamation of District Central Co-operative Banks (DCCBs) with State Central Co-operative Bank (StCB). As per the guidelines, RBI will consider the proposal for amalgamation when the state government makes a written proposal for amalgamating one or more DCCBs with the StCB. Besides, there should be an additional capital infusion strategy, assurance regarding financial support if required, projected business model with clear profitability and proposed governance model for the amalgamated bank. The scheme of amalgamation has to be approved by the requisite majority of shareholders.
7. RBI FLAGS RISK OF BUBBLE IN INDIAN EQUITY MARKETS: Reserve Bank of India has said that the sharp rally in the domestic equity markets despite an estimated contraction of 8% in GDP in 2020-21 poses the risk of a bubble. The benchmark index has crossed the 50,000 mark which represents a 100% increase from the slump just before the beginning of the lockdown in March’20 and 68% rise over the year 2020-21. The stock markets are mainly driven by money supply and Foreign Portfolio Investment (FPI). Also, economic prospects contribute largely to the movement of stock market but presently the impact of economic prospects is very bleak as compared to money supply and FPI.
8. BANK FRAUDS FALL BY 25% IN 2020-21: Bank frauds of Rs 1 lakh and above were reduced by 25% to Rs 1.38 trillion in financial year 2020-21 with the numbers of such cases also seeing a decline by 15%. This is as per the RBI’s annual report released this week. The share of public sector banks in total frauds, both in value and numbers decreased while that of private banks increased during the period.
1. RBI TO TRANSFER HIGHER PERCENTAGE OF SURPLUS TO THE GOVERNMENT IN FY 21: The Reserve Bank of India has raised its surplus transfer to the government to nearly 73% in financial year 2021. The surplus transfer amount is nearly Rs 1 lakh Crore, beating market expectations and even budget projection by the centre. This has become possible due to the gains in revaluation of foreign exchange reserves. After setting aside all the prescribed provisions, the RBI board approved the transfer of Rs 99,122 crores as surplus to the Central Government for the accounting period of nine months ended March 31,2021. This is 73.5% higher than Rs 57,128 crores transferred as surplus in FY 2020.
2. SUPREME COURT ALLOWS PERSONAL BANKRUPTCY CASES TO RESUME AGAINST INDIVIDUALS: The Supreme Court has now allowed personal bankruptcy cases to resume against individuals including those individuals who guaranteed those loans. Last year Lenders had filed bankruptcy cases against big tycoons including Reliance Group’s Anil Ambani, Dewan Housing Finance’s Kapil Wadhwan etc but the cases were halted on appeals filed in higher courts. The said verdict is a boost for lenders as it allows them to seek recovery dues from guarantors of loans even while the bankruptcy processes against the companies are pending.
3. PSU BANK EMPLOYEES TO GET SMALL GAINS THROUGH PERFORMANC-LINKED INCENTIVE: Employees of many Public Sector Banks are in for small gains due to the performance-linked component in the wage agreement signed with IBA in November 2020. Canara Bank has paid out a performance-linked incentive to its employees, equivalent to 15 days’ pay. Bank of Maharashtra which has posted a net profit of 165 crores which is 187% increase over the last years has also distributed the performance-linked incentive to its employees. This incentive is available to all employees irrespective of their rank or designation.
4. PSU BANKS SEEK SECOND RESTRUCTURING WINDOW, LOWER PROVISIONS: Public Sector banks (PSBs) have asked Reserve Bank of India to extend a second round of restructuring for all companies with a reduced provision rate of 5% as against the 10% last year. CEOs of all 12 PSBs were unanimous in their request for a second round of restructuring as the second wave of Covid-19 pandemic has hit both lives and livelihood of many and the entire economy is badly affected.
5. BANK OF BAROA PLANS TO HIRE DIGITAL MARKETING AGENCIES TO STRENGTHEN BRAND, CUSTOMER OUTREACH: Bank of Baroda is planning to hire three digital marketing agencies to strengthen its brand and aiming to be a preferred choice of customers with innovative banking models. Bank of Baroda is looking at an overall marketing strategy, improving effectiveness of digital eco system, suggesting ideas as per requirement of the bank. The digital marketing agencies thus hired, will be responsible for digital marketing communication as well across various media.
6. NOW YOU CAN AVAIL DOORSTEP BANKING FROM GOVERNMENT BANKS FOR A FEE: Major government banks have come together to form Public Sector Bank (PSB) Alliance to jointly offer important banking services to its customers which include both financial and non-financial services. According to the website of Psbdsb.in, the banks have engaged Atyati Technologies Pvt Ltd and Integra Microsystem Pvt Ltd to provide doorstep banking. The services are at present in 100 major centres across India. All these services are chargeable.
7. CREDIT FINANCE TO MSMEs UNDER CGTSME SCHEME DECLINES BY 26%: The Credit Guarantee Fund Trust for Micro, & Small Enterprises (CGTSME) which offers guarantee cover to banks and other lenders for collateral-free loans to Micro and Small Enterprises (MSEs) in case of default, has seen a 26% reduction in in the number of approved loans in financial year 2021. According to the available data from MSME Ministry, 6.19 lakh loans involving Rs 31,349 crores worth credit guarantee were approved in last financial year (FY’21) as compared to 8.38 lakh loans worth Rs 45,215 crores in FY’20.
8. INCOME TAX RETURNS FILING DEADLINE EXTENDED BY 2 MONTHS FOR INDIVIDUALS: In view of the ongoing severe impact due to the second wave of Covid-19 pandemic on individual tax payers and Corporates, the Income Tax Department has extended the due date of various compliances, including income tax return filing for salaried individuals by two months to September 30 from July 31. For Corporate tax payers and individual tax payers liable to tax audit, the due date has been extended by one month to November 30 from the existing date of October 31.
1. GLOBAL BANKS SHIFT THEIR OPERATIONS FROM INDIA DUE TO COVID IMPACT: The tech centres of global banks and financial institutions based in Bangalore, Gurgaon, Chennai and Mumbai whose staff are getting affected by Covid second wave has forced them to move some work to other geographics temporarily. Goldman Sach’s Bangalore office has over 6,000 employees had an impact as some of its employees were affected by Covid and they have moved some work from Bangalore to London. Likewise, HSBC which has 39,000 employees with 10,000 of them working in Bangalore tech centre. After many of its employees were affected by Covid, they have moved some of its work to China and Krakow in Poland.
2. RBI CANCELS UNITED CO-OPERATIVE BANK’S LICENSE: The Reserve Bank of India has cancelled the license of United Co-operative Bank Ltd of West Bengal as the bank does not have adequate capital and earning prospects. All depositors of the bank will receive the full amount of their deposits from the Deposit Insurance & Credit Guarantee Corporation (DICGC). With this, the bank ceases to carry on banking business with effect from May 13, 2021 and the process of liquidation will begin now.
3. GEOJIT SIGNS MOU WITH PUNJAB NATIONAL BANK TO OFFER THREE-IN-ONE ACCOUNT: Geojit Financial Services and Punjab National Bank (PNB) have joined hands to tap retail customers who are investing in capital markets by offering them a Three-in-One account which will combine savings, Dmat accounts of the bank with Geojit’s trading account. PNB customers can now open a Geojit trading account online in a few steps and start investing online in equity as well as Geojit’s Smartfolio product, which offers basket of carefully identified and curated stocks.
4. JANA SMALL BANK LAUNCHES “I CHOOSE MY NUMBER” FEATURED BANK ACCOUNT: Jan Small Finance Bank Ltd has announced the launch of “I choose my Number” feature for all its customers across India. This new feature gives the banks existing and new customers a freedom to opt and select their favourite number as their savings or current account number. The allocation of the account number as chosen by the customer will depend on the availability of the requested number.
5. BANK OF BARODA LAUNCHES “MICROSITE” TO SUPPORT ITS STAFF AMID SECOND WAVE OF COVID-19: Bank of Baroda has launched a micro-website that will serve as an emergency networking platform for all its employees amid second wave of Covid-19. This microsite will offer vital data, including a network of plasma donors to employees who are in need of it. Recovered employees can also enrol themselves voluntarily as donors. Apart from this, the site offers host of other facilities like providing contact details across zones, registration facility for employees to sign up for volunteer. The site also hosts external links for suppliers of necessities like oxygen cylinders, Ramdesivior, plasma and hospital beds.
6. ABOUT 2,118 BRANCHES OF PUBLIC SECTOR BANKS CLOSED OR MERGED IN LAST FISCAL: As many as 2,118 branches of 10 Public Sector Banks (PSBs) have either been closed or merged with other bank branches in the last fiscal. This data is available as per a RTI Reply. The highest number of 1,283 branches of Bank of Baroda were either closed or merged. These closures or merger of bank branches is the result of consolidation of 10 PSU banks in to four banks in the last financial year.
7. RBI MODIFIES NORMS FOR UNDERTAKING GOVERNMENT BUSINESS BY PRIVATE BANKS: RBI has come out with modified guidelines that allow sound private banks to undertake government business, whether at Centre or State. According to the modified norms, scheduled Private banks, which are soundly managed and are not under Prompt Corrective Action (PCA) framework of RBI, can undertake government business after executing an agreement with Reserve Bank of India.
8. FINANCE MINISTRY ASKS RESPECTIVE STATE GOVERNMENTS TO VACCINATE BANK AND INSURANCE STAFF ON PRIORITY: The Finance Ministry has asked respective state governments to accord priority in vaccinating bank and insurance staff. The letter to state governments from the Finance Ministry lauds the efforts of bank employees and says that they are exposed to high risks during these difficult times.
9. RBI AMENDS KYC NORMS TO FURTHER LEVERAGE VIDEO-BASED CUSTOMER IDENTIFICATION PROCESS: RBI has amended its master direction on Know-Your-Customer (KYC) to further leverage the Video-based Customer Identification Process (V-CIP) and simplify the process of periodic updation of KYC. V-CIP is an alternate customer identification with facial recognition and customer due diligence by a bank official by undertaking seamless, secure, live audio-visual interaction with the customer to obtain information.
1. RBI BOOSTER DOSE TO SUPPORT HEALTH SECTOR: Reserve Bank of India has taken a series of liquidity-boosting and loan-relief measures to help many sectors that have been adversely affected by the second wave of Covid-19 pandemic. It has announced a Rs 50,000 crore on-tap liquidity window which is aimed at rapidly boosting private investment in healthcare and financing individuals who have contacted Covid. Now banks will design schemes with extremely competitive rates and draw up eligibility criteria. The advantages of this scheme are that the terms and conditions are standardised and loans can be sanctioned without delay.
2. PSBs FORM “ALLIANCE” TO PROVIDE DOORSTEP BANKING: Public Sector Banks (PSBs) have come together to form a new Alliance in an attempt to take banking services to the doorsteps of their customers as they battle the challenges posed by Covid-19 pandemic. The new alliance is called PSB Alliance Pvt Ltd, will engage banking correspondents on behalf of the 12 public sector banks under a common Standard operating Procedure (SoP) to provide financial and non-financial services directly to the customers at their doorstep. Former SBI Chief General Manager Mr. Rajinder Mirakhur has been appointed as CEO of the new company.
3. GOVERNMENT OKAYS IDBI BANK STRATEGIC DISINVESTMENT: The government has approved the strategic disinvestment and transfer of management control in IDBI Bank. Presently the government holds a 45.48% stake in IDBI bank with LIC of India holding 49.24% stake. The government in a statement has said that the extent of respective shareholding to be divested by the government and LIC of India will be decided at the time of structuring of transaction in constitution with RBI. The strategic buyer will infuse funds, new technology and best management practices for optimal business development and growth of the bank.
4. BANKS, NBFCs ASK RBI TO RELAX BAD LOAN RULES: The second wave of Covid-19 pandemic is worse than the first wave which has disrupted the economy in a bad way and this has prompted banks and Non-Banking Financial Companies (NBFCs) to ask RBI to relax Non-Performing Assets (NPAs) or Bad Loan rules. They have requested for flexible restructuring up to two years across all categories of borrowers to be allowed. They have also asked for easier terms of repayment and moratorium on principal payments for borrowers below Rs 2 crore category, where the bankers feel that the impact of pandemic is severe. The lenders have also sought a cut-off time till September 2021 for fresh restructuring proposals for all standard assets and requested that restructuring be allowed outside the framework as prescribed by the K V Kamath Committee.
5. YES BANK SAYS NO TO NATIONAL ASSET RECONSTRUCTION: Yes Bank has said that it will not sell its bad loans to the newly proposed National Asset Reconstruction Company (NARC) as it believes it would be able to recover more than the proposed bad debt aggregator. At the same time the bank is still pursuing to form its own Asset Reconstruction Company (ARC) and is waiting for the new set of guidelines from RBI. RBI has refused Yes Bank’s earlier proposal to hold a majority stake in an ARC citing conflict of interest.
6. LOAN RECASTS---SMALL BORROWERS GET FRESH RELIEF FROM RBI: Individuals and Small businesses with loans up to Rs 25 crores who have never undergone restructuring before and who were classified as standard assets as on March 31.2021, shall be eligible under the new scheme floated by RBI which is named as Resolution Framework 2.0. The second wave of Covid pandemic has created new uncertainties and has impacted the economic growth and the most vulnerable category are the individuals, small businesses and MSMEs.
1. BANKS NEED TO ADOPT DIGITISATION: Former Finance Secretary Mr. S C Garg has said that with the surge in digital transactions there is a need for banks to adopt the model of Fintech companies. Fintech Companies have already captured a lot of area in payments space and now they are penetrating in credit segment as well which is the principal business of banks. He further said that if banks do not adopt the digitisation path, then they will start perishing.
2. ICICI BANKS LAUNCHES NEW DIGITAL PLATFORM FOR MERCHANTS: ICICI bank has launched a digital and contactless banking platform for merchants. The new platform named “Merchant Stack”, is targeted to cover over 2 crores retail merchants in the country to render banking services digitally. The Merchant Stack provides banking solutions including a zero-balance current account, instant credit facilities, digital store management and value-added services like e-commerce and digital marketing platforms.
3. SBI EARMARKS Rs 30 CRORES TO SET UP MAKESHIFT HOSPITALS FOR COVID PATIENTS: State Bank of India has decided to set up makeshift hospitals with ICU facilities for Covid-19 patients in some of the worst affected states. The bank is already in talks with some NGOs and hospital management for setting up medical facilities on an emergency basis. This is as per the Corporate Social Responsibility (CSR) initiatives. The bank intends to put in place 1,000 beds with 50 ICU facilities. It could be 120 beds at some places, while 150 at other places with adequate healthcare facilities.
4. BAD BANK TO GET Rs 2 LAKH CRORE OF DEFAULTING COMPANIES’ LOANS: The Indian Banks’ Association (IBA) has asked member banks to identify large loans where they are lead bankers and get approval from co-lenders so that these loans can be sold to National Asset Reconstruction Company (NARC) or the Bad bank. The association has identified 102 corporate bad loans, totalling to Rs 2 lakh crores, where the amount outstanding in each is over Rs 500 crores. They include loans in a variety of industries. These loans have been laying in the books of the banks for years with many accounts admitted under insolvency process and these loans are almost fully provided for by the banks.
5. RBI ISSUES GUIDELINES FOR APPOINTMENT OF STATUTORY AUDITORS OF BANKS, NBFCs: The Reserve Bank of India has tightened norms for appointing auditors and capped the numbers based on asset size of the bank. As per the new norms, banks will be required to take prior approval of RBI for appointment or reappointment of statutory auditors on annual basis. For banks with an asset size of Rs 15,000 crore and more, statutory audit will be conducted under joint audit of a minimum of two audit firms. All other entities should appoint a minimum of one audit firm for conducting statutory audit. RBI has also set criteria for audit firms regarding the number of audits they can take at a time and how they should conduct it.
6. RBI CAPS THE TENURE AND AGE LIMIT OF PRIVATE BANK CHIEFS’ : The Reserve Bank of India has capped both the tenure and age limit for senior Management including that of Chairman in all private banks. While the cap for non-executive directors and Chairman is set at 75 years, their tenure is fixed for 8 years and they can re-join after a gap of 3 years if they are found fit. Likewise, the posts of Managing Director, Chief Executive Officer as well as Whole Time Directors are capped at not more than 15 years. Banks will have to implement this norm by October 1, 2021.
7. OXYGEN/OXY-ANCILLARY SUPPLY COMPANIES TO GET LOAN FROM SIDBI AT 4.5% TO 6%: The Small Industries Development Bank of India (SIDBI) has launched two quick-delivery schemes to fund businesses in the Micro, Small & Medium Enterprise (MSME) segment that are helping tackle the second wave of the coronavirus pandemic. Under its scheme “SHWAS”, MSMEs engaged in manufacturing of oxygen cylinders, oxy-generators, oxygen concentrators, liquid oxygen or providing services in transportation, storage, refilling or supply of these items, will be eligible for low-cost credit. The rate of interest for such loans would be from 4.5% to 6%.
8. LOAN GROWTH REACHES NEW LOW DURING THE PANDEMIC YEAR: Bank loans to both large industries as well as small scale sector contracted in the Covid hit fiscal year. Loans to large industries fell by 0.8%. But the farm sector and the medium sized industries which were well supported by the government with special schemes and subsidies, saw a considerable growth. Agri loans rose by 12.3% in the year ended March 31, 2021 as compared to 4 % a year before. The loans to retail grew by 10%.
1. RBI BANS AMERICAN EXPRESS AND DINERS CLUB FROM SELLING NEW CARDS: Reserve Bank of India has banned American Express and Diners Club International from issuing new cards from May 1, 2021. The action has been initiated as these entities have been found that they were not storing payment data which the RBI had instructed them to store in India. As per the directions of RBI, all payment system providers need to store the payment data only in India.
2. CITI BANK’S CONSUMER BUSINESS ACROSS 10 MARKETS VALUED AT AROUND $ 8 BILLION: The Australian brokerage firm, Macquarie has estimated the value of Citibank’s consumer business across 10 markets out of the 13 that the bank has put on sale in the Asia pacific region at around $ 8 billion. The Indian business, which is also a part of the 10 markets, could fetch between $ 1.9 to $2.15 billion. Macquarie further added that DBS bank Ltd, Oriental Bank of China (OCBC) and Standard Chartered Bank are the most likely contenders to buy the Asia Pacific business.
3. INDIABULLS HOUSING FINANCE TO CHANGE ITS BUSINESS STYLE, TO BECOME ORIGINATOR OF LOANS: Indiabulls Housing Finance Ltd, a leading home-financier, no longer wants to be a lender. The lender has decided to be an originator of loans for the industry leader and India’s pioneer housing loan company- Housing Development Finance Corporation (HDFC). As per the new announced partnership, Indiabulls will originate and process retail home loans as per the jointly formulated credit parameters and eligibility criteria. Of these loans, 80% will be on HDFC’s books and 20% will be retained by Indiabulls.
4. COVID-19 RELATED DISRUPTIONS RAISE CONCERNS OVER NBFCs’ RETAIL LOANS: The rising Covid-19 cases since March’21 has again raised concerns on the asset quality of retails loans of NBFCs and Housing Finance Companies (HFCs) given the increasing instances of lockdowns in various cities across the country coupled with a gradual rise in severity of such restrictions by some state governments. The restrictions on movement would have a bearing on collection efforts for NBFCs, especially for microfinance loans where cash collections still remain dominant. This is as per a report placed by rating agency Icra Ratings.
5. BANKS TO CURTAIL BUSINESS HOURS, TO PROVIDE BASIC SERVICES: The Indian Banks’ Association has advised its member banks to provide basic banking services within restricted business hours till 2 pm as a business continuity plan in response to the surge in coronavirus cases. The banking body has laid out Standard Operating procedures (SOP) for bank branches but stressed on state-wise modifications on the gravity of the situation in respective states. Employees may be called on rotation basis or be allowed to work from home depending on the nature of the job. Ideally, 50% staff may be called for branch duty on rotation basis.
6. NPAs OF PUBLIC SECTOR BANKS MAY CROSS 18% IN EXTREME CASE SCENARIO: Former RBI Deputy Governor H R Khan has said that given the second Covid-19 wave all over the country, The Non-Performing assets (NPAs) of Public Sector Banks (PSBs) could cross 18% if there is further deterioration in economic activity due to the pandemic. Under the present circumstances it is projected that the NPAs would spurge to 13.5% of advances by September 2021, from 7.5% in September 2020
7. INDIAN BANKS GET NEW TOOL TO ASSESS “NEW TO CREDIT” CUSTOMERS: India’s oldest credit assessment company TransUnion Cibil has launched “CreditVision Score”, an eligibility score for new to credit customers who have never taken loan or have used only credit cards and hence have no formal credit history. CreditVision Score will use an algorithm to continuously monitor behavioural trends of subjects to capture any major shifts in trends, making it easier to lenders to assess their credit risk for such borrowers. The score ranges from 101 to 200, with higher values indicating lower credit risk or reduced probability of default.
8. GST OFFICERS TO BE SOON ARMED WITH REAL TIME DATA ON VEHICLES MOVING WITHOUT e-WAY BILLS: The government is working on a system to soon provide report to GST officers on a real-time basis for those vehicles which are moving without e-way bills. This will help to intercept stuck trucks at toll plazas and check GST evasion.
1. RESERVE BANK OF INDIA SETS UP REGULATORY REVIEW AUTHORITY TO REVIEW REGULATIONS, EASE COMPLIANCE: The Reserve Bank of India (RBI) has announced the setting up of a Regulatory Review Authority (RRA 2.0), to review regulations internally in consultation with other stake holders. The RRA 2.0 is thus named as such, as it follows a similar exercise conducted in 1999-2000. Deputy Governor Mr. M Rajeshwar Rao has been appointed as the Head of RRA 2.0. The recommendations will enable RBI to streamline and increase the effectiveness of several procedures, simplify regulatory prescriptions and will help in issuing master circulars and reduce burden on regulated entities.
2. GOVERNMENT ASKS PUBLIC SECTOR BANKS TO ADOPT NON-COERCIVE STRATEGY FOR RECOVERY OF EDUCATION LOANS: The government has asked Public Sector Banks (PSBs) to adopt non-coercive strategy for recovery of education loans. This comes after concerns were raised on the deteriorating condition of education loans in PSBs. The Non-Performing Assets (NPAs) level in education loans has touched 9.55% in December 2020, up from 7.61% in March’20. The government has addressed this issue through its nominees on bank boards.
3. COVID-19 WAVE PUSHES INDIA’S MIDDLE CLASS TOWARDS POVERTY: As the World continues to be ravaged by the covid pandemic since the last one year, it is becoming increasingly evident that the greatest burden has fallen on the poor and the middle-class. Many a poor class and middle-income group public who are not in an occupation in which Work-From-Home (WFH) is feasible are the worst sufferers as they have seen a drastic reduction in their incomes. Now the second wave of Covid-19 has stuck India, and the middle-class dreams of tens of millions of people face an even greater peril. Already, about 32 million people in India were driven into poverty by the pandemic last year.
4. BANK UNIONS REQUEST FINANCE MINISTRY FOR EMERGENCY STEPS TO PROTECT BANKSERS AS COVID-19 SURGES: Amid rising Covid-19 cases across country, bank unions have asked the Finance Ministry to initiate measures such as reducing bank working days and allowing banks to work with minimum staff to protect employees from Coronavirus infection. The United Forum of Bank Unions (UFBU), an umbrella of nine bank unions has given a representation to the Finance Ministry. Apart from these measures, it has already written to the Ministry for vaccination of bank employees on priority basis to instil confidence in their minds.
5. CITI BANK TO EXIT RETAIL BANKING IN INDIA: Citi Bank will shut its India retail banking business which includes credit cards, savings bank accounts, retail loans as part of its global decision to exit 13 markets, as the US-based bank focuses on a few wealthy regions around the World. Citi Bank started Retail banking in India in 1985 and was among the pioneers of credit cards. Now the bank says it will concentrate on corporate and institutional banking in India. Citi Bank will exit retail banking operations in Australia, Bahrain, India, China, Indonesia, South Korea, Malaysia, Poland, Russia, Taiwan, Philippines, Thailand and Vietnam.
6. HDFC BANK NET PROFIT JUMPS BY 18% IN QUARTER-04 OF FY 20-21: HDFC bank has reported an 18.2% year-on-year growth in its standalone profit at Rs 8,186.5 crores for the quarter ended March’21. As on March’20 the profit was Rs 6,927 crores. The increase in profit is mainly because of increase in Net Interest Income (NII) which grew by 12.60%. The profits would have been much more but for the provisions which rose by 24.02% during the quarter to Rs 4,693.70 crores.
7. LARGE PUBLIC SECTOR BANKS SPEED UP DIGITISATION IN THE POST-MERGER ERA: Public Sector banks (PSBs) have historically lagged behind their private peers in terms of their adoption of technology and digital systems. That might be changing as a pandemic that refuses to die, is forcing every bank to take a hard look at the way they have been doing business. For PSBs, the need to change has become even more relevant as mergers have expanded their scale and competition from tech-oriented players has only intensified.
8. SUPREME COURT ISSUES GUIDELINES FOR CHEQUE BOUNCE CASES, ASKS GOVERNMENT TO AMEND LAWS: Over the years, courts have been inundated with cheque bounce complaints which could not be decided within a reasonable time. To ensure speedy disposal of more than 35 lakh cheque bounce cases pending in various courts, the Supreme Court has given a number of directions, including asking the government to amend the laws to allow clubbing of multiple trials in cases filed for a same transaction against anyone.
1. RBI DIRECTS BANKS TO REFUND COMPOUND INTEREST CHARGED DURING MORATORIUM TO BORROWERS: The Reserve Bank of India has asked all banks to refund the compound interest (Interest on interest) charged on loan accounts during the moratorium period. Banks will have to immediately put in place board-approved policies to refund or adjust the “interest on interest” charged to borrowers during the period March 01, 2020 to August 31, 2020. Icra, the rating agency, in one of its report has estimated that the fresh refund exercise could be to the tune of an additional load of Rs. 7,500 crores for loans over Rs 2 crores.
2. FINTECH FIRMS WILL SOON PROCESS NEFT, RTGS PAYMENTS: Reserve Bank of India has announced a slew of measures for digital payments such as allowing Fintech companies to process NEFT and RTGS transactions and also set new norms on interoperability and cash withdrawal facilities for digital payment wallets. These measures are aimed at levelling the playing field for Non-bank Payment operators and banks, while also reducing settlement risks by widening the ecosystem. This means that companies such as Paytm, Visa, Mastercard and PhonePe among others will soon be able to process RTGS and NEFT payments.
3. MINI LOCKDOWN MAY AFFECT MICROFINANCE INSTITUTIONS’ COLLECTIONS: Crisil Ratings Agency in one of its latest reports has written that Microfinance Institutions (MFIs) may face challenges in loan recoveries if more states look at imposing mini-lockdowns like Maharashtra amid a surge in Covid-19 cases. Maharashtra, which is witnessing rise in maximum number of Covid-19 cases, has announced the most stringent restrictions—a mini-lockdown till April 30, 2021. Many states have already announced night curfew. And according to Crisil, if these curbs continue for long, MFI recovery would be greatly affected.
4. AIRTEL PAYMENTS BANK ANNOUNCES “REWARDS123” SAVINGS ACCOUNT, OFFERS BENEFITS ON DIGITAL TRANSACTIONS: Airtel Payments Bank has announced its new savings account “Rewards123” that offers other benefits and value to customers when they transact digitally using the bank account. Customers can get “Rewards123” at an annual fee of Rs 299/- and avail benefits ranging from certain cashback per month on payments for prepaid recharges, post-paid, broadband, landline and DTH bill payments, load money benefits and shopping rewards. Other benefits include zero minimum balance and free platinum online Mastercard Debit Card.
5. NBFCs FACE ASSET QUALITY RISKS AMIDST RESURGENCE OF COVID-19 INFECTIONS: Indian Non-Banking Financial Companies (NBFCs) face renewed asset quality challenges and liquidity risks amid a second wave of coronavirus infections according to global ratings firm Fitch Ratings. These risks could increase if recent restrictions to contain the pandemic are expanded or prolonged, leading to greater economic and operational disruptions.
6. BANKS WANT FREE VACCINE SHOTS TO THEIR EMPLOYEES: Indian Banks’ Association (IBA) has urged the government to allow vaccination of bankers against Covid-19 free of charge and without any age restrictions, like it was done for armed forces, police, healthcare and frontline workers. IBA says that bank employees are facing the risk of infection during public dealings. In a letter to the Ministry, IBA Chairman Mr Sunil Mehta noted that bank employees have been working uninterrupted while braving numerous odds since the Covid-19 pandemic outbreak last year.
7. THE TYPES OF NRI INCOMES THAT ARE TAXABLE IN INDIA: Tax on individual’s income depends on his source and the residential status in India. The residential status of an Indian citizen needs to be determined individually for every financial year which may vary from year to year. Till FY 2019-20, Non-Resident Indians (NRIs) would include individuals of Indian Origin who resides in India for less than 182 days in a particular financial year. However, in Budget 2020, the residency period has been reduced to 120 days for NRIs whose Indian Income is more than Rs 15 lakhs. As per the residency rules, an NRI is liable to pay income tax only on the income earned or accrued in India.
8. EQUITY MUTUAL FUNDS SEE INFLOWS AFTER 8 MONTHS: After seeing net outflows for continuous 8 months, equity mutual funds in March’21 saw investors re-allocating funds to equity schemes. Open-ended equity schemes saw net inflows of Rs 9,115 crores. This is as per a data from Association of Mutual Funds (AMFI). Mutual Funds have also seen sharp growth in Assets Under Management for FY 21, jumping at a rate of 30% as compared to last year.
1. PNB PLANS TO HIRE NON-JUDICIAL MEMBER TO SCRUTINISE PROPOSALS ON COMPROMISE AND WRITE OFF: Punjab National Bank (PNB) is planning to hire a non-judicial member for seeking advice on issues related to compromise settlement and write-off cases in loans. The bank has invited Expression of Intent (EoI) from professional and retired personnel. The non-judicial member will act as a member of the Head Office Committee which has been constituted by the bank for scrutinising the proposals relating to compromise and write-off.
2. ICICI BANK AND PhonePe TIE UP FOR ISSUANCE OF FASTag: ICICI bank Ltd and digital payment wallet PhonePe have partnered for issuance of FASTag, which facilitates electronic payment of fee at all toll booth points across India. Under the agreement, the issuance of FASTag will take place by using UPI on PhonePe App. All PhonePe app users can order and track the ICICI Bank FASTag conveniently on the app. Those PhonePe users who are also ICICI Bank customers do not need to visit the bank or the toll station in person to buy FASTag.
3. GOVERNMENT TO INJECT Rs 14,500 CRORES CAPITAL INTO 4 WEAK PUBLIC SECTOR BANKS: Government will inject Rs 145 billion (Rs 14,500 crores) into 4 Public Sector Banks to help strengthen their capital buffer and potentially free these banks from regulatory curbs. Central Bank of India, Indian Overseas Bank, Bank of India and UCO Bank are the four banks who will receive the funds through zero-coupon bonds. In this, except Bank of India all other three banks are under the Prompt Corrective Action (PCA) norms.
4. RISING COVID CASES COULD DERAIL FINANCIAL SECTOR RECOVERY: Rising Covid cases could potentially lead to severe lockdowns impacting economic activity and this will badly affect the financial sector. Eight large states including Maharashtra (which has Mumbai, the financial capital of the country) are leading in the Covid spike and it is spreading like wild fire. ICICI Securities in one of its report has stated that the investor confidence could be shaken if Covid cases continue to rise leading to a broad-based disruption.
5. BANK DEPOSITORS MAY FACE NEGATIVE RETURNS: Millions of bank depositors are faced with negative returns on their term deposits in commercial banks as the rate of interest on bank deposits have fallen to a historic low and at the same time the inflation is expected to hover around 5%. Experts say that since the inflation is hovering around 5% till September’20, hopes of a sizable positive return on bank deposits in the near future will solely depend upon the banks’ willingness to raise deposit interest rates.
6. BHIM UPI TRANSACTIONS MORE THAN DOUBLE IN MARCH’21: The number of transactions through BHIM UPI has more than doubled to 273 crores in March 2021. In March’20, around 125 crores transactions took place through BHIM UPI. The value of UPI transactions during March’21 stood at Rs 5,04, 886 Crores as against that of Rs 2,06,462 crores in March’20. In February’21, the number of BHIM UPI transactions were 229 crores valued at Rs 4,25,062 crores. This data is released by National Payments Corporation of India (NPCI).
7. INCOME TAX REFUNDS SEES AN INCREASE OF 43%: The Income Tax Department has issued refunds worth Rs 2.62 Lakhs crores to more than 2.38 crore tax payers in FY 20-21. This includes Rs 87,749 crore personal income tax refunds to 2.34 crore tax payers and Rs 1.74 lakh crore corporate tax refunds to around 3.46 lakh cases. The refunds issued in 2020-21 shows an increase of almost 43% over the last year. The total refunds issued in March’20 were Rs 1.83 lakh crore.
8. BANK CREDIT TO GROW AT 10% IN FY 22: According to rating agency Crisil, Banking system’s credit growth will almost double to 10% in financial year 2021-22 on account of speedy economic recovery and policy interventions. The quantum of Non-Performing assets (NPAs) will rise up to 10.5 to 11% by the end of FY 2021-22 which is a bit lower than what was expected. The GDP growth is expected to stand at 11% after a 7.7% contraction in the pandemic affected 2020-21.
9. SBI TO REVAMP MSME LENDING OPERATIONS TO INCREASE EFFICIENCY: State Bank of India (SBI) is planning to revamp its entire operational setup for lending to Micro, Small, & Medium Enterprises (MSMEs) with a view to improve Turnaround Time (TAT) and customer experience while keeping bad loans in check. Currently the bank’s share in MSME category is 15%. And with this revamp, it expects to increase this market share considerably.
1. FUTURE OF BANKING IN INDIA, RBI FORESEES FOUR KINDS OF BANKS: Reserve Bank of India (RBI) Governor Shri Shaktikanta Das has said that he foresees four categories of banks in the current decade. RBI is in discussion with the Central Government on this issue. Among the four categories, the first set of banks will be dominated by a few large banks with domestic and international presence. Next set will be several mid-sized banks with an economy-wide presence. The third set would have smaller private sector banks, Small Finance Banks (SFBs), Regional Rural banks (RRBs) and Co-operative banks which may specifically cater to the credit needs of small borrowers. The fourth segment would consist of digital players who may act as service providers directly to customers or through the banks.
2. TATA SONS READYING “UNIVERSAL” PAYMENTS SOLUTION: Tata Group’s retail payment entity Tata Sons is working on a mobile phone-based Universal point of Sale (PoS) system that could replace all thumbprint-powered transactions like the Aadhaar-enabled Payment System (AePS) in India. The payment system will be interoperable across all payment operators in the country. Notably, AePS is a popular payment system in rural India and its transactions have nearly doubled in one year, from Rs 11,286 crores in January’20 to Rs 21,978 Crores in January’21. This “Universal” payments network of Tata’s will pit against the Indian government’s National Payment s Corporation of India (NPCI).
3. SEBI ORDERS ATTACHEMENT OF BANK, DEMAT, MF ACCOUNTS OF RANA KAPOOR: Market regulator SEBI has ordered attachment of bank accounts as well as share and mutual fund holdings of Rana Kapoor, former MD and CEO of Yes Bank to recover dues over Rs 1 crore. In September 2020, SEBI had imposed a fine of Rs 1 crore on Kapoor for not making disclosures regarding a transaction of Morgan credit, which was an unlisted promoter entity of Yes bank.
4. ICICI BANK ENABLES CUSTOMERS TO BREAK HIGH-VALUE TRANSACTIONS INTO EMIs: ICICI Bank customers can now break their high-value transactions of above Rs 50,000/- into suitable EMIs directly on its internet banking platform to make their purchases more affordable. The said kind of facility is the first in the country by any bank. It will be applicable on transactions up to Rs 5 lakhs and will bear no additional cost to customers. The said facility is named “EMI@Internet Banking”. Customers can purchase any gadgets or pay for their insurance premium or school fees in easy EMIs from their savings account using internet banking. The bank has tied up with online payment gateways Billdesk and Razorpay to enable this facility.
5. GOVERNMENT MAY SEEK DETAILS OF INTEREST ON INTEREST CHARGED BY BANKS: Government may seek details of interest on interest charged by banks for loans exposure of over Rs 2 crores. This is the effect of the observation made by the Supreme Court where it noted that RBI and the government have not provided any rationale for the overall borrower’s debt cap of Rs 2 crores for waiver of interest on interest and has directed them to provide such relief to borrowers with overall exposure of Rs 2 crores.
6. PF THRESHOLD LIMIT RAISED TO Rs 5 LAKH FOR TAX-FREE INTEREST WHERE THERE IS NO CONTRIBUTION FROM THE EMPLOYER: The Finance Ministry has raised the limit for tax exemption interest earned on Provident Fund (PF) contribution by employees to Rs 5 lakhs per annum in specified cases as against Rs 2.5 lakhs proposed in the budget. This exemption is however is subject to condition that the up to Rs 5 lakhs contribution does not include employer’s contribution beyond the statutory limit of up to 12% of the basic pay. The new provision would come into effect from April 1, 2021.
7. SUPREME COURT LIFTS BLANKET BAN ON NPA CLASSIFICATION: In September’20, the Supreme Court had granted interim relief by ordering not to declare the loan accounts as Non-Performing assets (NPAs). Now this order stands vacated, ending the ban on classification of NPAs. However, there shall be no order as to costs.
8. PARLIAMENT PASSES BILL TO SET UP NATIONAL BANK FOR FINANCING INFRASTRUCTURE AND DEVELOPMENT: Parliament has passed a bill to set up the National Bank for Financing Infrastructure and Development (NaBFID) to fund infrastructure projects in India. The bill seeks to establish the National Bank for financing Infrastructure and Development to support the development of long-term non-recourse infrastructure financing in India including development of the bonds and derivative markets necessary for infrastructure financing and carry on the business of financing infrastructure and for matters connected therewith.
1. SBI’s DIGITAL TRANSACTIONS TOUCH NEW HIGH: State Bank of India’s digital transactions has seen a
perceptible increase in number of transactions at its multiple digital channels, with the percentage
moving from 60% in the pre-pandemic period to 67% as of now. This rise is largely driven by pick-up in
e-commerce during the pandemic lockdown period. Due to the lockdown with restricted movement,
the digital channels got wider currency and acceptability.
2. FEDERAL BANK PLANS TO BUY MICROFINANCE COMPANY TO EXPAND BUSINESS: Federal Bank sees an opportunity to grow both organically and through acquisition. The bank is interested in acquiring a microfinance business as part of its focus on growing the retail high-margin category. Mr. Srinivasan the Chairman of Federal Bank said that Federal Bank is now on par with any new-generation bank in terms of digital capability and operations and has sound asset quality due to its focus on retail business. The bank will also be launching its credit cards shortly and expanding personal loans.
3. BANK OF BARODA BETS ON NEW DIGITAL PALTFORM TO EXPAND RETAIL LENDING: Bank of Baroda is making a positive move to expand its retail business through its self-made digital lending platform which assesses credit risk through varied public and private data points like bank account statement, tax statements and consumption trends. Bank of Baroda has launched this digital lending platform in November’20 and has already disbursed Rs 1,000 crores of loans through this new digital platform and expects that half of its retail loans to be originated through this platform by the end of March 2022.
4. PERFORMANCE OF UNSECURED LOANS WORSENING: According to a report by India Ratings & Research, the performance of unsecured assets including microfinance loans and unsecured business loans is worsening. For secured loan segment the agency has a stable performance outlook considering the recovery in the economy in financial year 2022. The worsening performance of unsecured asset class is due to the deteriorating financial conditions of the borrowers.
5. POST EXIT FROM PCA, IDBI BANK TO FOCUS ON IMPROVING EFFICIENCY RATIOS: The Reserve Bank of India removed IDBI Bank from its Prompt Corrective Action (PCA) framework, which was imposed on the bank in May 2017, after it had breached certain regulatory thresholds. With restrictions thus imposed by RBI gone with removal from PCA, the bank is now looking at growing business in a calibrated manner with more focus on profitability and in improving efficiency ratios. In fiscal 2021- 22, the bank will be targeting to improve Net Interest Margin (NIM) to 3%, Return On Asset (ROA) at above 0.60to 0.70% and cost to income ratio to below 50% .
6. EX-PROMOTERS CANNOT SUGGEST REVIVAL SCHEME UNDER COMPANIES ACT: The Supreme Court has held that the promoter of a company undergoing liquidation under IBC cannot propose “Scheme of Compromise and Arrangement” for revival with lenders even if there are no resolution plans submitted for the corporate debtor.
7. PHONEPE CORNERED INDIA’S 42% UPI TRANSACTIONS IN FEBRUARY: PhonePe continued to remain the dominant UPI app for a third straight month in a row with its February’s share touching an impressive 42.5% out of the 2,292 million UPI transactions during the said month. PhonePe is currently competing with Google Pay and Paytm. Google Pay touched 34% while Paytm stood at third position.
8. RBI INSTRUCTS ALL BANKS TO IMPLEMENT IMAGE-BASED CHEQUE TRUNCATION SYSTEM IN ALL BRANCHES BY SEPTEMBER 30, 2021: The Reserve Bank of India has asked all banks to implement the image-based Cheque Truncation System (CTS) in all branches by September 30, 2021. This move is aimed at faster settlement of cheques resulting in better customer service. There are still 18,000 bank branches which are out of CTS purview. Last month RBI had announced Pan-India coverage of CTS by bringing all bank branches under CTS. CTS is in use since the year 2010 and presently covers around 1,50,000 bank branches. All the erstwhile 1,219 Non-CTS clearing houses have been migrated to CTS effective September 2020.
9. PUNJAB NATIONAL BANK INCORPORATES NEW ENTITY “PNB-CARDS & SERVICES” FOR CREDIT CARD BUSINESS: Punjab National Bank (PNB) has incorporated PNB Cards & Services, a wholly owned subsidiary of the bank. The new entity will undertake Non-financial support service related to credit card business. PNB Cards & Services has authorised capital of Rs 25 crores and paid-up capital of Rs 15 crores. PNB has reported a standalone profit of Rs 506.03 crores for December 2020 quarter as compared to a net loss of Rs 492.28 crores in the same period last year.
1. HDFC BANK TO COVER VACCINATION COST OF ITS EMPLOYEES & FAMILY MEMBERS: HDFC Bank has said that it will cover the vaccination cost of its 1 lakh employees and their family members. The bank will reimburse vaccination charges for the two moderate doses. Ms Ashima Bhat, HDFC Bank’s Group Head said that HDFC Bank employees who have ensured that an essential service like banking was available for its customers even during the lockdown and for their health and safety, covering the cost of vaccination for them and for their dependent family members is a small gesture from the organisation to express the management’s gratitude towards the employees.
2. GOVERNMENT TO INFUSE Rs. 14,500 CRORES IN BANKS UNDER RBI’S PROMPT CORRECTIVE ACTION FRAMEWORK: The Finance Ministry is likely to infuse Rs. 14,500 crores under RBI’s Prompt Corrective Action (PCA) framework in the next few days. The biggest beneficiary of this round of capital infusion would be the banks that are under PMA. Presently, Indian Overseas Bank, Central Bank of India and UCO Bank are under this PMA framework which puts several restrictions on them, including on lending, management compensation and Director’s fees.
3. RBI EXPLORING WAYS TO REGULATE ONLINE LOAN APPS: RBI has reached out to Google, Digital Lenders Association (DLAI), Fintech Association (FACE) and several non-bank lenders for inputs on ways to regulate non-bank digital lenders. RBI’s working group on digital lending has sought details from Google on its criteria for onboarding fintech loan apps on its play store platform and the parameters these lenders follow. The banking regulator is also seeking details on Google’s recent review exercise on online loan apps that proliferated on its platform, after which it removed more than 400 such apps deemed to be in violation of its policy. Many of these apps were backed by Chinese entities.
4. BANK UNIONS CALL FOR A TWO-DAY STRIKE AGAINST PROPOSED PRIVATISATION OF PSBs: United Forum of Bank Unions (UFBU), an umbrella body of 9 unions, has given a call for a two-day strike from 15TH Marc 2021 to protest against the proposed privatisation of two Public Sector Banks. The government has already privatised IDBI Bank by selling its majority stake in IDBI Bank to LIC of India and has merged 14 Public Sector Banks in last four years.
5. RBI REMOVES PCA RESTRICTIONS ON IDBI BANK: RBI has removed IDBI Bank from its Prompt Corrective Action (PCA) framework due to its poor capital, asset quality and leverage position four years ago. RBI has noted that as per the published results of the bank for quarter ending December 31, 2020, the bank is not in breach of the PCS parameters on regulatory capital, Net NPA and leverage ratio. The bank has also provided a written communication that it would comply with norms of minimum regulatory capital, net NPA and leverage ratio on an ongoing basis.
6. RBI REJECTS YES BANK’S ARC PLAN, CITES CONFLICT OF INTEREST: Yes Bank, in September 2020 had sought approval from RBI to launch its own Asset Reconstruction Company (ARC) and was expecting to operationalise it within 6 months of securing the clearance from RBI. But Reserve Bank of India has rejected the application to set up the ARC, citing a conflict of interest. Some of the biggest stressed loans on the books of Yes Bank are declared as fraud cases and as a result these accounts cannot be transferred to the proposed ARC and therefore, it would not have been very effective in resolving the situation that the bank is facing at present.
7. GST FRAUD OF Rs 20,124 CRORES DETECTED DURING NOVEMBER’20 TO JANUARY’ 21: The government has detected GST fraud of Rs. 20,124 crores between November 9, 2020 and January 31, 2021. A nationwide special drive against unscrupulous entities for availing and passing on Input Tax Credit (ITC) fraudulently on the strength of fake /bogus invoices is being carried out and around 2,692 cases have been booked by the GST officers. During the said period an amount of Rs 857.75 crores was recovered and as many as 282 persons have been arrested.
8. FRAUDULENT LOANS CANNOT BE SOLD TO BAD BANK: The Reserve Bank of India has said that loans classified as fraud should not be sold to the proposed National Asset Reconstruction Company (NARC) to be set up by Public Sector Banks. This would mean that a chunk of sticky loans would continue to remain on the books of the banks. According to a report by RBI, nearly Rs 1.9 lakh crore of bank loans had been classified as fraudulent as of March 2020. Public Sector banks account for around 80% of these fraudulent loans
1. SBI, HDFC BANK AND ICICI BANK WILL HAVE TO OFFLOAD EQUITY FROM THEIR INSURANCE ARMS:
State Bank of India, ICICI Bank and HDFC Bank will have to offload equity worth 1.21 lakh crores from
their respective insurance arms if RBI goes ahead with its reported plan to make banks cap their
stakes in insurance arms at 20%. RBI has recently approved Axis Bank’s plan to buy Max Life only after
it agreed to directly hold only 10% and also capped the overall holding at 20%. Currently regulations
allow banks to own over 50% stake in insurance arms.
2. INDIA RATINGS FLAGS SYSTEMIC RISK ISSUES ON BANKS’ EXPOSURE TO NBFCs: Domestic rating agency India Ratings has warned of rising systemic risk on banks increasing exposure to Non-Bank Finance. As per India Ratings, any sector concentration is to be closely watched out and especially that of NBFCs. The banks’ exposure to NBFCs has risen from 6% in 2015 to nearly 10% in FY 2020. At the end of September quarter state run banks alone contributed more than 64% of overall bank exposure to NBFC funding which is quite alarming. On the other hand, the funding from mutual funds has seen a sharp decline from 2.5 lakh crores in August 2018 to 1.5 lakh crore in December 2020.
3. ICICI BANK TARGETING TO SERVE 20 LAKH CUSTOMERS OF RIVAL BANKS THROUGH ITS APP: ICICI bank has said that around 10 lakh customers of rival banks are using its mobile application – “iMobile Pay” for their transactions. The bank expects the number of such rival bank customers who are using its app for instant UPI-based payments and recharges to double in the next three months. The bank is using NPCI’s interoperable infrastructure to serve these rival bank customers.
4. PNB HOUSING BANK AND YES BANK SIGN STRATEGIC CO-LENDING PACT: PNB Housing Finance Ltd and Yes Bank have signed a MoU for a strategic co-lending service that will facilitate retail home loans at competitive rates. This MoU will pave way to provide an efficient and seamless experience to existing and prospective home loan customers. PNB Housing will service the customers through the entire loan lifecycle including sourcing, documentation and collection with appropriate information sharing arrangement with Yes Bank.
5. CREDIT SCORE TAKES CENTRE STAGE IN POST-COVID HOME LOAN BOOM: Home loan interest rates have touched a 15-year low which is due to RBI’s easy liquidity stance wherein lenders are pricing home loans differently, depending on profile and creditworthiness of the borrower. Hence credit scores have become increasingly important for borrowers. Some top banks are levying different interest rates to customer based on their CIBIL scores. SBI for instance, has lowered its home loan interest rate to 6.7% but the rate is available for those customers with a Cibil score of more than 800.
6. DIGITAL BANKING—INFOSYS TAPPING THE POWER OF CLOUD TO HELP LENDERS: The dependence on digital financial services during the Covid-19 pandemic has led Infosys Ltd to accelerate digital transformation process. Leveraging advanced technologies such as deep analytics and machine learning which will empower banks with a more sound understanding of customers and preferences, Infosys team is focussing on helping banks build new business designs to bridge the divide between digital and physical worlds. This includes comprehensive digitisation of businesses through the full modernisation of digital engines.
7. FDI INFLOWS UP BY 22% IN APRIL-DECEMBER 2020: India attracted a total of $ 67.54 billion of Foreign Direct Investment (FDI) during April-December 2020, the highest ever for the first 9 months of a financial year and 22% higher year-on-year. FDI Equity inflows rose by 40% in April-December 2020. Measures taken by the government on the fronts of FDI policy reforms, investment facilitation and ease of doing business have resulted in increased FDI inflows into the country. FDI inflows are an endorsement of India’s status as a preferred investment destination amongst global investors.
8. AS PER RBI, CREDIT DEMAND TO PICK UP POST VACCINATION ROLL OUT: As per a report from RBI, credit demand is set to accelerate with the rollout of vaccination in the country. The collapse in credit demand was more due to Covid related issues like lockdown. According to RBI report, credit offtake is expected to pick up as the economy is poised to stage a smart recovery in 2021-22 on the back of decline in Covid infections and swift rollout of vaccination programme in addition to a number of measures announced by the government in the Union Budget 2021-22.
9. GOVERNMENT EXTENDS LAST DATE FOR ANNUAL GST FILING FOR FY-20 TILL MARCH END: The government has extended the deadline for filing annual GST return and reconciliation statement for Financial year 2020 till 31/03/2021 from the existing deadline of 28/02/2021. Experts termed the extension as a positive move for industry grappling with continuous compliance requirements even as it stumbles to normalcy amid Covid-19 pandemic.
1. INDIAN OVERSEAS BANK SIGNS CORPORATE AGENCY PACT WITH SBI GENERAL INSURANCE: Indian Overseas Bank (IOB) has signed a corporate agency pact with SBI General Insurance to sell its insurance products to its customers. IOB will sell the general insurance products of SBI General Insurance to its customers and this partnership will improve penetration in urban, tier II and III markets and also create awareness about personal lines of insurance to customers. IOB has 3,200 branches across the country.
2. NEW BAD BANK WILL BE A NEW ARC SET UP BY PSBs: RBI Governor Mr. Shaktikanta Das has said that the proposed Bad Bank will be an Asset Reconstruction Company (ARC) to be set up by Public Sector Banks (PSBs) to takeover bad loans. He further said that the new entity will in no way jeopardise the functioning of existing ARCs. Mr. Das further added that RBI will focus on refining and upgrading the regulatory architecture for ARCs to ensure that they remain in business
3. IBA STARTS IDENTIFYING STRESSED LOANS FOR PROPOSED BAD BANK: The Indian Banks’ Association (IBA) has started the process of identification of bad loans in public sector banks that can be transferred to the proposed Bad Bank. IBA has written to the lenders seeking a list of all bad loans above Rs 500 crores. This exercise by IBA could help the lenders to identify the magnitude of the bad loan problem and get clarity over the initial capital required to set up the entity. Lenders have been asked not to submit details of those loans which are nearing resolution under bankruptcy courts or are in the liquidation process.
4. NOW PRIVATE BANKS CAN VIE FOR GOVERNMENT BUSINESS: Private banks now can compete with their public sector counterparts for government business such as transactions related to taxes, revenue payments, pensions and small savings scheme. The decision announced by the Finance Minister is expected to improve efficiency and competition while helping smaller banks to earn revenue. With this, the private banks also can be equal partners in development of economy, furthering social sector initiatives of the government and thereby enhance customer convenience.
5. GOVERNMENT EXTENDS DEADLINE FOR FILING DECLARATIONS UNDER “VIVAD SE VISHWAS” SCHEME TILL MARCH 31, 2021: The government has extended the last date for availing the direct tax Vivad se Vishwas (VsV) dispute resolution scheme to March 31, 2021 from the earlier date of February 28,2021. This is the fifth extension of the said scheme. The Direct tax “Vivad se Vishwas” Act 2020 was enacted on March 17,2020, with an objective to reduce pending income tax litigations, generate timely revenue for the government and to benefit taxpayers. As per CBDT’s notification, the date for payment of tax without additional interest under VsV remains unchanged to April 30, 2021.
6. FINO PAYMENTS BANK INCLUDED IN THE LIST OF SCHEDULED COMMERCIAL BANK: RBI has included the name of Fino Payments Bank in the category of a scheduled commercial bank. The name of Fino Payments Bank is now included in the Second Schedule of RBI Act, 1934. The Scheduled Commercial bank, also called scheduled bank status, will enable Fino Bank to enhance its banking position in the treasury and participation in Liquidity Adjustment Facility (LAF) window. This will also improve its business prospects further.
7. BANKERS FEAR SPIKE IN NPA FROM MUDRA LOANS: Outstanding loans under the Pradhan Mantri Mudra Yojana (PMMY) are increasingly becoming a cause of concern for banks as stress in Small & Medium Enterprises (SMEs) has spiked default rates beyond an amount guaranteed by the government in the scheme. Bankers say that Supreme Court moratorium over classifying loans as NPAs has so far kept the default rate under control. But they fear that as much as 25% loans under this scheme could turn bad.
8. SBI JOINS JP MORGAN’S BLOCKCHAIN-BASED PAYMENT NETWORK: State Bank of India (SBI) has tied up with JP Morgan to use US bank’s blockchain technology to speed up overseas transactions. The tie up is expected to reduce SBI customers’ transaction costs and time taken for payments. Time taken to resolve cross-border payments-related inquiries can be reduced to a few hours as compared to a fortnight now. This will help cross-border payments reach beneficiaries faster using limited steps.
9. RBI IMPOSES Rs 2 CRORE BAN ON BANK OF MAHARASHTRA: RBI has imposed a monetary penalty of Rs 2 crores on Bank of Maharashtra for Non-compliance with certain direction on fraud classification and reporting. The bank has also violated the RBI directions on Concurrent Audit System, disclosure of customer complaints and unreconciled balances on account of ATM transactions and Micro, Small & Medium Enterprises (MSMEs) sector- restructuring of advances.
1. TEAM OF DIVERSE INVESTORS PUT IN BID FOR TROUBLED PMC BANK: A diverse set of investors-- German based Alfa Pharma GmbH, Aegis Investment Fund (Mauritius), NexPact (Mauritius) and Global Com Fin Investment LLC (Dubai) are part of a consortium that has bid for failed lender Punjab & Maharashtra Co-operative Bank (PMC Bank). The consortium, led by Mr Surinder Mohan Arora, an Indian businessman, has submitted a plan for revival of the bank and conversion of PMC Bank into a Small Finance Bank (SFB) subject to certain regulatory forbearance from RBI.
2. LIC HOUSING FINANCE DISBURSES Rs. 1,331 CRORE OF LOANS VIA MOBILE APP: LIC Housing Finance has disbursed Rs. 1,331 crores worth loans through its mobile banking app in the last one year. The asp is called “Homy App” and it has facilitated 14,155 customer home loan applications since its launch on February 14, 2020. More than 7,300 of these customers have had their home loans sanctioned and loans worth Rs. 1,331 crores have been disbursed.
3. BANK UNIONS STAGE PROTEST AGAINST PRIVATISATION: Bank Unions staged a protest in all the state capitals opposing government’s privatisation plans. They also plan to march towards Parliament next month if their demands are not met. About 10 lakh bank employees and officers under the banner of United Forum of Bank Unions (UFBU) consisting of 9 unions are agitating against the government’s proposal to privatise certain public sector banks.
4. INDIAN BANK SIGNS MoU WITH SOCIETY FOR INNOVATION & SCIENCE FOR FUNDING START-UPS AND MSME: Indian Bank has signed an MoU with Society for Innovation & Science (SID), an initiative of Indian Institute of Science (IISc) for extending exclusive credit facility to Start-ups and MSMEs. This initiative is a part of the bank’s scheme “Ind Spring Board” for financing the Start-ups and MSMEs which will empower them to realise their research efforts which is backed by incubation facilities offered by SID.
5. GOVERNMENT RAISES CONCERNS OVER SBI-BoB-HDFC BANK NUE PLAN: The Finance Ministry has raised concerns over SBI’s plans to set up a joint venture partnering Bank of Baroda & HDFC Bank under the RBI’s New Umbrella Entity (NUE) framework. Government is worried that this will squeeze the National Payments Corporation of India (NPCI) as it does not want public sector banks to set up NUEs that will rival the country’s premier payments entity.
6. RBI TIGHTENS PAYMENTS SECURITY NORMS FOR BANKS AND DIGITAL PAYMENT OPERATORS: With a view to strengthen the country’s payment architecture, RBI has published detailed guidelines to improve security, control and compliance among banks, gateways, wallet operators and other Non-Bank entities. The new rules come at a time when India’s ever growing payments ecosystem has seen increased instances of outages, frauds and cyber breaches. The new rules set the framework for all regulated entities to standardise their security operations to emulate best practices defined by RBI.
7. BANKS’ PROVISIONING IN Q-3 RISES 10% SEQUENTIALLY: Provisioning of banks in the December’20 quarter is up nearly by 10% as per a data of 18 banks. These 18 banks have provided Rs 52,403 crores against loans during December’20 quarter compared to Rs 47,827 crores in September’20 quarter. Despite this rise in provisioning, the aggregate net profit of these 18 banks stood at Rs. 28,604 crores, up by 6%.
8. NBFCs STRESSED ASSETS MAY TOUCH Rs 1.5 TO 1.8 LAKH CRORE BY MARCH’21: Stressed Assets of Non-Banking Finance Companies (NBFCs) are likely to touch Rs 1.5 to 1.8 lakh crores in March’21 which is around 6 to 7.5% of their Asserts Under Management (AUM) by the end of March’21. However as per a report by Crisil ratings, the one-time Covid-19 restructuring window, and MSME restructuring scheme of RBI will limit the reported Gross Non-Performing Assets (GNPAs).
9. RBI SETS UP PANEL TO SUGGEST STEPS FOR STRENGTHENING, CONSOLIDATING URBAN-CO-OPERATIVE BANKS: RBI has set up a committee to draw a vision document for strengthening Urban Co-operative Banks (UCBs) and exploring the potential of consolidation in the sector. The committee will be headed by former RBI Deputy governor Mr N S Vishwanathan. The said committee will suggest effective measures for faster rehabilitation and resolution of Urban Co-operative Banks (UCBs) and also assess their potential for consolidation in the sector.
1. UNION BANK OF INDIA TO RATIONALISE 950 BRANCHES: Union Bank of India will be rationalizing 950 of its branches very soon. The bank has identified around 950 branches in the first year of amalgamation of Corporation bank and Andhra Bank with itself. The real benefit of amalgamation will be derived only if rationalization of branches happens. After amalgamation, Union Bank of India now has over 9,500 branches, 13,300 ATMs with over 75,000 employees. Rationalisation after amalgamation is the need of the hour due to the close proximity of bank branches of amalgamated banks and will optimise operational costs.
2. SBI LOOKING TO DOUBLE ITS HOME LOAN PORTFOLIO TO Rs 10 LAKH CRORE IN NEXT FIVE YEARS: State Bank of India is planning to double its home loan portfolio to Rs 10 lakh crores in the next five years. State Bank of India dominates the housing loan segment with a market share of 33%. The bank has reached the milestone of Rs 5 lakh crores in home loans portfolio this month. Home portfolio is now the largest portfolio in the asset base of SBI as it accounts for 23% of SBI’s domestic loans.
3. FOREIGN FIRMS KEEN TO INVEST IN YES BANK’S PROPOSED ASSET RECONSTRUCTION ARM: Mr. Prashant Kumar, CEO of Yes Bank has told that foreign firms are keen to invest in the Asset Reconstruction Company (ARC) which the bank is planning to launch. The bank plans to launch this ARC as it wants to hive off its bad loans worth Rs 50,000 crores. The bank is likely to put in initial capital of Rs 10 billion while the foreign investor will put in nearly Rs 25 billion. Yes Bank has already approached RBI for regulatory approvals to launch this ARC and it hopes to operationalize the ARC within six months after securing clearances.
4. HDFC BANK BEATS SBI IN COVID-19 SCHEME LOANS: HDFC Bank has outdone State Bank of India in disbursement under the Emergency Credit Line Guarantee Scheme (ECLGS) introduced by the government as part of the Covid-19 relief package. The scheme involved a government guarantee for additional loans up to Rs 3 lakh crores, extended to businessmen facing stress due to the pandemic. Out of the total Rs 1.4 lakh crore extended by banks up to January 25 2021, HDFC Bank has disbursed Rs 23,504 crores. This is nearly 17% of the total loans sanctioned. SBI has disbursed Rs 18,700 crores.
5. SERVICE COMPLAINTS BY BANK CUSTOMERS RISE BY 57% : As per a report by RBI, consumer complaints about lack of banking services jumped by 57% to 3.08 lakhs for the year up to June 30, 2021. In the annual report on Ombudsman Schemes, RBI said over a fifth of complaints were about services at ATMs or with debit cards, followed by mobile or electronic banking. Non-observance of Fair Practice Code (FPC) was at third place.
6. TOP 100 WILFUL DEFAULTERS OWE Rs 84,632 CRORES TO BANKS: The country’s top 100 wilful defaulters owe Rs 84,632 crores to banks as of March 2020 with top 10 including Gitanjali Gems, Winsome Diamonds and Kingfisher Airlines accounting for 32% of it. While the banks will write-off nearly 3/4TH of it to clean their balance sheet and get tax benefits, the default borrowers continue to appear in RBI’s internal CRILC database till they clear the default.
7. CAPITAL SUPPORT TO PSB BANKS WILL DETERMINE THEIR LOAN GROWTH: According to a study by Fitch Ratings, State owned banks will be forced to continue on a path of risk aversion and soft loan growth without adequate capital support from the government. The banks have so far managed to avert further pressures on their weak core capitalization on the back of regulatory forbearance, limited underwriting and lower credit growth. Fitch said it expects a moderately worse operating environment for these banks in 2021.
8. INDIA’S FOREX RESERVES TOUCH A NEW HIGH, INDIA IS NOW “NET CREDITOR”: India now has forex reserves of over USD 590 billion, the highest ever, up by USD 119 billion over the previous year. While the external debt is USD 554 billion, making our country a “Net Creditor”. Mr. Anurag Singh Thakur Minister of State for Finance said that the country is witnessing a “V” shaped recovery post Covid-19 pandemic which is evident by the record GST collections during the past 4 months.
9. PUNJAB NATIONAL BANK SIGNS AN MoU WITH INDIAN OIL CORPORATION TO PROVIDE LOAN TO ITS DEALERS: Punjab National bank (PNB) has signed an MoU with Indian Oil Corporation (IOC) to provide up to Rs 2 crore loan to IOC’s dealers. The MoU would benefit the dealers with credit facilities at lower rate of interest, nil margin and with minimum or zero collateral requirements through PNB’s e-Dealer Scheme.
1. MANY OFFERS RECEIVED FOR PMC BANK RESOLUTION: RBI Governor Mr. Shaktikanta Das has said that three investors have submitted their offers for reconstruction of crisis-ridden Punjab & Maharashtra Co-operative Bank Ltd (PMC Bank Ltd) and the evaluation for those three offers are underway. But it is understood that PMC Bank itself is evaluating the offers. These three investors were given time till February 1, 2021 for submission of their final offer. The outcome will be soon announced by RBI.
2. PENDING BANK BRANCHES TO BE COVERED UNDER CTS BY SEPTEMBER 2021: There are around 18,000 bank branches across India which are at present not covered under the Centralised Clearing system called Cheque Truncation System (CTS). RBI has decided to cover all these pending branches under CTS by September 2021. This will further improve and speed-up the payment and settlement systems besides making it more fool-proof. RBI has also said that it will set up a 24x7 helpline for digital payments services to secure them more against frauds and phishing.
3. ICICI BANK & MUFG BANK TIE UP FOR SERVING JAPANESE CORPORATIONS OPERATING IN INDIA: ICICI Bank has tied up with Japan’s MUFG Bank for catering to the banking requirements of Japanese corporates present in India. Both the banks have signed a Memorandum of Understanding (MoU) to this effect. Japan is the fifth largest investor in India with a cumulative foreign direct investment inflow of USD 34.15 billion from April 2010 to September 2020, contributing 7% of India’s total Foreign Direct Investment (FDI) inflows during the period.
4. RBI ANNOUNCES MAJOR STRUCTURAL MOVE, GIVES RETAIL INVESTORS DIRECT ONLINE ACCESS TO SECURITIES MARKET: In a major move aimed at encouraging small investors to become direct investors in government bonds, RBI will allow small retail investors to directly buy government bonds. This makes India the first Asian Country to do so and among a few globally. RBI, tasked with managing a huge Rs 12 lakh crore in government securities in government borrowing target next fiscal, hopes that this move will allow greater depth to the gilt market in particular and the overall debt market in general.
5. RBI INTERNAL PANEL WORKING ON THE MODEL OF CENTRAL BANK’S DIGITAL CURRENCY: Private Digital Currencies (PDCs)/ Virtual Currencies (VCs)/Cryptocurrencies (CCs) have gained popularity in recent years. However, in India the regulators and the government have been sceptical about these currencies and are apprehensive about the associated risks. But now an Internal committee within RBI is taking a close look at the model of Central Bank’s Digital Currency and very soon will come out with a decision on this. Last week Government has moved to ban private cryptocurrencies.
6. INTEREST ON PF CONTRIBUTION ABOVE 2.5 LAKH TO BE TAXABLE: From April 1, 2021 onwards, the interest earned by the Provident Fund contributions above Rs 2.5 Lakhs a year will now be added to the taxable income and taxed at the normal rates as applicable. This will only apply to employee’s contribution and not on employer’s contribution. This will impact the high-income salaried people who use the Voluntary Provident Fund to earn tax-free interest. Last year’s budget had capped the tax exemption on Employer’s contribution to Provident Fund, NPS and super annulation fund to Rs 7.5 lakhs.
7. RBI ANNOUNCES INTEGRATED OMBUDSMAN SCHEME FOR BANK CUSTOMERS: Presently, there are three separate ombudsman-- for Banks, for Non-Banking Finance Companies and for Non-Bank Prepaid Payment Issuers (Wallets). These are operated by RBI from 22 ombudsman offices spread across the country. Now RBI has decided to integrate all these three separate ombudsman under one centralised scheme to make the grievance redressal mechanism more efficient and simpler. The scheme will be rolled out in June 2021.
8. NOW NBFCs CAN INITIATE RECOVERY IN Rs 20 LAKH LOAN DEFAULT UNDER SARFAESI ACT: Finance Minister Mrs. Nirmala Sitharaman has proposed to lower the threshold limit for Non-Banking Financial Companies (NBFCs) to initiate recovery proceedings against loan defaulters under the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest (SARFAESI) Act, 2002. She has proposed to lower the threshold of loan defaults to Rs 20 lakh as against Rs 50 Lakhs earlier.
1. RBI CANCELS THE LICENCE OF MAHARASHTRA BASED SHIVAM SAHAKARI BANK: Reserve Bank of India has cancelled the licence of Maharashtra-based Shivam Sahakari Bank Ltd as it does not have adequate capital and earning prospects. With this, Shivam Sahakari Bank ceased to carry on banking business with effect from January 29,2021. As per the data available, around 99% of the depositors are fully insured by Deposit Insurance & Credit Guarantee Corporation (DICGC).
2. AXIS BANK TO TREAT HOME LOANS OF CREDIT CARD DEFAULTERS AS NPAs: Axis Bank has said that those of its customers who get classified as defaulters on credit cards will see their housing loans tagged as Non-Performing Assets (NPAs). This is being done by the bank as a part of prudent provisioning practice in tackling bad loans. This would mean that the bank would take a hit on its earnings as it has to provide for such NPAs and at the same time, any interest charged to such accounts will cease to be regarded as income.
3. BANK OF BARODA IS THE FIRST PUBLIC SECTOR BANK TO LOOK AT PERMANENT WORK-FROM-HOME OPTION: Bank of Baroda (BoB) is the first public sector bank to consider Work-From-Home (WFH) as a permanent policy for a section of its employees. BoB which recently concluded the integration of Vijaya Bank and Dena Bank with itself, has appointed management consultancy firm McKinsey & Co to help implement a strategy for a post-Covid world.
4. RBI CONFIRMS IT IS NOT WITHDRAWING OLD SERIES OF Rs 100, 10 AND Rs 5 BANK NOTES FROM CIRCULATION: The Reserve Bank of India has clarified that it has no intension of withdrawing old series banknotes of Rs 100, Rs 10 and Rs 5. RBI has also introduced a new Rs 100 and Rs 10 denomination currency note as a part of Mahatma Gandhi (new) series banknotes.
5. ECONOMIC SURVEY POINTS OUT THE ORIGINAL MISTAKE THAT CAUSED INDIA’S BANKING CRISIS: The Economic Survey which has been presented has dealt at length on what is called the original mistake (sin) that caused the India’s banking mess. The policy of Forbearance was brought in during 2008 to deal with financial crisis. It entailed at relaxing the norms by banks for restructuring assets to help companies deal with temporary hardship. However, this practice should have been discontinued after main crisis was over but was not. So, the banks started exploiting the forbearance window to restructure loans for unviable entities, thereby window dressing their books. The inflated profits were used by the banks to pay dividends to shareholders. This resulted in under-capitalisation of Indian banks and this triggered a dissolution in banks’ potential incentives, eventually forcing them to indulge in risky lending.
6. RBI PROPOSES BANK-LIKE NORMS FOR BIG NBFCs: Large Non-Banking Finance Companies (NBFCs) are likely to be more intensely regulated and their lending to sensitive sectors like real estate and capital markets capped if the RBI were to implement proposals that it has put forward. The norms, which will be brought on par with banks for large NBFCs, include provisions for standard assets, CEO compensation guidelines, disclosure requirements and rule for selling bad loans. These big NBFCs will also need to have a centralised core banking system in place.
7. AMAZON TIES UP WITH GOVERNMENT’S STARTUP INDIA INITIATIVE TO BOOST e-COMMERCE EXPORTS: Amazon has launched Amazon Global Selling Propel (AGSP) to support Indian startups. For this, Amazon has tied up with government’s Startup India Initiative. Through this initiative, they will help early-stage startups working in consumer product space to enter international markets via Amazon’s AGSP. For this Amazon has formed a mentorship board which will engage with the emerging brands.
8. UNION BANK OF INDIA COMPLETES IT INTEGRATION OF ALL ANDHRA BANK AND CORPORATION BANK BRANCHES WITH ITSELF: Union Bank of India has completed IT Integration of all branches of Andhra Bank and Corporation Bank with itself. With this, all erstwhile Andhra Bank and Corporation Bank have been successfully migrated to Core Banking Solutions (CBS) of Union Bank. The said integration has been affected without any change in the account numbers, debit cards, and net banking credentials of both Andhra and Corporation Bank customers.
9. FOR INCOME TAX REFUNDS YOU MAY HAVE TO CONFIRM IT TO THE TAX DEPARTMENT: Your Income tax refund may be held up by tax department for want of your confirmation about its accuracy if there is a significant difference in incomes or deductions that you have claimed while filing your returns compared to your Form-16 or 16A. In such cases, for the refund to be credited to your account, you may have to respond to the email sent b y IT department, asking you to confirm your claim.
1. RBI IMPOSES Rs 2 CRORE PENALTY ON STANDARD CHARTERED BANK: The Reserve Bank of India has imposed a Rs 2 crore penalty on Standard Chartered Bank for delays in reporting of frauds to it. The said penalty is imposed on the bank for non-compliance with certain directions contained in the Reserve Bank of India – Frauds – Classification & Reporting by Commercial Banks. The said issue was revealed during the statutory inspection of the bank with reference to its financial position as on March 31, 2019.
2. BUDGET 2021 MAY KEEP ASIDE Rs 25,000 CRORES FOR PSB CAPITAL INFUSION: The government may set aside Rs 25,000 crores in FY 2022 budget for providing capital to Public Sector Banks (PSBs) . Finance Ministry has sought details from each PSB on capital requirements, estimated bad loans and plans to raise funds. The final capitalisation amount will be decided after these discussions. While various other discussions and proposals are being made, including a bad bank, an assessment is being done on capital requirements for banks. The amount may also vary on how the government plans to divest its stake in some banks.
3. HDFC BANK SUBMITS OUTAGE CONTROL PLAN TO RBI: HDFC Bank has submitted a plan to Reserve Bank of India outlining remedies for repeated glitches in the bank’s technology platform over the past 3 years. The bank is working on immediate and long-term solutions as part of its internal review. The action plan which the bank is working on may take anywhere between 10-12 weeks to implement. HDFC Bank is expected to invite RBI for inspection once its review is over. RBI has put restrictions on HDFC Bank on new card acquisition until it sorts out the problems.
4. RBI PAPER SUGGESTS CAPS ON NBFCs IPO, REAL ESTATE FINANCING: Reserve Bank of India, while discussing on new regulatory framework for Non-Banking Finance Companies (NBFCs) has proposed a cap on lending by NBFCs to subscriptions in initial public offering s (IPOs) and in lending to real estate unless government approvals are obtained. IPO financing by NBFCs, a large business for some of these NBFCs has come under scrutiny.While there is a limit of Rs 10 lakh for banks financing IPOs, there is no such limit for NBFCs. The new norms which are there for discussions in the public domain, say that the internal ceiling on sensitive sectors for NBFCs should separately disclose capital market and commercial real estate exposures.
5. YES BANK’S NEW INITIATIVE FOR MSME—Rs 5 CRORE LOAN WITHOUT COLLATERAL FOR STARTUPS: Aiming to boost and facilitate speedy and access to funds to Micro, Small and Medium Enterprises (MSMEs), Yes bank has recently launched YES MSME. With YES MSME, the bank will provide curated offerings to address business and individual needs of MSMEs, nurture new age entrepreneurs and maximise their potential. Here Yes Bank will enable start-ups to avail up to Rs 5 crore collateral-free funding by reducing the turnaround time for processing MSME loans. Under the new initiative, the bank will offer pre-approved commercial credit cards, advisory and wealth management solutions along with dedicated relationship managers.
6. ICICI BANK LAUNCHES “INSTA-FX” MOBILE APP: ICICI Bank has launched a new mobile application for authorised money changers to help customers of any bank to get ICICI Bank Forex Prepaid Card swiftly. The app is called InstaFX, enables the authorised money changers, who are partners for the bank, to complete the KYC verification and validation of customers digitally and on real-time basis. This facility significantly improves customer convenience as the ICICI Bank Forex Prepaid Card gets activated swiftly within a few hours, as against the industry practice of up to two days. ICICI Bank is the first bank in the country to offer such facility to money changers.
7. SBI WORKING ON SETTING UP e-COMMERCE PORTAL FOR MSMEs: State Bank of India is working on setting up an e-commerce portal for marketing of products manufactured by Micro, Small & Medium enterprises (MSMEs). The portal called as Bharat Craft, would be jointly run by the bank and the government. Last year MSME Minister had said that government is planning to launch Bharat Craft, an e-commerce poral, on the lines of Alibaba, and soon see turnover on the platform to the tune of Rs 10 lakh crore in a few years once it is launched.
8. BAJAJ FINANCE TO MAKE PAYMENTS APP WITH MERCHANTS: Bajaj Finance Ltd is in the process of launching “Bajaj pay” for consumers which will offer an integrated payment solution comprising of Unified Payment Interface (UPI), Prepaid Payment Instrument (PPI), Equated Monthly instalment card (EMI card)and credit card to its customers. It is also planning to provide a broadening payment solution for its merchants and enabling growth in its market share from these merchants. These moves are a part of Bajaj Finance’s business transformation plan.
1. PIRAMAL GROUP WINS BID FOR DHFL: Piramal Group has emerged as the preferred bidder for the troubled mortgage lender Dewan Housing Finance Limited (DHFL). The Committee of Creditors (CoC) is understood to have favoured the Piramal with almost 94% votes. A resolution plan needs a minimum of 66% votes to be passed by lenders. Piramal’s bid is for Rs 37,250 crores and Piramal’s offer had higher upfront cash payment which has likely impressed the creditors. The Piramal group’s offer translates to 43% recovery for DHFL creditors.
2. IDFC FIRST BANK ENTERS CREDIT CARD BUSINESS WITH INNOVATIVE INITIATIVES: IDFC First Bank has entered the credit card business with some innovative offers. The bank’s credit card will allow interest free cash withdrawal through ATMs at a nominal fee of Rs 250/- per transaction up to 48 days. It is offering the lowest finance charges that would be synchronised with customer ratings. IDFC First Bank will levy finance charges at an annual rate of just 9% for the best rated customer, climbing up to 36% for the lowest rated customer. The bank hopes to disrupt the credit card market with these first-of-kind initiatives.
3. BANKS GROSS NPAs MAY RISE TO 13.5% BY SEPTEMBER 2021: Reserve Bank of India in its bi-annual Financial Stability Report (FSR) has reported that Banks’ Non-Performing Assets (NPAs) may rise to as high as 14.8% in one year in case of severe stress scenario. The RBI’s stress test covers the first six months of the current fiscal ended March’21 and projects the Gross NPA at 13.5%. The Public Sector Banks’ Gross NPA ratio of 9.7% in September 2020 may increase to 16.2% in September’21 while the private sector banks’ Gross NPA may increase from 4.6% in September’20 to 7.9% in September’21 and Foreign Banks’ Gross NPA may rise from 2.5% in September’20 to 5.4% in September’21.
4. AXIS BANK ANNOUNCES NO PENALTY ON PREMATURE CLOSURE OF TERM DEPOSITS: Axis Bank has announced the removal of penalty clause on premature closure of fixed deposits of all new retail term deposits booked on or after December 15, 2020 for a fixed deposit with a tenure of two years or more. There will not be any penalty if the entire deposit is prematurely withdrawn post 15 months of booking. This is a first of its kind move by any bank.
5. GOVERNMENT INSPECTING CHIT FUNDS AND MULTI LEVEL MARKETING COMPANIES: Ministry of Corporate Affairs has asked Registrar of Companies (RoC) to probe the accounts of chit fund companies and certain Multi-Level Marketing (MLM) firms. As many as 87 companies have come under the scanner for alleged irregularities related to chit fund schemes and money circulation in the garb of multi-level marketing.
6. ICICI BANK TIES UP WITH “NIYO” TO ISSUE PREPAID CARDS TO MSMEs: ICICI Bank Ltd has tied up with Niyo, a new age fintech company, to issue prepaid cards to workers of Micro, Small & Medium Enterprises (MSMEs). The blue collared MSME workers who are mostly under-banked will now be able to get ICICI bank Niyo Bharat Payroll Card powered by Visa. With this, MSME companies can upload salaries of their workers on the card, which the workers can utilise as per their needs in a seamless manner. With this, the MSME workers will be able to enjoy the convenience and safety of digital banking.
7. MAHINDRA LIFESPACE DEVELOPERS TIES UP WITH SBI FOR FASTER HOME LOAN APPROVALS: Realty firm Mahindra Lifespace Developers Ltd has signed an MOU with State Bank of India for faster approvals of home loans as well as to offer special discounts to customers and employees of both the companies. As a part of the agreement, employees and customers of both the companies will be able to avail the benefits of faster home loan processing, approvals and special discounts.
8. YES BANK PARTNERS WITH ADITYA BIRLA WELLNESS TO LAUNCH WELNESS THEMED CREDIT CARD: Yes Bank has partnered with Aditya Birla Wellness Pvt Ltd to launch the “Yes Bank Wellness and “Yes Bank Wellness Plus” Credit cards, aimed at the holistic health, self-care and wellness of customers. Yes Bank customers can now enjoy the many complementary health benefits by simply registering on the Aditya Birla Multiply App. The app allows the customers to avail complementary benefits such as annual health check-ups, round the clock doctor or counselling helpline, home based workout sessions, personalised diet plans etc.
9. NBFCs URGE RBI TO RELAX COMPLIANCE RULES AS THEY CONVERT INTO BANKS: NBFCs want the RBI to relax compliance with norms for reserve ratio, priority sector and sectoral exposure while transforming into a bank. They have also requested RBI to pursue with the government, the issue of tax neutrality for restructuring existing entity (NBFCs) for becoming a bank under Non-operating holding company structure.
1. STATE BANK OF INDIA & INDIAN OIL CORPORATION LAUNCH CO-BRANDED RuPay DEBIT CARD: State Bank of India (SBI) and Indian Oil Corporation (IOC) have launched a co-branded contactless RuPay Debit Card. It is a contactless card and transactions up to Rs. 5,000/- can be paid with just a tap. Using the card in any IOC outlets will earn them a loyalty points worth 0.75% against purchase of fuel. Customers can also earn reward points for spending on dining, movies, grocery and utility bills.
2. PUNJAB NATIONAL BANK, IIT-KANPUR & FIRST HAVE PARTNERED TO SET UP FINTECH INNOVATION CENTRE: Punjab National Bank (PNB) has aligned with Indian Institute of Technology (IIT) Kanpur and Foundation for Innovation & Research in Science & Technology (FIRST) to set up Fintech Innovation Centre that would explore solutions in digital lending, payments and cyber security. The said partnership will facilitate research and develop technological solutions to address challenges faced by financial institutions and also explore opportunities. It will also pave the way to develop new products or solutions.
3. RBI APPOINTS ADVISORY COUNCIL FOR SUPERVISORY COLLEGE: The Reserve Bank of India (RBI) has appointed a six-member Academic Advisory Council (AAC) to support its newly setup College of Supervisors (CoS) which will reinforce supervisory skills among its regulatory & Supervisory Staff at entry level and also impart supervisory skills on regular basis. RBI said that the AAC will identify areas where skill building/upgrading the skills are required, plan and develop curriculum of all programmes and benchmark the programmes with international standards. It will also develop appropriate teaching skills.
4. PUBLIC SECTOR BANKS MAY FOLLOW A UNIFORM PRACTICE ON EMPLOYEE ACCOUNTABILITY FOR BAD LOANS: Public Sector Banks (PSBs) may follow a uniform practice on employee accountability for bad loans and other risk- oriented business calls to prevent potential witch-hunting in guise of probing lapses. Indian Banks’ Association (IBA) has formed a committee under Canara Bank Executive Director Mr. M V Rao to look into the nuances of staff accountability. The decision comes at a time when bankers at different levels are wary of taking business decisions over concerns of future probes if any. The government and RBI have on several occasions mentioned the need to end the fear psychosis among bankers to induce lending and economic revival.
5. SHIVALIK CO-OP BANK GETS LICENSE AS SMALL FINANCE BANK: Shivalik Urban Co-operative Bank Ltd is the first Urban Co-op bank in the country to convert as a Small Finance Bank under the voluntary transition scheme. Shivalik Urban Co-op Bank now becomes Shivalik Small Finance Bank (SSFB). The bank had received an in-principal approval from RBI for converting to a Small Finance Bank in January 2020 and was given an 18-month timeline to commence its business as a Small Finance Bank. SSFB expects to commence business as a Small Finance Bank from April 1, 2021.
6. RESERVE BANK OF INDIA IMPOSES Rs 2.5 CRORE PENALTY ON BAJAJ FINANCE FOR VIOLATION OF NORMS: The Reserve Bank of India has imposed a monetary penalty of Rs. 2.5 crores on Bajaj Finance for violation of regulatory norms. The lapses were linked to risk management and specific fair practice code.
7. CMS INFO SYSTEMS TO SET UP 3,000 ATMs FOR SBI BY MARCH’21: CMS Info Systems will set up 3,000 ATMs by March’21 for State bank of India. This is an outsourced model which is called Brown Level ATM (BLA) which is managed by a service provider on behalf of the bank. Most of the ATMs will be Offsite ATMs. As a part of the contract, CMS will select the site, deploy ATMS, provide cash management service, regular maintenance and upkeep of ATMs. The contract is valid for 7 years, extendable up to 3 more years on mutual agreement. With this, CMS Info Systems will have 5,000 ATMs.
8. BANK OF BARODA LAUNCHES WHATSAPP BANKING SERVICES: Bank of Baroda has launched banking services on messaging platform WhatsApp. Through this the bank is offering services such as balance enquiry, mini statement, cheque book request, request for blocking of debit card and information on product and services.
9. SMALL FINANCE BANKS HAVE HIGHEST RETURN ON ADVANCES: Small Finance Banks (SFBs) which came into existence in 2016 with an objective of providing a savings vehicle for the unserved sections as well as supplying credit to small businesses and marginal farmers are performing very well. Presently there are 10 SFBs in India and they pay a high 8.66% in cost of funds as against 4.92 by Public Sector Banks (PSBs)and 5.41% by private lenders. But when it comes to return on advances, SFBs pocket a whopping net 19.87% as against 8.16% for PSBs 10.10% for private banks and 8.45% for foreign banks.
1. BANK CREDIT GROWS AT 5.4% IN SEPTEMBER’20 QUARTER: As per an RBI data, Bank credit growth on a year-on-year basis stood at 5.4% in September’20 quarter as compared to 5.7% growth in the previous quarter. RBI data has covered 1,26,580 branches of 89 scheduled commercial banks (excluding Regional Rural Banks). Personal loans, which accounted for one-fourth of bank credit, continued to maintain double digit growth during the said period. The report also reveals that there is improvement in bank credit in rural, semi-urban and urban areas.
2. CCPA SEEKS RBI INTERVENTION ON BANKS DELAYING REFUND IN CASE OF FAILED TRANSACTIONS: Central Consumer Protection Authority (CCPA) has flagged the issue of delay in reversing or refunding of money on account of failed or cancelled banking transactions with RBI seeking its intervention to ensure banks reverse such money on time. In a letter to RBI the CCPA Chief Commissioner Nidhi Khare has stated that 2,850 complaints pertaining to failed/cancelled banking transactions but money not refunded by banks have been received through the National Consumer Helpline (NCH).
3. POST OFFICE SAVINGS BANK LIKELY TO BE INTERCONNECTED WITH OTHER BANKS: India Post is planning to make Post Office Savings bank interoperable with other bank accounts by April’21. It will also focus on enhancing digitisation of all services in 2021. The India Post has already digitised its banking and financial services and now it will focus on digitising services and delivery of services at doorstep in the coming months.
4. BANKS NEED Rs 1 LAKH CRORE FOR NPA MANAGEMENT AND GROWTH: The Reserve Bank of India has said that banks will need additional capital of up to Rs one lakh crore (around 1.5% point of risk-weighted assets). Preliminary estimates suggested that potential recapitalisation requirements for meeting regulatory purposes as well as for growth, capital may be to the extent of 150 basis points of the common equity tier-I (CET I) ratio for the banking system. RBI has said this in its report on “Trend and progress of banking in India”
5. RuPay PARTNERS WITH RBL BANK TO LAUNCH “RuPay PoS”: National Payments Corporation of India (NPCI) has announced that RuPay has partnered with RBL Bank to launch an innovative payment solution for Indian merchants--- RuPay PoS in association with PayNearby. The RuPay PoS will transform smartphones into merchant Point of Sale (PoS) terminals for the retailers. Merchants will now be able to accept contactless payments upto Rs 5,000/- through a simple tap and pay mechanism on his NFC enabled mobile phones. Customers using RuPay cards or have tokenized their RuPay cards, can carry out contactless payments for their regular purchases.
6. YES BANK RETAIL LOAN PROCESS TO BECOME EASIER AND FASTER: Yes Bank has partnered with Salesforce, a global leader in customer relationship management, to build a next generation technology platform to smoothen its retail lending business. Yes Bank is the first bank to collaborate with Salesforce for loan origination and processing. Yes bank said this collaboration aims to engage customers with a unified experience and drive aggressive retail growth for the bank.
7. MORE AND MORE MSE UNITS TURN TO DIGITAL PLATFORMS TO SHORE UP SALES: Covid-19 has changed the status quo for aspects related to Micro and Small Enterprises (MSEs) business. Now to fast track their sales MSE have increasingly switched to digital channels such as online aggregators or marketplaces, social media and mobile marketing. Before Covid-19 the MSEs using these channels were around 29%. But after Covid-19 the figure has gone up to 49%. This is as reported by Crisil Survey.
8. PRIVATE BANKS ARE TAKING AWAY SHARE FROM PSBs IN RURAL CREDIT: Rural Credit has gathered steam in FY 20 and has surpassed growth in other categories after a gap of 4 years. Private banks have begun to gain share in rural credit even as public sector banks’ share is reducing. As has been observed for the last few years, branch expansion in rural areas remained subdued as the Branch Correspondent (BC) model has made further inroads in villages with population of more than 2,000.
9. LARGE PUBLIC SECTOR BANKS HIRE EX-BANKERS, DEFENCE PEROSNNEL TO LOWER OPERATIONAL COSTS: The outbreak of pandemic has forced banks to seek the services of experienced personnel in operational roles. Large Public Sector Banks (PSBs) have moved to hire retired bankers and defence personnel in a bid to lower operational costs as also to seek advice while expanding the reach of some specific product categories.
1. CENTRAL BANK OF INDIA TO COME OUT OF HOUSING FINANCE BUSINESS, WILL SELL THE JOINT VENTURE STAKE: Central Bank of India has decided to sell its entire stake of over 64% which it has in Cent Bank Home Finance Ltd (CBHFL) and exit its housing finance joint venture. It will divest its entire equity share of 64% to Centrum Housing Finance for Rs 160 crores. But this is subject to approvals from regulatory authorities.
2. BANKS WILL FOCUS ON CASH-FLOW BASED LENDING IN FUTURE: Mr Ajay Vyas, Executive Director of UCO Bank, in a virtual panel discussion on Redefining Corporate Financing in New Normal, organised by PHD Chamber has opined that now banks will start focussing on cash-flow based lending. This has already been started by State bank of India and the bank is advocating for cash-flow based lending models over the traditional asset-based or rating-based lending. In cash-flow based lending, a bank grants a loan that is backed by the recipient’s past and future cash flows.
3. HDFC BANK, ICICI BANK AND SBI AMONG THE TOP 10 LENDERS IN 2020, GOOGLE PAY AND PHONEPAY TOP WALLET BUSINESS:As per a report by Wizikey which reports about the top 100 banks in India and emerging Banking Financial Services & Insurance (BFSI) models such as wallets UPI and NBFCs, HDFC Bank, ICICI Bank, Yes Bank, PNB and SBI as the top-10 banks in 2020, while google Pay and PhonePe are top wallets among the customers.
4. NOW GST RETURNS TO BE MADE A QUARTERLY AFFAIR: From January 1, 2021 almost 92% (around 94 lakh registered GST tax payers) of GST tax payers with a turnover of up to Rs 5 crores can opt to file their GST returns once a quarter. While the said modification is expected to ease the compliance burden on these companies, the government is also trying to plug in the loopholes and frauds by tightening the grant of input tax credits.
5. ICICI BANK LAUNCHES “INFINITE INDIA” ONLINE PLATFORM: ICICI Bank has announced the launch of an online platform called “Infinite India” for foreign companies looking to establish or expand their business in India. The said platform offers them banking solutions as well as value-added services. The platform offers significant convenience to foreign companies as it eliminates the need of co-ordinating with multiple touchpoints leading to a hassle-free experience of doing business in India. This initiative by ICICI Bank is its strategy to further strengthen its technology-enabled offerings aimed to partner with foreign companies coming to Indiato do business.
6. GOVERNMENT PLANS TO EXTEND SUSPENSION OF FRESH INSOLVENCY PROCEEDINGS TILL MARCH’21: The government is planning to extend the suspension of fresh insolvency proceedings till March 31, 2021. This move will provide major relief to corporate borrowers hit by the coronavirus pandemic. The government has taken several steps including deferment of tax payment date to help businesses. As a part of “Atmanirbhar Bharat” package, the government raised the minimum threshold to initiate insolvency proceedings to Rs 1 crore from Rs 1 lakh, which covers most of Micro, Small and Medium Enterprises (MSMEs) from bankruptcy on defaulting on loan repayments.
7. GOVERNMENT TO SET UP A DEVELOPMENT FINANCE INSTITUTION WITHIN A FEW MONTHS: The government is planning to set up a Development Finance Institution (DFI) in the next 3-4 months with a view to mobilise Rs 111 lakh crores required for funding of the ambitious national infrastructure pipeline projects. Mr. Debashish Panda, Financial Services Secretary told the media that there is a need for a Development Financial Institution as infrastructure financing needs patient and long-term capital, which the banks currently are not in a position to lend for long term projects which do not generate any cash-flow for years.
8. “POSITIVE PAY” SYSTEM FOR CHEQUES FROM JANUARY 2021: The Reserve Bank of India will introduce “Positive pay” system for cheques payments beyond Rs 50,000/- from January 1, 2021. Under the new system, the drawer of the cheque has to submit certain minimum details of the cheque (like date, name of the beneficiary and amount) to the drawee bank through channels like SMS, mobile app, internet banking etc. The drawee bank will cross check these details before passing the same. This is being implemented to avoid any fraudulent transactions.
9. NPCI STRENGHTHENS RuPay CONTACTLESS WITH NEW FEATURES:National Payments Corporation of India (NPCI) has introduced RuPay Contactless (Offline) feature which also provides reloadable wallets within RuPay Card, for day-to-day transit payments. NPCI has introduced this RuPay Contactless-Offline feature for retail payments on pilot basis. These additional features will increase the overall transaction experience for the RuPay card holders and revolutionise the overall card payment ecosystem.
1. BANKS DISCUSS MOVING TO RBI FOR “STANDSTILL CLAUSE” TO AVOID NPA TAG ON COVID-HIT COMPANIES: Leading banks are considering to approach Reserve Bank of India to introduce a “Standstill Clause” to avoid the NPA tag on loans to companies that have been restructured to overcome slowdown effect caused by Covid-19. The proposed “Standstill” period that will require the approval of RBI is between invoking the debt resolution on a loan and its implementation.
2. RBI LAYS DOWN NORMS FOR DIVIDEND DISTRIBUTION RULE FOR NBFCs: The Reserve Bank of India has laid down strict norms for distribution of dividend by Non-Banking Finance Companies (NBFCs). Only those NBFCs with a minimum of 15% capital adequacy and net NPA below 6% for three years will be eligible to declare dividend from this fiscal onwards. However, RBI has said that NBFCs with less than 4% net NPA can still be eligible for dividend distribution even if its minimum capital adequacy norms are not met for the previous two years.
3. BLANKET INTEREST WAIVER ON ALL LOANS DURING MORATORIUM WILL COST Rs 6 LAKH CRORES: The Central government has informed the Supreme Court that if Supreme Court considers waiving of interest on all the loans and advances to all categories of borrowers for the 6-month moratorium period announced by RBI in view of Covid-19 pandemic, then the amount forgone would be more than Rs 6 lakh crores. If banks were to bear the burden, then it would wipe out a substantial and a major part of their net worth, rendering most of the banks unviable and raising a very grave situation wherein it would be very difficult for most of the banks to even survive.
4. RESERVE BANK OF INDIA CANCELS THE LICENSE OF KARAD JANATA SAHAKARI BANK: The Reserve Bank of India has cancelled the license of The Karad Janata Sahakari Bank Ltd, Karad, Maharashtra as it does not have adequate capital and earning prospects. More than 99% of the depositors of the bank will get full payment of their deposits from DICGC.
5. ICICI BANK OPENS UP ITS MOBILE APP FOR CUSTOMERS OF RIVAL BANKS: At a time when RBI has tightened scrutiny over digital services offered by banks in light of the increased instances of outages, ICICI Bank Ltd has upgraded its mobile app to allow customers of rival banks to avail basic online banking services on its platform. The new App is a first of its kind in the industry which will allow other bank customers to link their bank accounts, generate a UPI ID and avail services such as online transactions, opening savings accounts, making investments, applying for loans and credit cards without being an ICICI Bank account holder.
6. FINO PAYMENTS BANK FIRMS UP PLAN TO CONVERT INTO SMALL FINANCE BANK: Fino Payments Bank which started generating profits three quarters ago, has started its plans to eventually convert into a Small-Finance Bank (SFB). Enthused by recent internal working group report that advocated allowing payments bank to convert to SFB after three years of operations, Fino Bank is looking to go ahead and convert into SFB.
7. GRADUAL PHASE-OUT OF MORATORIUM MITIGATES THE RISK OF DECLINE IN ASSET QUALITY: According to Moody’s Investor Service report, gradual tapering of moratorium relief measures will help prevent a spike in non-performing assets. The gradual tapering of support measures will give borrowers time to adjust and enable banks to build loan-loss buffers, in turn reducing the risk of a sharp decline in banks’ asset quality. Further the report says that still the risks remain amid a likely uneven recovery in 2021 that remains vulnerable to setbacks.
8. BANKS NEED TO HIRE EXPERIANCED CHIEF OFFICERS TO COUNTER CYBER ATTACKS: Deloitte India in one of its report observes that nearly 22% of cybersecurity attacks which took place in India during 2018-19 were on banking industry. The banking system needs to prepare itself to address the risks and challenges arising from cyber security and the disruptions being thrown up by technology adoptions. Mr. Gulshan Rai National cyber security coordinator at National Cyber Security Council in the PMO while addressing a banking technology summit organised by IBA opined that the banks need to be prepared to address the challenges of security, the challenges of risks and challenges of disruption which technology would present.
9. POST-LOCKDOWN BOOST--- PUBLIC SECTOR BANKS TOLD TO TAP MARKETS AGGRESSIVELY: The government has addressed the public sector banks (PSBs) to raise capital from markets more aggressively, taking advantage of abundant liquidity, and ensure a sustained activities thereby ensure a sustained credit push to help spur economic activities as lockdown curbs are slowly being lifted.
1. RBI GOVERNOR ADVISES BANKS TO INVEST MORE IN I-T INFRASTRUCTURE FOR BETTER REACH: RBI Governor has stressed that banks need to strengthen banking technology systems and also their supervision. The financial sector is becoming increasingly IT-dependent and the banks and NBFCs need to invest more in IT technology to stay in the market. With this increasing dependence on technology on each passing day the banks need to strengthen their grievance resolution and customer protection tools to ensure continued confidence in rapidly increasing virtual channels that are crucial for financial inclusion.
2. RBI HIKES THE LIMIT IN CONTACTLESS TRANSACTION TO DRIVE DIGITAL MOVE: Reserve Bank of India has increased the contactless transaction limit from Rs 2,000/- to Rs 5,000/-. This will drive digital payments further. This increase in contactless transaction limit will be effective from January 1, 2021. The increased limit will help boost the average value of transaction and push the adoption of digital payments. This step re-affirms the commitment of the country to become a cash-less economy.
3. RBI ELEVATES RURAL BANKS BY ALLOWING THEM TO ACCESS THE LIQUIDITY WINDOWS: The Reserve Bank of India has decided to broaden the size and scope of financial systems by offering regional rural banks to access the liquidity windows of RBI and the call/notice money market. To facilitate more efficient liquidity management by the rural-focussed at competitive rates, RBI will also extend the Liquidity Adjustment facility (LAF) and Marginal Standing Facility (MSF) to rural banking sector. They will also be permitted to take part in call/notice money market, both as borrowers and lenders.
4. RBI ASKS BANKS TO RETAIN PROFIT, NOT TO MAKE ANY DIVIDEND PAYMENT FOR FY20: In view of the economic stress caused by the Covid-19 pandemic, RBI has asked scheduled commercial banks and co-operative banks not to make any dividend pay-outs for the financial year ended March 2020. In view of the ongoing stress and the heightened uncertainty on account of the pandemic, it is imperative that banks continue to conserve capital to support the economy and absorb losses if any. The decision is based on the review of the September quarter financial performance of the banks.
5. RBI TO COME OUT WITH DIGITAL PAYMENT SECURITY CONTROL DIRECTIONS: RBI Governor Mr. Shaktikanta Das has said that it will be introducing digital payment security control directions for regulated entities. Such move will improve the security of digital payment channels and also convenience for users. The directions will contain requirements for robust governance, implementation and monitoring of certain minimum standards on common security controls for channels like internet and mobile banking etc.
6. RTGS TO BE MADE AVAILABLE 24x7 IN NEXT FEW DAYS: In a business-friendly move, the Reserve Bank of India has said the Real Time Gross Settlement (RTGS) system, used for large value funds transfer, will be made available round-the-clock in a few days. One more arm of the funds transfer mechanism, NEFT (National Electronic Funds Transfer) system was made available round-the clock in December 2019. Currently, RTGS is available from 7.00 am to 6.00 pm on all working days except on second and forth Saturdays of every month.
7. RBI TEMPORARILY BANS HDFC BANK FROM ISSUING NEW CREDIT CARDS AND LAUNCHING NEW DIGITAL INITIATIVES: The Reserve Bank of India has asked HDFC Bank to temporarily stop all new digital launches and sourcing of new credit card customers. The RBI order also states that the bank’s Board needs to examine the recent lapses and also fix accountability. The decision of RBI to restrict the bank comes after the bank suffered its third big outage in a span of just two years. The first outage was in November 2018, the second was in December 2019 and another incident happened in November 2020 which hampered customer service and it led to confusion in customers’ minds regarding the safety and services.
8. PUNJAB NATIONAL BANK LAUNCHES LOAN MANAGEMENT SOLUTION TO SPEED UP DELIVERY: Punjab National Bank (PNB) has launched a tech-based loan management solution called “LenS” ---The Lending Solution, to speed up and maintain accuracy in online loan processing and sanctioning of credit proposals. The main purpose behind this is to standardise the system, process and appraisal formats for loan processing, speed up the process of credit sanctions and auto-generate loan documents.
1. HALF OF NBFCs WHICH QUALIFY FOR BANK LICENCE ARE CORPORATE-OWNED: Almost Half of top Non-Banking Finance Companies (NBFCs) with an asset value of over Rs 50,000 crores that meet the RBI’s size criteria to get a bank licence are part of corporate groups. Among the top NBFCs in terms of asset under management, Aditya Birla Capital, Bajaj Finance, L&T Finance, Mahindra Finance, Tata Capital and Piramal are part of corporate group. HDFC is already a promoter of HDFC Bank while Life Insurance Corporation, promoter of LIC Housing Finance, owns IDBI bank.
2. JIO PAYMENTS BANK SEEKS TO OPEN RELIANCE INDUSTRIES GROUP COMPANIES’ CURRENT ACCOUNT: The Reliance Industries-promoted Jio Payments Bank has sought permission from Reserve Bank of India to open current account of Reliance Industries and other operating companies within the present group. The current accounts thus opened will be purely used for only collection and payment services. Jio’s proposal comes at a time where RBI has put in restrictions on scheduled commercial banks from opening current accounts of companies to which they have not lent beyond a certain limit.
3. HITACHI PAYMENTS ON EXPANSION SPREE: Hitachi Payment Services, a leading operator of white-label ATMs, plans to double its machine deployment by March’21 to 5,000 from its current installed capacity of 1,340 machines. Hitachi’s aggressive expansion spree is interesting as the white label ATM business has been in losses since the beginning because of the lower inter-change charges which the banking industry and the regulator has not been able to revise to a profitable level for the operators which has forced many a player in the sector to withdraw from the business.
4. RBI HAS SET PRECEDENCE IN LVB BOND WRITE-OFF, WILL HURT OTHER BANKS: Lakshmi Vilas Bank which is being merged with DBS Bank has been proposed by RBI to write-off Rs 318 crores of Tier-II bonds ahead of its merger. Replying to this write-off instructions by RBI, rating agency ICRA has reported that RBI has set a precedence with the proposed write-off as it is for the first time ever that tier-II bonds is being written off. The rating agency further says that this will hurt the private sector lender’s peers.
5. RBL BANK TO HOLD VIRTUAL CYCLOTHON TO RAISE FUNDS FOR GIRL CHILD EDUCATION: Amid Covid-19 crisis, RBL Bank has flagged off a virtual cyclothon on 27TH November wherein 127 shortlisted cyclists have taken part to finish the 1,000 km in 14 days. The funds raised through this event will be used to support girl child education. The funds raised from this event will go towards setting up of a second school (Udhbav RBL School) for girl child education. The first school has been set up in Hyderabad from Rs 5.10 crore funds raised from last year’s cyclothon. The bank aims to set up 10 such schools by 2030.
6. NPCI ALLOWS PAYMENT BANKS AND FINTECH COMPANIES TO BE SHAREHOLDERS: National Payments Corporation of India(NPCI) has said that it has completed private placement of 4.63% of its equity shares worth Rs 81.64 crores, allowing small finance and payment banks, as well as Fintech companies to be its shareholders. NPCI had made an offer for private placement to 131 regulated entities of which 19 companies showed interest and were allotted shares in NPCI. With this move, small finance & payment banks and Fintech Companies have joined NPCI’s shareholding and now they hold upto 0.44% each in NPCI.
7. RBI REJECTS MUTHOOT FINANCE’S PROPOSAL TO BUY IDBI MUTUAL FUND: Muthoot Finance Ltd had applied to RBI, proposing to buy IDBI Asset Management Ltd and IDBI MF Trustee Co Ltd from IDBI Bank Ltd & IDBI Capital Markets & Securities Ltd. But RBI has not cleared the said proposal. The Central Bank has conveyed to Muthoot Finance Ltd that the activity of sponsoring a mutual fund or owning an asset management company will not match with the activity of an operating NBFC.
8. HDFC LTD TO ACQUIRE 19.9% STAKE IN RENAISSANCE INVESTMENT SOLUTIONS LTD:HDFC Ltd will acquire nearly 20% stake in Renaissance Investment Solutions ARC (Asset Reconstruction Company) Pvt Ltd worth Rs 49.8 lakhs. HDFC will hold 4,98,750 equity shares of Rs 10 each. Renaissance Investment will undertake the business assert reconstruction subject to receipt of approval from RBI.
9. ADANI GROUP TOPS DHFL BID : Four Entities—Adani Group, Piramal Group, US-based asset management company- Oaktree Capital and SC Lowy have submitted bids for DFL. Adani Group has off late revised its offer to a total of Rs 30,000 crores plus interest of Rs 3,000 crores which is the highest bid as compared to other quotes. But lenders who are getting DHFL auctioned to recover unpaid loans, want the suiters to revise their bids as original offers were low.
1. RBI INTERNAL WORKING GROUP RECOMMENDS PROMOTERS TO HOLD HIGHER STAKES IN PRIVATE BANKS: The Reserve Bank of India’s internal working group formed to review ownership in Indian private banks has recommended that the promoters can hold higher stakes. The recommendation says that the promoters can hold up to 26% stake in banks over a period of 15 years. The group has also recommended increasing the cap on non-promoter holding to 15% so as to bring a uniformity among all types of shareholders.
2. LARGE CORPORATES MAY BE ALLOWED AS PROMOTERS OF BANKS: The RBI Internal Working Group has recommended that large industrial houses may be allowed as promoters of banks. The group has recommended that Large Corporate/Industrial houses may be allowed as promoters of banks only after necessary amendments to the Banking Regulations Act, 1949 to prevent connected lending and exposure between banks and other financial and non-financial group entities and strengthening of supervisory mechanism. The group has also recommended that well run large NBFCs with an asset size of over Rs. 50,000 crores be considered for conversion into banks subject to completion of 10 years of operation.
3. AXIS BANK OFFERS e-GOVERNANCE SOLUTIONS TO BANGALORE WATER SUPPLY AND SEWEARGE BOARD: Axis bank has partnered with Bangalore Water Supply & Sewerage Board (BWSSB) to manage various e-payment collections through digital and offline modes. The integrated payment solutions will help BWSSB authorities to collect payments from its 10 lakh plus customers in a seamless and effective way. All BWSSB customers can now pay digitally through Bharat Bill Payment System (BBPS), BHIM/UPI/QR Code.
4. DBS BANK WILL HAVE A STRONGER PRESENCE IN INDIA AFTER LAXMI VILAS BANK MERGER: Reserve Bank of India has announced a draft scheme to amalgamate the troubled Laxmi Vilas Bank Ltd (LVB Ltd) into DBS Bank India, which is fully owned by DBS Bank Ltd Singapore. Moody’s Investors Service has said that DBS Bank will strengthen its India business following the merger with LVB Ltd. LVB Ltd presently has 500 branches to DBS Bank India’s 27 branches. The merger will increase DBS Bank’s net loans in India to around 1.5% of group loans from the present 0.9% The acquisition will help DBS bank to increase the traditional banking practices in India with its digital strategy.
5. YES BANK LAUNCHES CO-BRANDED PREPAID CARD WITH NEOKRED FOR CASHLESS PAYMENTS: Yes Bank Ltd has launched a co-branded prepaid card in partnership with Neokred Technologies to facilitate cashless payments. The card can be personalised to suit the requirements of corporates seeking salary cards or expense cards for their employees. Initially the card will be offered to Neokred’s corporate partners across various sectors.The prepaid card has to be loaded with balance first and then can be used for any purchases, utility bill payments, online shopping etc including cash withdrawal at ATMs.
6. BAJAJ FINANCE, M&M FINANCIAL MAY BE FRONT RUNNERS TO BECOME BANKS: If the Reserve Bank of India accepts the recommendations of its internal working group for allowing well run NBFCs to be converted into full fledged banks then Bajaj Finance, Mahindra & Mahindra Financial and Shriram Transport Finance may become prime candidates for conversion into high-street banks despite their strong corporate lineage. But none of these large NBFCs has shown eagerness to grab the on-tap licence opportunity that is available since 2016 to start banking business, perhaps because they enjoy the light regulatory structure for NBFCs as compared to the more stringent and regulated banking rules.
7. RESERVE BANK OF INDIA APPEALS TO SUPREME COURT TO ALLOW NPA CLASSIFICATION: Reserve Bank of India has appealed to Supreme Court to let banks classify loans as Non-Performing Asset (NPA). Presently Supreme court has put aninterim stay on banks to classify loans into NPAs to help borrowers in the Covid-19 pandemic. But RBI is of the opinion that this could greatly harm the nation’s financial system. RBI has warned that failure to lift the said interim stay on banks immediately would undermine the Central Bank’s regulatory mandate.
8. INDIAN STATE GOVERNMENTS’ RISING DEBT POSE A RISK TO THEIR FINANCES: A report by RBI (Study of State Finances) published recently states that Indian state governments’ are racking up more debt to fund the prospect of wider budget deficits as they step up their spending to fight the pandemic. This increased spending has generated unprecedented pressure on fiscal positions at sub-national levels. The Central government has revised its borrowing plan for a second time in this fiscal with an additional 1.1 trillion rupees to compensate states for the shortfall in goods & Services Tax Collection.
1. HDFC BANK EYEING 10-FOLD GROWTH IN MERCHANT BASE IN 3 YEARS: HDFC Bank Ltd has set up an ambitious target to expand its merchant base by 10-fold in next 3 years. It is eying a sizable share of India’s rapidly growing digital payments market. The Bank is planning to reach out to more than 20 million small and medium merchants and also professional services like doctors, pharmacies, salons and laundry services across metro, semi-urban and rural India in the next 3 years. Presently HDFC Bank has about 2 million merchants on its network. For this to happen HDFC Bank has launched a new banking solution for its merchants called “SmartHub” through which merchants and professionals can open current account and start accepting payments.
2. IBA, BANK UNIONS CONCLUDE WAGE NEGOTIATIONS, OVER 8.5 LAKH EMPLOYEES TO BENEFIT: Over 8.5 lakh bank employees will get around 15% wage hike with the conclusion of the 11TH Bipartite Wage Negotiations. After 3 years of intense negotiations, the United Forum of Bank Unions (UFBU) and the IBA have entered in to a memorandum of Understanding (MoU) for a wage hike of 15%. The 15% wage hike would be for a period of 5 years starting November 2017.
3. ICICI BANK’S RETAIL HOME LOAN CROSSES Rs 2 LAKH CRORES: Even as the unlocking after Covid-19 is happening in stages, demand for housing loans has surged and ICICI Bank which has more than half of its retail loans in mortgages, witnessed an all time monthly high loan disbursement in October 2020. But most of the disbursements were in second and third tier cities. Overall, ICICI Bank’s retail housing loan portfolio reached Rs 2.05 lakh crores as on September 30, 2020, showing 9.6% year-on-year growth. The bank became the first private sector bank to reach the Rs 2 lakh crore milestone. State bank of India has a home loan portfolio of Rs 4.68 lakh crores as on September 30, 2020.
4. RETIRED PSU BANKERS MAY GET ONE RANK, ONE PENSION PLAN: A one-rank, one-pension (OROP) kind of a scheme in in the planning stage for the retired Public Sector Bank employees. OROP was a long-standing demand of bank employees where the pension would be reworked so that everyone who retired in the same rank will get the same pension, irrespective of the date of retirement. The recently concluded 11 Bipartite wage negotiation has already covered the Family pension updation.
5. GOVERNMENT OKAYS Rs 5,500 CRORE EQUITY INFUSION INTO PUNJAB & SIND BANK: The government has okayed the infusion of Rs 5,500 crores capital into Punjab & Sind Bank. The capital infusion is towards the contribution of the Central government in the form of preferential allotment of equity shares of the bank during the financial year 2020-21. The government’s shareholding in the bank as on September 30,2020 stood at 83.06% as per BSE data.
6. MICRIFINANCE INDUSTRY SEES 31% RISE IN LOAN PORTFLIO: India’s microfinance industry registered a 31% jump in its loan portfolio to Rs 2.36 lakh crores for 2019-20. The industry expects to post a moderate growth of about 15% in the current financial year. Despite the onset of the coronavirus pandemic for the past 8 months, the growth of 31% is considerable achievement. Bur it was less than the growth in FY 2018-19 which was 41%.
7. WHATSAPP PAY STARTS OPERTAING IN INDIA: WhatsApp has finally been allowed to roll out its payments service in India. WhatsApp had been offering the payments service in India on trial basis since early 2019. The approval comes after a lot of court battles and regulatory hurdles. WhatsApp will use the multibank Unified Payments Interface (UPI) which is operated by National Payments Corporation of India (NPCI). It has been allowed to begin with a user-number cap, and then gradually increase its UPI base. So, for customers using the WhatsApp pay app, transferring money will be as easy as sending a message.
8. ICICI BANK’S NEW INITIATIVE---- CONVERT THE KIRANA STORE TO BIG-BASKET LIKE ONLINE SHOP: In order to convert Kirana stores into online shops, ICICI bank Ltd has unveiled its Digital Store Management platform. This platform helps the merchants to manage full in-store operations online. The platform guides the merchants from inventory to billing to payment collections through PoS, QR-Code and payment links. A kirana Store owner can quickly create an online store and start receiving orders from customers in a few clicks. Any merchant can apply for the Digital Store Management platform while they are applying for PoS machine on ICICI Bank’s Eazypay applications for merchants.
1. SBI CARD TO LAUNCH CREDIT CARDS PARTNERING PAYTM: SBI Cards and Payment Services said it has launched credit cards in partnership with digital payment platform Paytm. The card will be available in two variants, Paytm SBI Card and Paytm SBI Card Select. The product has been launched on Visa Platform. The partnership aims to bring new and fresh credit card users. The card which can be used across Paytm ecosystem, third party platform and offline retail stores, will also enable digital process for the card application, issuance and managing expenses.
2. SCAM-HIT PMC BANK SEEKS INVESTORS FOR BAILOUT PLAN: Scam-hit Punjab & Maharashtra Co-operative Bank Ltd (PMC Bank) has invited expressions of Interest from investors to take management control of the bank and run its day-to-day operations. In a notice posted on its website, the bank said eligible investors could be financial institutions, individuals or companies, societies, trusts or any other such entities. But the bank has not quoted precise financial qualification. The last date for the submission of bids is December 15.
3. KOTAK MAHINDRA BANK REDUCES HOME LOAN RATES TO 6.75%, THE LOWEST EVER: Home loan rates across the country are at a 15-year low. Banks and other institutions are wooing home buyers by offering lowest of rates and other riders. Kotak Mahindra Bank has cut its housing loan interest rate to 6.75% which is the lowest in the industry at present and the same is applicable from November 1, 2020. Lower prices, lower stamp duty, low interest rates and other attractive riders could further support the sector making it the best time for anyone to buy a house.
4. SBI NET PROFIT GROWS 52% IN SEPTEMBER QUARTER: Backed by robust growth in retail loans and lower provisions for bad loans in September quarter, State Bank of India has reported a sharp 52% year-on-year jump in net profit to Rs. 4,574 crores. Retail business has been the bank’s major lever for the said growth. The home loan sanctions saw a growth of 29% on a year-on-year basis while the auto loans saw a growth of 27%.
5. FOR THE FIRST TIME UPI TRANSACTIONS HIT 200 CRORE PAYMENTS MARK: The number of Unified payments Interface (UPI) based payments crossed Rs 200 crores mark in October’20, reflecting a trend of faster adoption of digital payments in a post pandemic world. National Payments Corporation of India (NPCI) said that BHIM UPI has managed to change the face of person-to-person and person-to merchant money transfers in the past few years while making them safer and more secure.
6. NOW INDIA IS WORLD’S 5th LARGEST FOREX RESERVE HOLDER: A massive surge of $ 8.2 billion in Foreign Currency Assets (FCA), which is a major component of the overall forex reserves, took India’s forex reserves at a record level of $ 501.7 billion as on June 5, 2020. So now India becomes the 5TH largest foreign exchange reserves holder in the world with forex reserves crossing $ 500 billion mark for the first time ever. So, RBI is now looking at diversifying its foreign exchange reserve investments amid the fall in global interest rates caused by Covid-19 pandemic.
7. SBI INTEGRATES YONO KRISHI WITH IFFCO e-BAZAR: State Bank of India has facilitated the integration of Yono Krishi with IFFCO e-Bazar under its mandi section. The Yono Krishi Platform caters to all the needs of the farmers agricultural needs from sowing to harvesting. With the said integration, the farmer customers of the bank can avail free home delivery of all farm related products in over 27,000 locations across the country from IFFCO e-Bazar portal. Farmers can place order online for any farm products. Over 3 crores registered Yono customers will benefit with the said integration.
8. YES BANK IN TALKS WITH ARCs TO SELL NPAs WORTH Rs. 32,000 CRORES: Yes Bank is in discussions with several Asset Reconstruction Companies (ARCs) to sell off bad loans worth Rs 32,344 crores. Yes Bank has already made provisions for 76% of its gross NPAs worth Rs 24,476 crores and is looking forward for the said sale to regain its place in Indian Banking sector. The bank has already sold bonds held in Dewan Housing Finance Ltd (DHFL) in the secondary market to raise Rs 500 crores and reduce its exposure in the troubled DHFL.
9. BANKS PLACE CURBS ON FREE CASH DEPOSITS & WITHDRAWALS PER MONTH: Many Public Sector Banks have decided to withdraw the latest changes that they had made in service charges on cash deposits and withdrawals but have reduced the number of occasions the free deposits and withdrawals can be made. Most banks have restricted the free cash deposits and withdrawals in a month by allowing only 2 to 5 free cash transactions per month. SBI allows only two free cash transactions in a month for customers keeping an average monthly balance of Rs. 25,000/-.
1. AXIS BANK REVISES ITS JOINT VENTURE DEAL WITH MAX LIFE: On July 27, 2020 Axis Bank had a joint venture deal with Max life Insurance but the same was not approved by RBI as it flouted the banking norms. Now Axis Bank has yet again revised the terms of its deal with Max Financial to form a joint venture involving Max Financial Life Insurance entity. As per the revised deal, Axis Bank will now acquire 9% of the equity share capital of Max Life while its subsidiaries (Axis Capital & Axis Securities) will hold up to 3%. This deal however, is subject to approvals from regulatory authorities including RBI.
2. GOVERNMENT NOTIFIES REIMBURSEMENT OF COMPOUND INTEREST DURING MORATORIUM: Government has issued notification for waiving off the compounded interest (Interest on interest) on loans during the moratorium period between March 1 and August 31,2020. Likewise, RBI has issued a notification directing banks to follow the government order for reimbursing small borrowers with loans up to Rs 2 crores that have paid compounded interest during the moratorium period. This will restrict the losses of the banks.
3. COMPOUND INTEREST WAIVER—OUTSTANDING AS OF FEBRUARY 29, 2020 TO BE THE REFERENCE FOR EX GRATIA RELIEF: The loan outstanding as of February 29,2020 would be the reference amount for calculating the differential interest amount under the scheme for reimbursement of compounded interest during moratorium period for loans up to Rs 2 crores. The scheme is called as Ex gratia payment of difference between compound interest and simple interest.
4. JAN-DHAN ACCOUNTS RISE BY 60% DURING PANDEMIC: As per a research made by SBI, the Covid-19 pandemic has led to 60% increase in opening of new Jan-Dhan accounts. The latest data showed that the total number of Pradhan Mantri Jan Dhan Yojana accounts stood at over 41 crores with a total balance of Rs 1.31 lakh crore. Since April 1, around 3 crore new accounts have been opened with a deposit of Rs 11,060 crores. Using the Jan Dhan-Aadhaar Mobile (JAM) trinity, the central government has managed to seamlessly transfer money to these accounts, particularly women account holders, to help the poor tide over the difficult pandemic period.
5. YES BANK STARTS PHYSICAL TAKEOVER OF ANIL AMBANI’S RELIANCE GROUP HEAD QUARTER IN MUMBAI: Yes Bank has started the process for obtaining physical possession of Reliance Centre, the headquarters of Ambani’s Reliance Group in Mumbai. The bank is seeking to either sell the property or move its headquarters there. The bank had taken the symbolic possession of the said building in July. The action was under SARFAESI Act to recover dues of Rs 2,892 crores from Reliance Infrastructure. It is premature for Yes Bank to make plans for the property as the legal process could go on for some time.
6. BANKS TO TURN TO ARTIFICIAL INTELLIGENCE TO CURTAIL LOAN FRAUDS: State run banks are looking to deploy Artificial Intelligence (AI) enabled early warning signal system that crawls the web for information on borrower’s activities, including news articles and social media. Some of the capabilities sought by banks are AI, web crawling, Optical Character Recognition (OCR) for triggering early warning signals.
7. INCOME TAX RETURNS FILING DATE EXTENDED: In a relief to tax payers, the government has further extended the deadline for filing income tax returns by individual taxpayers for financial year 2019-20 to December 31,2020. Also, the due date for filing returns by those taxpayers whose accounts require to be audited has been extended till January 31, 2021. Likewise, the due date for filing 2018-19 Annual GST returns has been extended till December 31, 2020.
8. GOVERNMENT PROCUREMENT FROM MSMEs CROSS Rs 12K CRORE MARK: Central Ministries and departments, which have been mandated by the government to procure a minimum of 25% of their annual procurement from Micro, Small & Medium Enterprises (MSMEs) have purchased goods worth Rs 12,291 crores from these MSMEs in financial year 2020-21 so far. Out of the 54 ministries the Ministry of Petroleum & Natural Gas, Ministry of Power, Ministry of Heavy Industries and Public Enterprises, Ministry of Defence and Ministry Steel are the biggest buyers from MSMEs.
1. SURGING UPI TRANSACTION FAILURE RATE WORRY BANKS: There is a record surge in UPI payments failures which is a worrying factor for public sector banks. Data from National Payments Corporation of India (NPCI) shows a sharp spike in failed online transactions. 10 of the top 30 banks using the county’s Unified Payment Interface (UPI) network recorded failure rates of over 3% for the month of September 2020. UPI clocked 1.8 billion transactions in September 2020 worth Rs 3.6 lakh crores. The failure of UPI transactions may lead to pile-up of credit reversals.
2. INDIA MUST NOT NEGLECT BANK RECAPITALISATION DESPITE PANDEMIC: According to Mr. Viral Acharya, the former Deputy Director of RBI, India is neglecting bank recapitalisation as it focuses on debt moratorium and interest waivers for borrowers amid Covid-19 pandemic. Indian Banks are already burdened with over $ 120 billion in bad debts, and in severely stressed conditions the bad debt ratio could nearly double by March ’21. Mr. Acharya said that more such loan moratorium, interest waivers and farm loan waivers favouring the borrowers in the short term will be detrimental to a sound recovery of credit growth in the medium term.
3. RETAIL CHEQUE PAYMENTS COME DOWN IN FY-20: The aggressive push to a digital payments and settlement system has paid rich dividends to Reserve Bank of India as the share of cheque clearing in retail payments has come down in financial year 2020 as per a data released by RBI. The cheque clearing in retail payments has plunged by 2.96% in terms of volume and by 20.08% in terms of value. The efforts towards digitization have been very successful is clear from the steady fall in the cheque clearing.
4. HDFC BANK Q-2 NET PROFIT JUMPS BY 18.4%: HDFC Bank’s Q-2 profit for September 2020 rose by 18.4 % as asset quality remained steady and interest income rose. The net profit rose by 18% (year-on-year basis) to Rs 7,513 crores in September 2020. Net Interest Income (NII) rose by 17% to 15,776 crores in the same period. The gross non-performing asset ratio stood at 1.36%. The bank’s capital adequacy ratio stood at 19.1%. Considering the pandemic scenario which has affected the entire banking sector, these figures are very much encouraging.
5. MSME LONG TERM RECOVERY AFFECTED BY SUBDUED DEMAND AND LOWER DISPOSABLE INCOME: Micro, Small & Medium Enterprises (MSMEs) is among the five key sectors in India that has witnessed severe impact of pandemic. The MSME sector was expected to be revived, but according to a report by Dun & Bradstreet, subdued domestic consumption demand and lower disposable income would make the MSME revival more constrained and difficult. Also, costs required for maintaining hygiene levels and change in work processes would increase for small businesses making it more difficult for them.
6. CYBER CRIMES IN INDIA CAUSED Rs 1.25 LAKH CRORE LOSS IN 2019: Cyber crimes in India has caused a loss of Rs 1.25 lakh crores in FY-2019. These cyber threats will continue to increase as the country starts developing smart cities and rolling 5G network. There are only a few companies in India who are making some cyber security products and there is a big vacuum in this sector. Mr Pant, National Cyber Security Coordinator has called for setting up of dedicated industry forum for cyber security to develop trusted indigenous solutions to check cyber-attacks.
7. SOON, SMALL BUSINESSES CAN SELL THROUGH WHATSAPP: In order to ease selling for small businesses on WhatsApp, Facebook-owned massaging app will be launching a “Shopping-Button” for customers to purchase goods from within the app. They might use their catalogue and brochures to showcase their products and then chat with the prospective customer to coordinate the details and payment. This has been launched globally by WhatsApp but will be launched in India very soon.
8. SBI CARDS SEES A SPURT IN DEFAULTS: SBI Cards said its gross non-performing assets (NPAs) rose to 4.3% as on September 2020 compared to 2.3% a year ago, clearly showing the signs of financial stress among individual borrowers. The company added that this figure would have been 7.5% had there not been a Supreme Court order that restrained declaring some Covid-related defaults as bad loans.
9. YES BANK POSTS Rs 129 CRORE NET PROFIT: Yes Bank has reported a Net Profit of Rs 129 Crores in September 2020 quarter. The bank had announced a loss of Rs 600 crores in the corresponding period last year. The bank has reported a net profit of Rs 45 crores in June 2020. The bank has also shown improved asset quality during September 2020 quarter. The bank has already made full repayment of Rs 50,000 crores to RBI on account of special illiquidity facility provided by the regulator. The bank has also stepped up provisions due to Covid-19.
1. BANK OF BARODA PLANNING FOR 50% OF ITS STAFF TO WORK FROM HOME IN NEXT 5 YEARS: Bank of Baroda is considering a proposal to divide its workforce in such a way that about 50% of its staff may start work from home in next 5 years. In the next 5 years 50% of the bank’s staff may be full time employed in branches and the balance would be working from home. The bank could divide its employees into 3 categories of people—people who need to work in branches, people who are in back office remotely and rest who can work from home. This may give an opportunity to access talent and it might be possible to even employ fruitful people who have retired but still can contribute to the bank.
2. GOVERNMENT SEEKS APPROVAL FROM CABINET COMMITTEE ON ECONOMIC AFFAIRS ON DILUTING STAKES IN IDBI BANK: The government is planning to seek in-principle approval from the Cabinet Committee on Economic Affairs (CCEA) on lowering its stake in IDBI Bank. Presently the government holds 47.11% in IDBI Bank. Once the approval is granted, the government will decide on the percentage of stake to be sold. LIC of India presently holds 51% in IDVBI bank.
3. BANKS NEED ARTIFICIAL INTELLIGENCE FOR CORPORATE LENDING: Chief Economic Advisor Mr Krishnamurthy Subramanian has said that Indian Banking sector needs to use emerging technologies such as Artificial Intelligence (AI) and machine learning for corporate lending for improving its quality.He further said that for the past 15 years banks have not developed any special models to actively lend to the corporates and MSMEs. Mr Subramanian also opined that the use of AI and machine learning in agriculture sector can enable better crop choice and crop diversification which are one of the key issues that exist in the country.
4. 5% OF THE TOTAL BANK LOANS COULD BE RESTRUCTURED DUE TO COVID-19: CARE Ratings has estimated that almost 5% of the total loans in the banking system could be recast under the one-time restructuring (OTR) scheme available to customers impacted by the pandemic. CARE also said that the OTR scheme is expected to dilute Covid-19 impact on the asset quality of banks. Earlier India Ratings had estimated that up to 7.7% or Rs. 8.4 lakh crores of total bank credit could get restructured. But now the impact of OTR could be lesser as specific segments like NBFCs have been kept out of the ambit of the scheme and those accounts which are classified as SMA -1 and SMA-2 will also not be considered for OTR.
5. UNION BANK CHAIRMAN Mr. RAJKIRAN RAI IS THE NEW IBA CHAIRMAN: Indian Banks’ Association (IBA) has appointed Union Bank of India’s MD & CEO Mr Rajkiran Rai as the new Chairman of IBA for the term 2020-21.State Bank of India Chairman Mr Dinesh Kumar Khara has been elected as the Deputy Chairman of IBA.
6. RBI RAISES BANKS’ AGGREGATE EXPOSURE LIMIT FOR SMALL BUSINESSES TO Rs 7.5 CRORE: The Reserve Bank of India has raised banks’ maximum aggregate retail exposure limit to 7.5 crores from the present Rs 5 crores. This is applicable to small entities with a turnover of up to Rs 50 crores. This will apply to all fresh exposures and also to existing exposures where incremental exposure may be taken by banks up to the revised limit of Rs 7.5 crores.
7. NO RECAST OF LOANS FOR LOAN ACCOUNTS THAT WERE IN DEFAULT FOR OVER 30 DAYS AS ON MARCH 1, 2020: Loan accounts that were in default for over 30 days as on March 1, 2020 will not be eligible for One Time Restructuring (OTR) even if they are regularised thereafter. For the purpose of eligibility for the resolution under the framework, the definition of Micro, Small & Medium Enterprise (MSME) that would be applicable is the one that existed as on March 1, 2020 and not the revised one under the gazette notification dated June 26, 2020.
8. DIGITAL ADOPTION WILL IMPROVE RETURN OF EQUITY FOR INDIAN BANKS: Morgan Stanley, in its forecast has said that banks could see a rise of atleast 20 basis points in their return on equity , if the digital drive continues at the current pace. This increased digital adoption by Indian banks would lead to higher return ratios in the next few years. The forecast also reflects faster growth in retail and MSME segments, increased cross-selling and faster product delivery. Morgan Stanley believes that Indian banks are now ready and are well placed to manage the increasing competition from Fintech companies.
1. INTEREST RATES ON HOME LOANS ABOVE Rs 30 LAKH LIKELY TO DROP: Interest on home loans above Rs 30 lakh is about to become less. The biggest reduction may be in home loans of over Rs 75 lakhs. At present interest rates are linked to the size of the loan amount. Rates are lowest for loans up to Rs 30 lakhs and the they rise with the size of the loan. The progressive increase in rates is because of capital requirements that rise with the size of the loan. This will change as the RBI has announced that it will rationalise the risk weights in home loans and link it to Loan-to-Value (LTV) ratios for new home loans.
2. RBI RATIONALISES RISK WEIGHTS ON HOME LOANS, BIG BOOST FOR REAL ESTATE SECTOR: The Reserve Bank of India has announced that it will rationalise the risk weights and link home loans to Loan-to-Value (LTV) ratios for new housing loans sanctioned up to 31/03/2022. With lowering the risk weights, the requirement of capital provisioning for banks will come down and this is a much-needed boost to the real estate sector. This will encourage banks to lend more and offer lower rate of interest as well for the big-ticket size loans.
3. DINESH KUMAR KHARA IS THE NEW CHAIRMAN OF SBI, SAYS MAINTAINING ASSET QUALITY IS A PRIORITY: Mr. Dinesh Kumar Khara has been appointed as the chairman of State Bank of India. He opines that maintaining asset quality, protecting net interest margins (NIMs) and continuing on the path of digitisation are the three priorities at present. Mr. Khara was also confident of the bank’s provisioning requirements and said the bank will continue to make upfront provisions as and when required. SBI’s NPA post provisioning was 1.86% in June 2020, down from 3.07% in June 2019. Its Net Interest Margin (NIM) was 3.01% in June 2020, up from 2.81% in June 2019.
4. DHFL’S APPOINTED AUDITOR REPORTS FRAUDULENT TRANSACTIONS WORTH Rs 2,150 CRORES: Debt-ridden mortgage lender DHFL’s administrator had roped in Grant Thornton as auditors to conduct an investigation into the affairs of the mortgage firm. The auditing firm has said that fraudulent transactions worth Rs 2,150 crores by way of undervaluing the company’s insurance subsidiary have been detected. DHFL is undergoing resolution process under Insolvency and Bankruptcy Code.
5. MCA MAY ASK BIG UNLISTED FIRMS TO FILE FINANCIAL STATEMEMNT MORE FREQUENTLY: Armed with the recent amendment to Companies Act, the Ministry of Corporate Affairs (MCA) may direct large unlisted entities (like Flipkart, Zomato, Patanjali etc) to file financial statements more frequently with Registrar of Companies (RoC) than the usual annual periodicity now. The rationale behind the move is to enable early fraud detection and statutory compliance. At present listed companies have to submit financial statements annually to RoC and upload their financial results on aquarterly basis on the stock exchanges under SEBI norms. However, the private unlisted companies furnish financial data to the RoC only once a year. This will change now.
6. REGIONAL RURAL BANKS INCUR A NET LOSS OF Rs 2,206 CRORES IN FY-2020: Regional Rural Banks (RRBs) as a group reported a net loss of Rs 2,206 crores in Financial year 2019-20 (Year ended 31/03/2020), as against a net loss of Rs 652 crores in Financial year 2019. This is as per the data published by NABARD. Out of the total 45 RRBs, 26 RRBs incurred a net profit of Rs 2,203 crores while the rest 19 RRBs incurred a net loss of Rs 4,409 crores. These 45 RRBs are functioning in 685 districts across the country.
7. GOVERNMENT OPEN TO MORE CAPITAL INFUSION IN SELECT STATE-RUN BANKS: The government is willing to infuse more capital into select state-run banks in this fiscal to boost lending if there is any pressing need for more capital from these banks. The government through last five years, has infused Rs 3.1 lakh crore into the state-run banks. The government had refrained from providing any more capital infusion in its Budget for FY 21. However, the covid-19 outbreak has dented the balance sheets of most of the banks which has forced the government to seek parliamentary approval last month for a supplementary demand of Rs 20,000 crores to extend fresh capital. However, the one-time restructuring window for troubled loan accounts extended by RBI has reduced the pressure of fresh delinquencies.
8. NOW RTGS TO BE AVAILABLE ROUND THE CLOCK/365 DAYS: The Reserve Bank of India has announced that the Real Time Gross Settlement (RTGS) system of payments will soon be available 24 hours on all 365 days. This has been facilitated to support the ongoing efforts aimed at global integration of Indian financial markets and provide wider payment flexibility to domestic corporates and institutions.This facility will be made available from December 2020.
1. “POSITIVE PAY SYSTEM” FOR CHEQUE PAYMENTS LAUNCHED BY RBI: In order to check bank frauds, RBI has introduced the “Positive Pay System” for cheque payments from October 1, 2020. Under this Positive Pay System, re-confirmation of key details will be needed for payments beyond Rs 50,000/-. Availing this facility will be at the sole discretion of the account holder. But banks may consider making this mandatory in case of cheques amounting to Rs 5 lakhs and above. Under this system, the issuer of the cheque will be required to submit electronically/through SMS/mobile app/internet banking certain minimum details of the cheque to the drawee bank. The National Payments Corporation (NPC) will develop the facility of Positive Pay System in CTS and make it available to participant banks.
2. BANK CREDIT AND DEPOSITS INCREASE: According to RBI, Bank credit grew by 5.26% while deposits grew by 11.98% in the fortnight ended September 13,2020. Amount wise the bank credit touched a figure of Rs. 102.04 lakh crores while the deposits touched Rs. 142.48 lakh crores. Advances to agriculture and allied activities registered a growth of 5.4% in the reporting month as compared with a growth of 6.8% in the corresponding period last year. Loans to Industrial sector also was very sluggish as compared to last year.
3. CENTRE READY TO WAIVE INTEREST ON INTEREST DURING MORATORIUM PERIOD: The Central Government has informed the Supreme Court that it is ready to waive certain interest levies on loans up to Rs 2 crores under the moratorium period. This essentially means compound interest or interest on interest will be scrapped for loans taken out for certain purposes like housing, education, credit-card dues, MSME loans, personal loans, auto loans, professional and consumer loans. This move will bring relief to millions of borrowers. The government will bear the burden of money.
4. “GRAM SAMPARK ABHIYAN” INITIATIVE LAUNCHED BY PUNJAB NATIONAL BANKS: Punjab National Bank has launched a financial inclusion and literacy initiative called “Gram Sampark Abhiyan”. The campaign is centred on four key themes—digital, credit, social security and financial literacy that will include various activities and will prescribe the cherished theme of “Atmanirbhar Bharat”. Under this campaign, the bank’s 3,930 rural and 2,752 semi-urban branches will aim to reach 526 districts with two camps per branch every month.
5. INDIA POST PAYMENTS BANK ATTAINS 3.6 CRORE CUSTOMERS AMID PANDEMIC SCENARIO: The government backed India Post Payments Bank (IPPB) is gaining ground amid a Covid-19 pandemic scenario. The bank has attained a total customer base of 3.6 crores and has completed over Rs. 38,500 crores of financial transactions cumulatively until September 15,2020. IPPB launched its operations just two years ago had crossed the milestone of one crore customer base in August 2019. Aadhaar Enabled Payment System Service (AePS) has been a game changer of sorts for IPPB.
6. SBI TO PARTNER HINDUSTAN UNILEVER LTD TO PROVIDE DIGITAL SOLUTIONS TO SMALL RETAILERS: State Bank of India has partnered with Hindustan Unilever (HUL) to offer digital and financing solutions for small store owners and distributors of HUL. SBI will provide paperless instant overdraft facility to retailers to enable payments to distributors. It will also provide UPI-based solutions to HUL’s retailers to assist with cashless payments.
7. MANY RULES FOR DRIVING LICENCE, USE OF CREDIT CARDS, HOME LOANS AND HEALTH INSURANCE MODIFIED: The government has introduced issue of Uniform vehicle Registration Cards (RC books) and driving licences across India from October 1, 2020. The driving licence will have an advanced microchip with many features. The issue of RC books will be paperless. All banks have been directed by RBI not to unnecessarily issue international facilities to customers’ cards unless the customer demands for it. The customer will now get the option to register for preferences like opt-in and opt-out services, spend limit and other services for online transactions. A lot of changes have also been initiated in health insurance policies.
8. CORPORATE RELATIONSHIPS NOW MORE IMPORTANT THAN BIG-TICKET LENDING FOR SBI: State Bank of India has changed its approach of serving Corporate clients to beyond extending supply of credit. The bank’s Chairman Mr Rajnish Kumar said that the new approach involves giving solutions to a variety of needs of the corporates and their stake holders like supply chain vendors, distributors and employees. Earlier the approach was just limited to extend credit to corporates but now the time has come to strengthen the relations by extending a host of solutions to these corporates and their stake holders.These value additions will go a long way in strengthening the relationship into a win-win scenario for the bank and the Corporate client.
1. SBI PLANNING TO MONETIZE ITS INTEGRATED DIGITAL BANKING PLATFORM “YONO”: State Bank of India is planning to monetize its flagship digital banking platform “YONO” by allowing smaller banks and regional rural banks to use it. Very soon SBI may carve out the integrated digital platform into a separate entity. Other lenders would need to connect with YONO API (Application Programming Interface) for using the platform. YONO is a profitable platform with over 2.7 crore users.
2. GOVERNMENT NEEDS TO CAP MDR ON DEBIT CARDS TO PROMOTE DIGITAL TRANSACTIONS: A study done by the Indian Institute of Technology (IIT) Mumbai has suggested that the government needs to cap the Merchant Discount Rate (MDR) on all types of debit and pre-paid cards at a lower rate with a view to promote digital transactions. The IIT, Mumbai suggested that there could be anupper ceiling of Rs 150/-. The study also suggests that for small and medium merchants accepting POS based payments and having a turnover of up to Rs 2 crore, the MDR for all types of cards may be fixed at 0.25% for transactions upto Rs 2,000/- and at 0.6% for transactions exceeding Rs 2,000/-.
3. SBI LAUNCHES e-FACILITY FOR RESTRUCTURING OF RETAIL LOANS FOR BORROWERS AFFECTED BY COVID-19 STRESS: State Bank of India has launched e-Facility on its website to help retail customers check their eligibility for one-time loan restructuring announced by RBI. Instead of customers actually visiting the branches to check their eligibility, the bank has provided a slot on its website whereby the customer can initially check his eligibility. An eligible customer however, will have to later visit the branch to complete other formalities.
4. AXIS BANK PARTNERS WITH BAYER’S “BETTER LIFE FARMING”INITIATIVE: Axis Bank has partnered with life sciences firm Bayer for its Better Life Farming (BLF) initiative for providing enhanced and holistic financial solutions to small farmers and rural farming communities. Through this partnership, Axis Bank will offer end-to-end financial solutions and services such as affordable priced farm loans, deposits, withdrawals and payments solutions. Digital financial solutions and doorstep delivery of these services will be a part of the said program to ensure convenient and hassle-freetransactions.
5. VARIOUS STATE TRANSPORT AUTHORITIES TO ADOPT CONTACTLESS SOLUTIONS: Across India, many state transport authorities are inviting banks, fintech companies and payment network providers to replace their traditional ticketing systems with contactless solutions. The said move is aimed at aligning with the latest trend of social distancing and hygiene norms in light of Covid-19 outbreak. Uttar Pradesh, Gujrat and Rajasthan transport authorities have issued tenders for contract, calling for bids from banks and digital service providers to help scale their technology requirements to offer contactless ticketing solutions.
6. SCHEDULED BANKS COLLECTIVELY RECORD HIGH INFLOW OF DEPOSITS DURING APRIL-AUGUST’20 PERIOD: All Scheduled Banks collectively received about Rs.6,09,763 crores of deposits in the first five months (April to August) in this financial year as againstRs. 2,21,737 Crores in the same period during the previous year amounting to a jump of about 2.75 times. This inflow of deposits comes despite a drastic deposit rate cuts across banks. This kind of trend shows the preference of depositors towards safety of bank deposits.
7. NBFC DELINQUENCIES MAY RISE UPTO 250 bps IN FINANCIAL YEAR 20-21: Rating agency Crisil Ratings has reported that Non-Banking Finance Companies (NBFCs) are likely to see up to 250 basis points (bps) increase in their delinquencies (bad loans) in the current fiscal. The effect of Covid-19 pandemic and intermittent lockdowns will increase the asset quality challenges of these NBFCs because of vulnerability in borrowers cash flows. The report further states thatin home loans, the largest NBFC segment, asset quality is expected to be better than other segments.
8. INDIAN RAILWAYS EYES OVER $4 BILLION INVESTMENTS WITH WORLD CLASS PRIVATE PASSENGER TRAINS: Recently the central government has announced two major initiatives of seeking private investmentin Indian Railways. One is running private passenger train services on Indian Railways network and the other is the redevelopment of railway stations across the country. These two projects have the potential of bringing an investment of over $7.5 billion in the next five years. The private investors will be responsible for finance, design procurement, maintenance, operation of trains along with setup and upgradation of the depot for train maintenance.
1. SBI CARD PLANNING TO PROVIDE THE FACILITY OF SEEING CREDIT SCORES TO ITS CUSTOMERS: SBI Card is working on the process of providing its customers the facility to see their credit bureau scores when they log in to their credit card accounts. This is a customer friendly initiative which the SBI card is planning to implement and the idea is mooted by SBI Card MD and CEO Mr Ashwini Kumar Tiwari, who took charge last month. Once this is implemented the customer would be able to see his credit score as he logs into his account.
2. RBI ASKS BANKS TO FULLY AUTOMATE NPA RECOGNITION PROCESS: The Reserve Bank of India has mandated banks to fully automate NPA Classification and provisioning calculation process. All borrower accounts have to be covered under the new regime. All banks have been asked to complete the process by June 30, 2021. This is being implemented to ensure the completeness and integrity of classification of all loan accounts and their upgradation, provisioning calculation and Income Recognition process. The new guidelines will include all borrower accounts, including temporary overdrafts, irrespective of the size or sector.
3. BANKING REGULATION (AMENDMENT) BILL PASSED IN LOK SABHA TO BRING COOPERATIVE BANKS UNDER RBI: Considering the deteriorating condition of cooperative banks in the country, Lok Sabha has passed the Banking Regulation (Amendment) Bill, 2020. The bill proposes amendments to the Banking Regulations Act, 1949, whereby all cooperative banks will come under the supervision of the Reserve Bank of India.
4. TITAN WATCHES TIES UP WITH SBI TO LAUNCH CONTACTLESS PAYMENT WATCHES: Titan has partnered with State Bank of India to introduce new contactless payment watches powered by SBI YONO App. Through this partnership, Titan and SBI are launching a range of stylish new watches with contactless payment facility. With this launch, SBI account holder can tap his/her Titan Pay Watch on the contactless Payment POS machine without the need of swiping or inserting his/her SBI bank card. Payments of up to Rs 2,000/- can be made through this mode. The exclusive collection of watches is attractively priced between Rs 2,995/- to Rs 5,995/-.
5. ICAI SEEKS EXTENSION OF FY-19 GST ANNUAL RETURN FILING DEADLINE BY 3 MONTHS: The Institute of Chartered Accountants of India (ICAI) has written to GST Council seeking extension of 2018-19 GST annual returns filing deadline by 3 months till December 31, 2020. The last date for filing annual return for 2018-19 fiscal for GST registered taxpayer is September 30, 2020. ICAI in its representation, has said that majority of taxpayers are working partially due to the Covid-19 pandemic and hence the relaxation should be given.
6. AMAZON TO HIRE 1 LAKH PEOPLE TO KEEP UP WITH ONLINE SHOPPING SURGE: Amazon will be hiring another 1,00,000 people to keep up with a surge of online orders. The new appointments will help in packing, shipment and sorting. The company has already hired 1,75,000 people earlier this year to keep up with rush of orders.
7. FINANCIAL HEALTH OF ALMOST 20% URBAN COOPERATIVE BANKS IS VERY WEAK: There are 1,482 urban and 58 multi state co-operative banks across the country with Rs 8.60 crore depositors, having a total savings of close to Rs 5 lakh crores. Out of this, as many as 277 Urban Co-operative Banks (UCBs) have “weak” financial status. Since it is equally important to protect the interests of the depositors, the Lok Sabha has passed the Banking Regulation (Amendment) Bill through which the supervision of all Cooperative banks will now be looked after by RBI.
8. INDIA RATINGS REVISES BANKING SECTOR OUTLOOK TO NEGATIVE: India Ratings& Research has revised its outlook on the banking sector to negative from stable for the second half of the current fiscal year. The downward revision is due to the expected spike in stressed assets, higher credit costs and muted growth prospects in light of the covid-19 pandemic. The agency further states that the banks’ modest capital buffers will deplete further in FY-21 due to the provisioning requirements.
9. SMALL FINANCE BANKS WILL REQUIRE Rs. 5,000-6,000 CRORES EQUITY INFUSION: ICRA, the rating agency has reported that Small Finance Banks (SFBs) may need an equity infusion of close to Rs. 5,000-6,000 crores for the industry to attain a Compound Annual Growth Rate (CAGR) of 15-20% till financial year 2023 and to absorb losses. The report further said that the industry as a whole is expected to report losses at consolidated level in the current fiscal driven by high operating costs and elevated credit costs of around 3.5 to 4%.
1. HDFC BANK PLANS TO INCREASE NUMBER OF BANK CORRESPONDENTS TO 25,000: In a bid to expand its rural reach, HDFC Bank is planning to increase the strength of its banking correspondents (BCs) to 25,000 by March’21. At present the bank has 11,000 BCs. The bank strives to provide best of the banking services even in remote parts of the country. A customer in remote villages will get all banking facilities close to his house through the BCs.
2. SBI INCLUDES COVID-19 TREATMENT UNDER MEDICAL INSURANCE SCHEME FOR RETIRED EMPLOYEES: State Bank of India has included Covid-19 treatment under its medical insurance scheme for its retired employees. After reviewing the present scheme, it has been decided to include Covid-19 as an infectious disease along with some other similar and relevant diseases in the existing list of ailments covered under hospitalisation in SBI Heath Care Scheme. The number of diseases covered has been now expanded to 25 from the existing 20. In line with the government guidelines related to Covid-19 treatment under home quarantine the Bank has decided to allow expenditure of Rs 25,000/- for home treatment.
3. SOME TOP BANKS SEE SURGE IN SUSPICIOUS DEALINGS: Some large banks like SBI, ICICI Bank, Bank of Baroda have started red-flagging transactions that defy traditional company patterns after witnessing a substantial spike in suspicious bank (which include cash and overseas transactions) transactions since the start of Covid-19. Some companies where banks have noticed a sudden spurt in trading or increased dealings in unrelated goods and services or there is a sudden outflow of funds to other countries. Since April’20 these banks have seen a jump of around 30% to 50% transactions in some companies’ transactions as suspicious patterns.
4. YES BANK REPAYS ENTIRE Rs 50,000 CRORES SPECIAL LIQUIDITY FACILITY DUES TO RBI: Yes Bank has fully repaid Rs. 50,000 crores to RBI it had borrowed under the Special Liquidity Facility (SLF). Theamount has been repaid much before the due date as the bank received string customer liquidity inflows. Ithas also raised Rs. 15,000 crores through a Further Public Offer (FPO) and post the FPO the bank’s Pro-forma Common Equity Tier (CET) I ratio has increased to 13.4% from 6.6% at the end of June’20, bringing the bank’s capitalisation largely in line with the private sector peers.
5. SUPREME COURT GRANTS RELIEF TO BORROWERS, EXTENDS LOAN MORATORIUM PERIOD TILL SEPTEMBER 28, 2020: The Supreme Court virtually extended the loan moratorium period till September 28, 2020, granting relief to borrowers. It has also asked the banks not to declare any loan accounts as NPA (those accounts which are not declared as NPA as on 31ST August’20) till further orders.
6. BANKS DO NOT WANT UNIFORM PROCESS FOR EACH CATEGORY OF DEBT RECAST: Reserve Bank of India has permitted lenders to classify Covid-affected borrowers into three categories—mild, moderate and severe for restructuring. Banks are not in favour of a uniform process for all categories of borrowers. Banks are also concerned about the hurdles in signing the Inter-Creditor Agreements (ICAs) for resolution of accounts where there is more than one lender. Any lender who does not sign ICA will have to make 20% extra capital provisioning.
7. 70% OF BANKING SECTOR DEBT AFFECTED BY COVID-19 IMPACT: The Indian economy shaking to come into shape well before the Covid-19 pandemic outbreak, has been affected very badly after the outbreak. The report by the RBI expert committee headed by K V Kamath brings this issue very clearly. The report notes that the pandemic has affected even the best of the companies and businesses that were otherwise viable before the outbreak. 19 sectors which were not under any stress before the pandemic have now been affected by it and this accounts for 15.5 lakh crores of debt. Retail and wholesale trade are the worst affected with outstanding debt of 5.4 lakh crores.
8. SBI’S “YONO” APP IS NOW WORTH MORE THAN $ 40 BILLION, BECOMES THE BIGGEST START-UP BY ANY BANKS: Within 3 years of its launch, State Bank of India’s digital banking platform “YONO” (You Only Need One) has a valuation of over USD 40 billion. YONO App has been adding around 70,000 new users daily and as of now it has a total of 27 million registered users.
9. I-T DEPARTMENT PREPARES TO IMPLEMENT FACELESS INCOME-TAX APPEALS: The Income Tax Department is preparing to implement faceless income tax appeals from September 25, 2020. The department has already implemented faceless assessment facility for all tax payers from August 13, 2020. The department is also trying to explore whether cases of penalty and transfer pricing could be included in the faceless regime. The regime of faceless system will lead to reduced compliance burden, lower cost and reduced litigation.
1. HDFC BANK ADOPTS SINGLE TEAMAPPROACH TO DRIVE INNOVATIONS: HDFC Bank has started creating dedicated teams by taking executives from various business functions to execute different projects. This has been adopted with an aim to speed up product innovation. The bank has formed nearly a dozen such agile teams having up to 40 members each drawn from across various business functions/departments. The said approach has so far delivered three projects—Instant account opening, Know Your Customer (KYC) and Fixed Deposit renewals. The bank is working on 10 other projects.
2. RESERVE BANK OF INDIA REJIGS PRIORITY SECTOR GUIDELINES: With a focus on inclusive development, RBI has revamped its priority sector guidelines by increasing the weightage for loans given in underpenetrated districts, increasing the targets for lending to small & marginal farmers, weaker sections including loans for setting up health infrastructure. The target for lending to small & marginal farmers is increased from 8% to 10% by 2023-24 and the target for lending to weaker sections has gone up from 10% to 12%. Bank finance to start-ups of upto Rs 50 crores, loans to farmers for installation of solar power plants and Compressed Bio Gas (CBG) have been included under priority sector.
3. RBL BANK LAUNCHES CARDLESS CASH WITHDRAWAL FACILITY THROUGH ATM: RBL Bank has launched cardless cash withdrawal facility from ATMs, leveraging the Instant Money Transfer (IMT) system. The bank has tied up with Empays Payment Systems, a global financial technology provider to offer the said service. Now the RBL Bank customers can withdraw cash without their debit cards from 389 IMT-enabled ATMs of the bank or more than 40,000 other bank ATMs across the country.
4. PNB HOUSING FINANCE SET TO LAY OFF ABOUT 5-7% OF ITS EMPLOYEES: PNB Housing Finance Ltd is all set to lay off about 5 to 7% of its employees in an attempt to rationalise cost amid shrinking business. The company has asked about 80-100 employees to leave. PNB Housing has a market cap of Rs 4,863 crores and Rs 68,000 crores outstanding loans and has more than 1,500 employees.
5. INCOME TAX DEPARTMENT LAUNCHES FUNCTIONALITY FOR BANKS TO CHECK ITR FILING STATUS OF ENTITIES: The Income Tax Department has launched a functionality for scheduled commercial banks to check the status of income tax returns filed by entities based on their PAN no. To ensure filing of returns by these persons and keep a track on cash withdrawals by non-filers and also to curb black money this has been implemented.
6. SMALL BORROWERS MAY GET PRINCIPAL PAYMENT RELIEF AS PART OF ONE-TIME RESTRUCTURING OF LOANS: Banks and Non-Banking Finance Companies (NBFCs) may offer a six-month moratorium on principal repayments for retails and MSME borrowers as part of the one-time restructuring of loans that the RBI has allowed. Customers seeking a debt revamp will be asked to make regular interest payments, while the principal will be restructured or the tenor may be extended, depending on the repayment capacity. The intension is to restructure loans only for the needy customers.
7. SUPREME COURT SAYS BANKS SHOULD NOT DECLARE FRESH NPAs TILL FURTHER ORDER: The Supreme Court of India has passed an interim order saying that the accounts not declared as Non-Performing Assets (NPAs) as on Aug’31ST will not be declared as NPA till further notice. Meantime the Supreme Court will continue hearing about the bunch of petitions demanding waiver of interest or waiver of interest on interest on the suspended EMIs during moratorium period till 10TH Sept’ 2020.
8. NITI AAYOG BATS FOR BANK CONSOLIDATION AND PRIVATISATION: NITI Aayog has prepared a blueprint for the banking sector, with consolidation and privatisation in focus. The Aayog think tank has asked the government to retain control over top 4 banks--- SBI, Punjab National Bank, Canara Bank and Bank of Baroda. It has recommended for privatisation of three small banks—UCO Bank, Punjab & Sind Bank and Bank of Maharashtra on priority basis. As for the remaining five state run banks—Bank of India, Union Bank of India, Indian Overseas Bank, Central Bank and Indian Bank, the government may either amalgamate them with the four large banks or trim its stake in these five banks over a stipulated time-frame to 26%.
9. KAMATH PANEL MAY SUGGEST DIFFERNTIATED RECAST PLAN: The K V Kamath committee appointed by RBI is preparing the criteria for debt recasts is likely recommend differentiated restructuring for identified accounts. The committee has identified six problematic sectors including aviation, real estate, automobile, infrastructure and power and has prepared solutions for 29 out of 307 identified sectors. The committee will also vet the resolution plans for all the accounts where the exposure is more than Rs 1,500 crores.
1. BANKS BOARD BUREAU RECOMMENDS DINESH KHARA AS NEXT SBI CHAIRMAN: The Banks Board Bureau (BBB) has recommended Mr. Dinesh Khara as the next Chairman of State Bank of India. Mr. Khara is the senior most Managing Director at SBI. Mr. Khara’s nomination will be now put up before the appointments committee of the cabinet (ACC) which is chaired by the Prime Minister. The present Chairman Mr Rajnish Kumar is slated to retire in the first week of October’20. The Bureau also has recommended Mr C S Shetty, another MD at SBI as the reserve candidate.
2. STATE BANK OF INDIA GETS GLOBAL RECOGNITION FOR HR INITIATIVE “NAYI-DISHA”: State Bank of India has got global recognition for its HR initiative “NAYI-DISHA” which over the course of 1.5 yearshas trained 2.40 lakhs of employees. Through “Nayi-Disha” the bank has successfully deployed programs, strategies, modalities, processes, systems and tools to achieve measurable results. SBI has appreciated the workforce for its commitment towards customer service excellence while serving with the same rigour even in the remotest corners of the country.
3. PRADHAN MANTRI JAN-DHAN YOJANA SCHEME COMPLETES 6 YEARS, BENEFITS 40.35 CRORE PEOPLE: The Pradhan-Mantri Jan-Dhan Yojana (PMJDY) which was launched six years ago as a national mission for financial inclusion has benefited 40.35 crores of people. The PMJDY has provided every adult with bank account through which many government benefits like direct benefit transfers, Covid-19 financial assistance, PM-Kisan, Life & Health insurance cover were routed through these accounts.
4. FACIAL RECOGNITION, IRIS SCANS MAY BE USED FOR WELFARE SCHEME BENEFITS:Facial-recognition and IRIS scans could soon be used for Aadhaar authentication of beneficiaries using Jan-Dhan Bank accounts to access Direct Benefits Transfer pay-outs and domestic transfers. The National Payments Corpn of India (NCPI) and UIADAI, has in initiated a test rollout of facial recognition with four banks, namely ICICI Bank, Yes Bank, RBL Bank and Fino Payments Bank. Facial recognition only needs a smartphone or other device running Android version 7 and above, while IRIS checks require a specialised machine.
5. NON-BANKING FINANCE COMPANIES OFFER COVID-19 INSURANCE COVERS TO ITS GOLD LOAN CUSTOMERS: The Non-Banking Financial Companies (NBFCs) offering gold loans to its customers have come up with a new scheme after RBI permitted banks to offer loans up to 90% of the gold value pledged by the customers. Several NBFCs are now offering Covid-19 Insurance covers to their gold loan customers. These NBFCs have tied up with many general insurance companies for this.
6. AADHAAR AUTHENTICATION FOR NEW GST REGISTRATION IS NOW ACTIVE: Aadhaar authentication for new Goods & Services Tax (GST) registration has now been activated. This will enhance ease of doing business as for those who opt for Aadhaar authentication, new GST registration will be issued within 3 working days and would not need to wait for physical verification. However, for those not opting for Aadhaar authentication for GST registration, it would take up to 21 working days.
7. CAUTIOUS PSBs SET ASIDE BULK OF THEIR PROFITS AS PROVISIONS: The 12 Public Sector Banks (PSBs) have set aside about 80% of their aggregate operating profits they made in June’20 quarter as provisions being cautious on accounts under moratorium. This is higher than the comparable amount of nearly 60% set aside by private sector banks but lower than 130% that the PSBs set aside in March’20 quarter.
8. RBI PUSHES BANKS TO RAISE CAPITAL OVER BAD-DEBT PILE UP: Reserve Bank of India (RBI) is pushing banks and Non-Bank Finance Companies (NBFCs) to raise capital to brace for a possible pile-up in bad loans in coming months. Private Sector banks such as ICICI Bank and HDFC Bank have responded by raising over Rs 50,000 crores. BUT Public Sector Banks are very slow in raising the capital. Some big banks like SBI BoB and Union Bank have initiated the process of raising money. But if these banks fail to raise money then the government will have to pump in additional capital.
9. BANKS PREFER TO PARK FUNDS IN G-SECS THAN TO GIVE OUT RISKY LOANS: Considering the weak credit demand and the risks that are involved in lending combined with the effect of Covid-19 pandemic yet to play out in full, these banks are preferring to invest in safer government securities (G-secs). The cautious approach by banks is despite the RBI’s and government’s push to increase lending across sectors. Between March 27, 2020 to 31 July, 2020, outstanding credit shrunk by Rs 1.06 trillion while banks’ investment in G-secs rose by Rs 5.90 trillion.
1. BANKS & PAYMENT OPERATORS WANT TO RENDER CONTACLESS DIGITAL SERVICES: Top retail banks, technology companies, ATM manufacturers, Point-of-Sale (PoS) deployers, card network operators and UPI players are all sensing the opportunities in rendering their respective services “Contactless”. Increased apprehension among consumers during this Covid Pandemic towards physical modes of payments is giving rise to a new category of digital payments spends which are “Contactless” in nature. The latest mantra is removing any unnecessary touch thereby making payments safer.
2. PSU BANKS FACE FRESH CAPITAL SHORTAGE: Moody’s Investors Service in one of its latest reports has said that the sharp slowdown in India’s economic growth due to Covid Pandemic will hurt Public Sector Banks (PSBs) asset quality and drive up credit costs. And this will weaken their capital buffers. This means these banks need to pump in an additional capital of Rs 1.9 lakh crores to Rs. 2.1 lakh crores in the next two years to restore loss-absorbing buffers. The most likely source of capital to plug these capital shortfalls is the government despite of its completion of a large recapitalisation just a few months ago.
3. HFCs REQUIRE Rs 3.8 TO 4.5 TRILLION TO MEET REFINANCING REQUIREMENTS THIS FISCAL: As per a latest ICRA report, Housing Finance Companies (HFCs) are likely to see a muted portfolio growth and would require Rs 3.8 to Rs 4.5 Trillion to meet their refinancing requirements in the current financial year. The pandemic effect is expected to lower the housing credit growth to 5-8%.
4. AXIS BANK LAUNCHES HIRING INITIATIVE “GIG-A-OPPORTUNITY”: Axis Bank has plans to employ nearly 1,000people under its new hiring initiative “Gig-A- Opportunity”, a model devised to attract skilled talent that can work with bank remotely, from anywhere in the country. The hiring model comprises of two working patterns, first is full-time permanent job and the second is based on the duration of the project. Earlier the mindset was that for working you have to come to the office, but nowthis Work-From-Home concept has changed many things.
5. 4 PSU BANKS TO BECOME PRIVATE BY END OF THIS YEAR: The government has drawn a list of four Public Sector Banks namely Punjab & Sind Bank, Bank of Maharashtra, UCO Bank and IDBI Bank, in which it directly or indirectly holds majority of stake, and wants to disinvest equity. The government may privatise these four PSU banks as early as by the end of this financial year. The move is made in an effort to generate revenue to the government, which is severely hit by the coronavirus crisis.
6. BANKS MAY RECAST LOANS WORTH Rs 8.4 LAKH CRORES: As per a report by India Ratings & Research, banks may restructure loans worth Rs 8.4 lakh crores, or around 7.7 % of the total bank credit. The banks may segregate loans for debt restructuring plan. Bankers are busy preparing a restructuring plan to determine the eligibility and ensure borrowers do not misuse the one-time loan restructuring package to be offered to stressed individuals and companies. There is a plan to divide them into two segments--- customised and standardised, Corporate borrowers will be offered customised solutions because of the complexity of their loan contracts and involvement of multiple banks. Individual borrowers will be given a standardised package if they can show substantial loss of income because of Covid-19 pandemic.
7. ALL FUTURE COMMUNICATION WITH TAX PAYERS WILL BE THROUGH NATIONAL e-ASSESSEMENT CENTRE UNDER FACELESS ASSESSMENT: The Income Tax Department has issued guidelines for implementation of faceless assessment, making the National e-Assessment Centre (NeAC) as the main gateway for communication with the tax payer. The Central Board for Direct Taxes (CBDT) has notified NeAC and various Regional e-Assessment Centres across 20 cities for implementing faceless assessment scheme.
8. CRISIL PEGS LOSS FOR COMMERCIAL VEHICLE MAKERS AT Rs 6,000 CRORES: As per a report submitted by CRISIL, Commercial Vehicle (CV) makers are likely to report a los of Rs 6,000 crores in this fiscal, on the back of a continued decline in sales. This continuous decline in sales volumes with a continuous stress on the working capital would result in six-fold increase in net losses.
9. COVID-19 EFFECT ON MSMEs, 3 OUT OF 4 UNITS WORKING AT BELOW CAPACITY: 9 out of every 10 of India’s 63 million Micro, Small & Medium Enterprises (MSMEs) have restarted operations after the lockdown due to Covid-19 pandemic but only one out of four units (25%) is producing at half of its capacity, largely on account of poor demand, poor logistics and financial crunch. Rest of the 75% units are not even working at half of their capacity.
1. SBI FACILITATES FARMERS TO REVIEW THEIR LIMIT ON KISAN CREDIT CARD THROUGH “YONO APP”: State Bank of India has introduced a review feature in its YONO App and has named it “YONO-KRISHI”. The feature facilitates farmers to revise loan limit on their Kisan Credit Cards (KCCs) without the need to visit the branch. KCC review option in the App will help the farmers to apply the same in just 4 clicks from the comfort of their homes without any paperwork.
2. HDFC BANK LAUNCHES AGRICULTURE LOANS FOR MILITARY AND PARA-MILITARY PROFESSIONALS: HDFC Bank has launched as Agri-loan facility targeted at 45 lakh military and para-military professionals for catering to their family’s agricultural needs back home. The product is named as “Shaurya KGC Card” which entails both short-term loans for cropping and also long-term loans for farm investments for a period of upto 5 years which will be reviewed at regular intervals.
3. RBI SLAPS Rs 10 LAKH PENALTY ON FOUR CO-OPERATIVE BANKS FOR LAPSES IN REGULATORY COMPLAINCE ISSUES: The Reserve Bank of India has imposed a total penalty of Rs 10 lakhs on four co-operative banks for deficiencies in regulatory compliance. In this, Rs 5 lakhs has been imposed on Jowai Urban Co-op Bank Ltd for contravention of the directions issued by RBI on “Exposure Norms and Statutory Restrictions.
4. SEBI FINES SBI, LIC, BANK OF BARODA FOR VIOLATING MUTUAL FUND NORMS: Market regulatory SEBI has imposed a penalty of Rs 10 lakh each on SBI, LIC and Bank of Baroda (BoB) for not complying with Mutual Fund norms. SBI, LIC and BoB are sponsors of SBI MF, LIC MF and Baroda MF respectively, and they hold more than 10% stake in these companies. In addition, SBI, LIC and BoB are also sponsoring UTI AMC and hold more than 10% stake individually and this is not in conformity with the requirement of Mutual Fund Regulations.
5. MFI COLLECTIONS RECOVER BY 70% AFTER LIFTING OF COVID-19 RESTRICTIONS: The collections of Microfinance Institutions (MFIs), which had plunged to near zero in April’20 on account of the Covid-19 pandemic lockdown, has rebounded to 70-75% in July’20 on account of gradual lifting of restrictions. The collections had diminished to single digit in April’20 but now has recovered 70-75% in July’20. While the bounce back has been faster than expected, improving it to the pre-pandemic levels of 98-99% would be more important from an asset quality perspective.
6. DEBIT, CREDIT CARD USE CLIMBS BACK TO PRE-COVID LEVEL: Value of transactions through credit and debit cards have reached pre-COVID levels after witnessing a major drop in April’20. The same has jumped 111% in June’20 as compared to April’20 Transactions using debit, credit cards soared to Rs 1,05,266 crores in June’20, more than double the figure of Rs 49,807 crores in April’20. The jump in the said transactions indicates a pickup in consumer spending after crashing during lockdown period. The economy is suffering from lot of layoffs and salary cuts, but the above figures show that this has not deterred the spending habits.
7. RBI TIGHTENS CORPORATE GOVERNANCE NORMS FOR CORE INVESTMENT FIRMS: The Reserve Bank of India has revised set of guidelines for Core Investment Companies (CICs), tightening corporate governance and disclosure norms for these entities. A CIC is a Non-Banking Financial Company (NBFC) which carries on the business of acquisition of shares and securities and holds not less than 90% of its net assets in the form of investment in equity shares, bonds debentures, debt or loans in group companies.
8. DEUTSCHE BANK INFUSES Rs 2,700 CRORES INTO INDIA BRANCHES: Germany’s largest bank Deutsche Bank has infused Rs 2,700 crores into its India Branch operations, taking its total investment in Indian branches to Rs 18,200 crores. The bank had invested Rs 3,800 crores in 2019.The fresh capital will be used to support further expansion of its branches in India. Deutsche Bank in India caters to Corporate, Investment Banking and private banking clients.
9. DOMESTIC ROAD TRANSPORT SECTOR LIKELY TO CONTRACT BY 18-20% IN FY 20-21: Rating Agency ICRA, in its report has said that the domestic road transport sector is likely to contract by 18-20% on account of Covid-19 pandemic induced challenges. It has revised the outlook on the logistics sector from “Stable” to “Negative” given the present circumstances.
10. YOU MAY SOON BE ELIGIBLE FOR GRATUITY EVEN WITHOUT 5 YEARS ON THE JOB: Gratuity is paid by a company to its employee for the services rendered by the employee during his/her tenure in the company. Under the current rules, an employee has to work for the company for 5 continuous years to be eligible for gratuity payment. But with shorter job tenures increasingly becoming more common, the government is considering easing of this key eligibility requirement.
1. RBI ALLOWS ONE-TIME RESTRUCTURING OF LOANS: The Reserve Bank of India has allowed a one-time restructuring of loans without classifying them as NPAs to help companies and individuals manage financial stress caused by Covid-19 pandemic.
2. RBI SETS UP PANEL FOR ONE-TIME RESTRUCTURING OF LOANS: Reserve Bank of India (RBI) is constituting an Expert Committee under Mr. K V Kamath for one-time restructuring of loans which shall make recommendations to RBI on the required financial parameters, along with sector-specific benchmark ranges for such parameters to be factored into the resolution plans. Many large bank heads have pitched in for a sector-specific one-time loan restructuring package after the end of the six-month loan repayment moratorium which ends on 31ST August, 2020.
3. RBI ASKS BANKS NOT TO OPEN CURRENT ACCOUNTS FOR CUSTOMERS HAVING CASH CREDIT/OVERDRAFT FACILITIES: With a view to improve credit discipline, RBI has barred banks from opening current accounts for customers who have availed cash credit or overdraft facilities. Stressing on the need for credit discipline, RBI has said that rather than opening a new current account the customer must be advised to route all his transactions through the existing cash credit or overdraft facility.
4. SBI TAPS FACEBOOK MESSENGER FOR ONGOING "GHAR SE BANKING" CAMPAIGN: State Bank of India has started a new scheme called “Ghar Se Banking” for its customers by downloading its YONO App, YONO Lite, SBI Quick and BHIM SBI Pay and the bank is leveraging conversational marketing via Facebook Messenger. In times of physical distancing it is essential to stay in touch with the customer, consequently the conversational marketing digital solutions such as Facebook Messenger can prove to be very effective method.
5. NOW GOLD JEWELLERY TO FETCH HIGHER LOAN AMOUNT: The Reserve Bank of India has raised the loan-to-value ratio for gold loans to 90% to mitigate the impact of Covid-19 pandemic on households. This means that one can get a gold loan upto 90% of the gold value. Earlier the margin was kept at 75%.
6. NOW ONLINE SYSTEM FOR CUSTOMER GRIEVANCVES IS A MUST: Reserve Bank of India has made Online Dispute Resolution (ODR) compulsory for banks. It is technology-driven and customer friendly system for resolving customer disputes relating to digital payments using zero or minimal manual intervention. RBI has instructed authorised Payment System Operators (PSOs) of banks and non-banks to place the system for ODR.
7. UPI TRANASACTIONS HIT A NEW HIGH OF 149 CRORES IN JULY: The number of payment transactions on Unified Payments Interface (UPI) hit anall-time high of 149 crore transactions in July 2020 with the value of transactions reaching 2.91 lakh crores. This is as per the NPCI data. Thew figure was 134 crores in June 2020.
8. NOW CAs DOCTORS, LAWYERS CAN ALSO GET LOAN UNDER MSME EMERGENCY CREDIT SCHEME: The government has decided to relax the eligibility criteria for getting loan under Emergency Credit Line Guarantee Scheme (ECLGS) to cover professionals such as doctors, CAs and lawyers to benefit from it. Although there is no enhancement in the overall credit limit of Rs 3 lakh crore yet, the said additional beneficiaries are estimated to be sanctioned loans upto about Rs 1 lakh crore.
9. INCOME TAX RETURNS DATE FOR ASSESSMENT YEAR 2019-20 EXTENDED: The Central Board for Direct Taxes (CBDT) has extended the last date for filing ITR for assessment year 2019-20 ( period covering 01/04/2018 to 31/03/2019) FROM 31St July 2020 to 30TH September 2020, in view of the constraints faced by the tax payer due to the Covid-19 pandemic and also to ease the compliances.
10. RBI TO ALLOW OFFLINE PAYMENTS THROUGH CARDS ON PILOT BASIS: The Reserve Bank of India has announced a scheme on pilot basis for offline retail payments using cards and mobile devices to encourage customers to go for digital transactions even in those areas that lack internet connectivity. RBI has proposed to allow a pilot scheme for small value payments in offline mode with built-in features for safeguarding interest of users.
11. RBI TO ENHANCE SECURITY FEATURES FOR CHEQUES ABOVE Rs 50,000: RBI has announced that it plans to introduce a mechanism called “Positive Pay” in order to enhance safety features of cheques of value of Rs 50,000/- and above. Under the mechanism all such cheques will be processed for payment by the drawee bank based on the information passed on by its customer at the time of issuance of cheque. Operational guidelines in this regard will be issued separately soon.
1. VERY FEW TAKERS FOR BANK LOANS: The Industry body Associated Chambers of Commerce & Industry of India (ASSOCHAM) has expressed that presently there are very few takers for Bank Loans. It feels that reeling under the debt-ridden balance sheets and economic uncertainties in the face of Covid-19 crisis, the Indian Industry is left with little appetite for any more loans. With this, most of the bank deposits are either being parked with RBI or used by the Central Bank to fund ever-increasing government borrowings. Barring a few, most of the sectors witnessed de-growth in credit deployment.
2. ABOUT 84,545 BANK FRAUD CASES REPORTED DURING 2019-2020: As per the information revealed by RBI as sought under RTI, around 84,545 fraud cases involving about Rs 1.85 lakh crores were reported by scheduled commercial banks and select Financial Institutions during 2019-20. The period covered is between April 1, 2019 to March 31, 2020.
3. YES BANK LOOKS TO CARVE OUT TECHNOLOGY PLATFORM AND TO TRANSFER STRESSED ASSETS TO SUBSIDIARIES: Yes Bank Ltd is looking to carve out its technology platform and transfer its stressed assets into two separate subsidiaries. The bank is also looking to get equity partners in these two businesses later. The bank is planning to create a structure for what will be an in-house bad bank that will house all its bad loans and also buy bad assets from other lenders as well. A consultant to design this project will be appointed in the next 2-3 weeks, after which the bank would approach RBI for approval. The bank would also create a separate subsidiary for its technology platform that could be valued at around $ 7 billion.
4. STATE OWNED BANKS TO NEED MORE CAPITAL TO SAFEGUARD AGAINST STRESS: Fitch Ratings Agency has said that state-owned banks will need more capital support from the government to mitigate the anticipated risks. Several large-scale banks have recently announced their plans to raise a total of USD 6 billion in fresh equity from capital market but Fitch Ratings feels that Indian state-owned banks’ plan to raise capital from private sources will not be sufficient to mitigate anticipated risks unless supplemented with additional capital support from the government.
5. INCOME TAX DEPARTMENT TO SHARE TAX-PAYERS INFORMATION WITH 10 CENTRAL INTELLIGENCE PROBE AGENCIES: The Income Tax Department will sign an MOU with counter-terrorism platform National Intelligence Grid (NATGRID) to facilitate automatic exchange of information linked to bank accounts, PAN, Tax Returns and any other mutually agreed information with 10 agencies. The Tax department already shares information on tax assessees with over 50 notified agencies.
6. MSME SECTOR IS THE MOST ADVERSELY AFFECTED SECTORS DUE TO COVID IMPACT: Micro, Small & Medium Enterprises (MSME) segment is the most badly affected sector due to the Covid-19 crisis. Even as majority of sectors have witnessed sizeable recovery but MSME segment is the worst affected which has suffered from massive labour migration, production halt, cash flow crunch during the lockdown and the recovery in this segment looks bleak in the next six months.
7. GOVERNMENT WORKING ON APLAN TO REVAMP INDIA POST--- COULD SOON TURN IT INTO A FULL-FLEDGED BANK: Loss making India Post, having a size and workforce hugely disproportionate to its shrinking role, may reinvent itself by converting it into a full-fledged bank. The government is discussing a plan to convert India Post into a bank by bringing the 14,000 strong branch networks of Regional Rural Banks (RRBs) under the fold of India Post. India Post itself runs 1.56 lakh post offices. The Government will wield control over the proposed bank via a holding company, of which the RRBs, where the government already holds 50% will become the subsidiaries. The existing India Post Payments Bank also will be a subsidiary of the holding company.
8. MUTUAL FUND INVESTMENT VIA SYSTEMATIC INVESTMENT PLAN RISES TO OVER Rs 50,000 CRORES IN H-1 OF 2020: The Mutual Funds Industry has garnered over Rs 50,000 crores through the route of Systematic Investment Plans (SIPs) in the first six months of 2020, up by 3% as compared to last year. SIP has been a preferred route for retail investors to invest in mutual funds as it helps them to reduce market timing risk. Inflow into SIP have averaged to about Rs 8,350 crores in the past 6 months.
9. INDIA’S FOREX RESERVES REACH A NEW PEAK: According to the latest data released by RBI, India’s Forex Reserves continued to hit a new high level as they rose by $ 1.275 billion for the week ended July 17 to $ 517.63 billion. Of this, $ 476.88 billion was held in Foreign Currency Assets (FCAs) comprising of US Dollar, Euro, Pound Sterling and Japanese Yen. Gold component was $ 34.743 billion.
1. BANK NPAs MAY RISE BY 4% DUE TO COVID PANDEMIC: The Reserve Bank of India in its annual Financial Stability Report (FSR) has indicated that the Gross Non-Performing Asset (GNPA) ratio of all banks may increase from the present 8.5% to 12.5% by March 2021. This is due to the sharp slowdown in the economy as a result of lockdown imposed to fight the Covid-19 pandemic. The FSR also predicts a contraction of GDP by 4.4%, Gross Fiscal Deficit of 10.9% and Consumer Price Inflation of 4.1%. The six-month loan moratorium extended by banks could distort the NPA picture. RBI said that since the impact of moratorium is still uncertain and evolving, the exact nature of how the same will impact the quality of banking asset is difficult to ascertain accurately.
2. MORE BANKING SECTOR REFORMS NEEDED TO IMPROVE EFFICIENCY AND ACCOUNTABILITY: The banking reforms that started in 2015 in right earnest has achieved a lot. But looking at the massive banking frauds that have happened since 2015 coupled with rising Non-Performing Assets (NPAs), a lot more needs to be done. This is probably the best time to complete the banking sector reforms as activity in the banking industry is at an all time low. But the restructuring of operations to increase the efficiency and accountability in the Public Sector Banks (PSBs) has however still not been effectively implemented. The process is a bit complex and will take a lot of time, but it is the real repair work without which the PSBs will never be able to perform or deliver.
3. INVESTMENT IN TECHNOLOGY UPGRADATION MUST FOR SURVIVAL OF BANKS: SBI Chairman Mr. Rajnish Kumar has said that Banks and Financial Institutions need to make enough investment in technology upgradation for survival in this era of digital banking. He opined that in this era of digital banking any institution or bank which is not investing enough resources both in terms of manpower as well as the financial investment in digital and latest technologies will not be able to survive. Going forward, mobile banking transactions would take over and become the most preferred digital channel even more that the internet. Mr Kumar also emphasised the need to focus on the cyber security aspect with proliferation of digital banking.
4. GOVERNMENT KEEN ON ONE-TIME RESTRUCTURING OF LOANS BY RBI: The government is keen on Reserve Bank of India allowing a one-time restructuring of loans by banks because of the stress being faced by many borrowers in the wake of Covid-19 pandemic. The decision on restructuring and details of such a move would be up to the RBI. Many bankers have already spoken in favour of one-time restructuring of loans rather than the extension of the moratorium be RBI. The six months moratorium which ends on August 31, 2020 has allowed a breather to the borrowers and at the same time it also allows the banks to keep the accounts as standard asset. Banks fear that after the moratorium period ends on August 31ST, many borrowers may not have sufficient capital/cash flow to start paying EMIs and this may lead to rise in defaults.
5. GOVERNMENT PLANS TO REDUCE NUMBER OF PSU BANKS TO JUST FIVE: The government is looking to privatise mare than half of its state-owned banks to reduce the number of government owned banks to just five as part of overhaul of the banking industry. The first part of the plan would be to sell majority stakes in Bank of India, Central Bank of India, Indian Overseas Bank, UCOI Bank, Bank of Maharashtra and Punjab & Sind Bank, leading to an effective privatisation of these state-owned banks. The idea is to have 5 to 6 Public Sector Banks (PSBs). At present India has 12 PSBs. Such a plan is currently being formulated by the government and this would be put before the cabinet for approval.
6. WhatsApp TO WORK WITH PARTNERS IN INDIA TO ENHANCE ACCESS TO FINANCIAL PRODUCTS: The Facebook-owned company WhatsApp has been working for more than a year now with banking partners in India to see how it can supplement their digital presence and accelerate the pace of financial access across segments. WhatsApp wants to open up with more partners over the coming years to help simplify and expand banking services, especially to the rural and lower income segments. The company will also support multiple pilots to test potential solutions to solve problems related to distribution of financial products.
7. BRICK-AND-MORTAR BANK BRANCHES TO LOSE RELEVANCE: Ms Arundhati Bhattacharya, Former Chairman of SBI and presently head of SalesForce India has said that the relevance of traditional (physical) bank branches will gradually decline even as they will continue to co-exist with internet and mobile banking. According to Bhattacharya, going forward one will see these workplaces evolve to look different. While physical banks will still be there because people trust branch banking scenariobut the importance of these branches will come down as customers will be able to access and do everything from comfort of their homes.
1. BANKERS FEEL SUPPORT HAS TO BE EXTENDED TO BORROWERS UNTIL CASH FLOWS IMPROVE: Majority of banks feel that lockdown has halted the economic activities in the country since March’20 and now the borrowers need support from them till their cash flows return to normalcy. The economic activities which have been hampered due to Covid-19 pandemic lockdown, due to which most of the borrowers are facing problem with their cash flows. Loan repayment is done from cash flows. This problem might creep into the second quarter of the present fiscal as well. So, there is a need for forbearance and support. However, more such support might also lead to an increase in the NPAs in the banking sector.
2. BANKS & NBFCs SANCTION Rs 1.23 LAKH CRORE LOANS TO MSMEs UNDER CREDIT GURANTEE SCHEME: Indian Banks and NBFCs have sanctioned about Rs. 1,23,099 crores under the Emergency Credit Line Guarantee Scheme (ECLGS) to pandemic hit MSMEs. Out of the sanctioned loan amount, Rs. 68,311 crores have already been disbursed by 12 Public Sector Banks, 22 Private banks and 21 NBFC as on July 15, 2020. Out of this, Rs 69,135 crores has been sanctioned by PSBs while Rs 54,209 crores has been sanctioned by private sector banks. Among the PSBs, SBI stands at the top where loans worth Rs 20,910 crores, followed by Punjab National Bank and Canara Bank.
3. NBFCs SEEK SPECIAL FUND FOR SMALL & MEDIUM SIZE PEERS: Non-Banking Finance Companies (NBFCs) have written to Finance Ministry, seeking a separate fund for Small & Medium sized NBFCs. The demand is to set up a fund through development finance institutions like Small Industries Development Bank of India (SIDBI) and National Bank for Agriculture & Rural Development (NABARD) that would offer Term Loans with a minimum tenor of 3 to 5 years. The letter also states that all small NBFCs irrespective of their rating and latest profit & loss accounts, be made eligible to borrow through this fund.
4. SBI TO INSTITUTE “WORK-FROM-ANYWHERE” INFRASTRUCTURE: State Bank of India will institute “Work-From-Anywhere” infrastructure. Chairman Mr Rajnish Kumar said the present focus will be on cost reduction, rationalisation and reskilling of workforce, improving staff productivity and redeployment of workforce from admin offices to sales roles. Following the global practices, the bank will institute “Work-From-Anywhere” (WFA) infrastructure to facilitate work from any location, while taking care of social aspects of work-life balance.This initiative is expected to save Rs. 1,000 crores through cost optimization and will be a key component of their business continuity during times of Covid-19.
5. NOW PAY TDS ON CASH WITHDRAWALS ABOVE Rs. 20 LAKHS: The Central Board for Direct Taxes (CBDT) has a data on cash withdrawals which indicated a huge amount of cash being withdrawn by persons who have never filed Income Tax Returns. Hence the Income Tax Department has implemented TDS on cash withdrawals above Rs 20 lakhs. It has initiated a new functionary for banks and post offices through which they can ascertain the TDS applicability rates on cash withdrawals above Rs. 20 lakhs in case of non-filers and above Rs 1 crore in case of filer of Income tax returns.
6. CORONAVIRUS WILL COST BANKS OVER $2 TRILLION GLOBALLY IN LOSSES ON LOANS: Global banks will face a combined loan loss of $ 2.1 trillion by the end of 2021 as a result of the coronavirus crisis. This is as per the estimates made by credit ratings agency S&P. The Global estimates for this year will be around $ 1.3 trillion. Around 60% of the losses are likely to be in Asia-Pacific region.
7. RBI ASKS ARCs TO ADOPT FAIR PRACTICES CODE TO PROHIBIT UNLAWFUL MEANS FOR DEBT RECOVERY: Reserve Bank of India (RBI) has asked Asset Reconstruction Companies (ARCs) to adopt a board-approved “Fair-Practice Code” which, among other things, should prohibit the use of uncivilised, unlawful and questionable means for recovery of loans. The code should also ensure transparency and fairness in operation.
8. JOB LOSES, PAY CUTS AND LOW INTEREST RATES IMPACT BANK DEPOSITS: Job losses, pay cuts and lowest interest rates on deposits seem to be pushing the people to withdraw their bank deposits. Bank deposits of all scheduled commercial banks collectively declined by a whopping Rs 74,727 crores in the fortnight ending June 19, 2020 as against Rs 1,11 242 crores in the previous fortnight ended June 5, 2020, according to data published by RBI. The major reasons being the low level of economic activity hit by the pandemic and also people, unhappy with the nominal returns by way of very low interest rates have become bold enough to withdraw bank deposits and invest in Mutual Funds, equity markets and Corporate deposits.
1. THE NPA LEVELS OF TOP 5 PRIVATE SECTOR BANKS MAY DOUBLE IN FINANCIAL YEAR 2021: Top 5 Private Sector Banks (HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank & IndusInd Bank) may see their Bad Loans -- Non-Performing Assets (NPAs) double to 5% this fiscal ( 2020-21) due to the poor loan offtake and moratorium driven contraction in net interest margins. These five banks collectively control 25% business of the banking system as a whole and 75% business of the private banking space. This is according to a report by India Ratings. In FY 2019 (2018-19) the slippages of these 5 banks was 2.3% and in FY 2020 (2019-20) it was 2.7%.
2. TRADERS BODY DEMANDS EXEMPTION OF MINIMUM BALANCE NORM IN CURRENT ACCOUNT: A traders’ body has asked RBI to instruct banks to exempt current accounts held by small businesses from maintaining minimum balance in view of the hardships being faced by these small businesses due to the ongoing Covid-19 pandemic The Federation of All India Vyapar Mandal (FAIVM) has written a letter to RBI to look into the issue and act accordingly.
3. SBI TO DIGITISE MSME LENDING: State Bank of India is looking to re-energise its Micro, Small & Medium Enterprises (MSMEs) lending vertical by digitising the module and putting top people in key business pockets to acquire new customers. SBI’s MSME portfolio has shrunk by over 7% in FY 2020 to Rs 2.68 crores from Rs 2.89 crores. About 9.5% of this portfolio has turned into NPA. SBI is also working on unveiling a pre-approved merchant loan through its Yono app Platform. The onus will be on digitisation and using analytics as risk management tool to boost client acquisition. The bank is deputing senior officers to SME vertical in about 80 locations across India.
4. TDS FORM HAS BEEN AMENDED TO INCLUDE MORE DETAILS: The Income Tax Department has amended the TDS form, making it more comprehensive and mandating deductors to state reasons for non-deduction of tax. The Central Board of Direct Taxes (CBDT) has amended Income Tax Rules to include TDS on e-commerce operators, dividend distributed by mutual funds and business trusts, cash withdrawals (above Rs 1 crore), professional fees and interest. The government has accordingly revised the Form 26Q and 27Q where details of TDS amount deducted and deposited on various resident and non-resident payments are furnished.
5. GOVERNMENT MAY REVIEW CAPITAL REQUIREMENT BY PSU BANKS AFTER SECOND QUARTER: The Finance Ministry may assess the capital requirement of public sector banks after September 2020 as there would be greater clarity about the spike in bad loans. There is a widespread fear that the Non-Performing Assets (NPAs) of banks will witness a huge surge due to the economic slowdown triggered by Covid-19 outbreak and resultant lockdowns. If the NPAs rise then this will need higher provisioning by banks as per the guidelines.
6. ALL YOUR SHARE TRADING, OTHER DATA WILL BE NOW WITH INCOME TAX DEPARTMENT: Many small retail investors trade in equities on a regular basis, resulting in small capital gains or losses. But many of these retail customers casually ignore mentioning the details in their Income Tax Returns (ITR) due to unaivaibility of data on capital gains. However, things are now going to change as a formal Memorandum of Understanding (MoU) has been signed between Central Board of Direct Taxes (CBDT) and Securities & Exchange Board of India (SEBI) for exchange of data between the two organisations due which sharing of data/information will be continuous and automatic. This will make disclosure of information on equity and equity related transactions more stringent.
7. MOODY’S WARNS BANKS OF INCREASED CYBER CRIMES: Global ratings agency Moody’s Investors Service has warned Indian banks of increased risks of cyberattacks during ongoing Covid-19 pandemic as employees are still adjusting their work from home routines and lenders are shifting their physical processes into digital. These attacks can be in the form of phishing emails, malware attacks and social engineering frauds. Banks digital customers are a natural target for fraudsters. Moody’s further said that banks can mitigate these risks by having a strong corporate governance, proper cybersecurity frameworks, policy enforcements and reporting.
8. PUNJAB NATIONAL BANK DECLARES ITS Rs 3,688 CRORE EXPOSURE TO DHFL AS FRAUD: Punjab National Bank (PNB) has declared its Rs 3,688 crores exposure to bankrupt lender Dewan Housing Finance Corporation (DHFL) as fraud. Under the rules set by the banking regulator, 100% provisioning is required in fraudulent accounts spread across a period of 4 quarters. So far PNB has made a provision of Rs 1,246 crores in the account. SBI, Union Bank of India and IndusInd Bank have already red-flagged DHFL account as fraud.
1. AXIS BANK DECIDES TO WIND-UP ITS UK BASED SUBSIDIARY: Axis Bank said it has decided to wind up its UK Subsidiary and the move will not have any material impact on its financial position. The Bank was reviewing its international strategy and as a part of this, has adopted a clear objective to focus on the Indian banking market and harness the potential in India. The bank is targeting for surrendering the banking license of Axis Bank UK Ltd in UK by the end of April 2021. The bank has assured that it will ensure transparency and fairness in dealing with all its employees and customers of Axis Bank UK Ltd throughout this winding down process.
2. NO RELIEF FOR “MUDRA-SHISHU” LOAN BORROWERS DURING LOCKDOWN: Mudra Shishu Loan borrowers opting for the moratorium on their existing debts will not get the 2% interest subvention under Centre’s Covid-19 relief package before the expiry of the repayment holiday. The subvention of 2% will only begin from June’20 for the next one year for only those borrowers who have opted out of the moratorium offer.
3. RBI ASKS BANKS TO SPEED UP ATM UPGRADES AS DEADLINE LOOMS LARGE: Most of the Indian banks are staring at penalties from RBI over missed deadlines on compliance with ATM security and cash management norms introduced by RBI over the last two years which banks say is not feasible enough to carry out the changes due to meddling in the fee structure. Most of the banks have not initiated upgrades on cassette swap, e-surveillance, installing digital locks and upgrading the Operating System as their cost analysis of such an overhaul is significantly higher than RBI’s estimates. Presently only 5% of the total ATMs have been upgraded.
4. NBFCs, HFCs WITH MORE THAN 6% NET NPAs WILL NOT BE ELIGIBLE FOR SPECIAL LIQUIDITY SCHEME: During May’20 the Union Cabinet had approved a special liquidity scheme for stressed Non-Banking Finance Companies (NBFCs) and Housing Finance Companies ( HFCs) to be channelled through a Special Purpose Vehicle (SPV).Now RBI has said the NBFCs and HFCs with more than 6% of Net Non-Performing Assets (NPAs) will not be eligible to receive support from the Rs 30,000 crore Special Vehicle Liquidity Scheme. The NBFCs will also need to have a capital adequacy above 15% and for HFCs it needs to be 12% as on March 31, 2019. And these NBFCS and HFCs should have made net profit in at least one of the last two preceding financial years (FY 2017-18 and FY 2018-19).
5. GOVERNMENT EXTENDS THE TERM OF UNION BANK OF INDIA CEO BY ANOTHER TWO YEARS: The Finance Ministry has said that it is extending the term of Mr Rajkiran Rai, CEO of Union Bank of India by another two years. Mr. Rai’s term which was ending on June 30, 2020 has now been extended till May 31, 2022. Mr Rai had taken over as CEO of Union Bank of India on July 1, 2017.
6. LOAN RECASTS WILL ONLY DEFER THE PROBLEM, NPAs MAY ZOOM UP BY AROUND 14% DUE TO COVID-19 EFFECT:The global rating agency, S&P has said that the loan recast (moratorium) will only defer NPAs recognition and it will not solve the problem. The rating agency also said that operational outrages and recession because of pandemic will have a deeper and longer impact on lenders and estimated that the gross Non-Performing Assets (NPAs) ratio to rise up to 14% in FY 2021 from 8.5% in FY 2020. The agency further said that the Covid-19 pandemic may set back the recovery plans of Indian Banks by years, which could hit credit flows and ultimately the economy will suffer.
7. IRDAI ASKS INSURANCE COMPANIES TO LAUNCH STANDARD COVID-19 HEALTH COVER WITH THE SAME NAME: With the spread of Covid-19 pandemic, the Insurance Regulatory & Development Authority of India (IRDAI) has asked the Health and General Insurance companies to launch short-term Covid-19 standard policy by July 15,2020 with a specific common name and features as per the guidelines issued b y the IRDAI. IRDAI has instructed that the nomenclature of the product shall be “Corona-Rakshak Policy”, succeeded by the Company name and no other name will be allowed. The minimum Sum Insured will be Rs 50,000/- and maximum sum assured will be Rs 2,50,000/-.
8. MSMEs TO BE KEY BENEFICIARIES IN GOVERNMENT’S DEFENCE PROCUREMENT UNDER PM’S ATMANIRBHAR VISION: Micro, Small & Medium Enterprises (MSMEs) will be the prime vendors in procurement of defence equipment by the government from the industry for Rs 31,130 crore approved by Defence Acquisition Council (DAC). The equipment are going to be manufactured in India involving Indian Defence Industry with the participation of several MSMEs as prime vendors. The approvals come amid the government’s call for economic self-reliance along with promoting local products under PM Modi’s “Vocal for Local” campaign.
1. GOOGLE PAY CLARIFIES THAT ALL TRANSACTIONS THROUGH GPAYARE FULLY PROTECTED: Google Pay (Gpay) has clarified that all transactions made through its platform—Gpay are fully protected by any redressal processes as laid out by the guidelines issued by RBI and the National Payments Corporation of India (NPCI). The statement comes against certain news floating in the media that any issues arising while transferring money through Gpay app cannot be redressed under law as the app is unauthorised. Google pay has clarified against this and said this can be clarified on NPCI website.
2. COOPERATIVE BANKS BROUGHT UNDER RBI SUPERVISION: The cabinet has approved an ordinance which will bring the cooperative banks under the supervisory powers of Reserve Bank of India. RBI’s powers on scheduled banks would be hence applicable on cooperative banks as well. The decision to bring 1,540 cooperative banks under RBI’s supervision will give an assurance to more than 8.6 crore depositors in these banks that their money amounting to Rs 4.84 lakh crores will stay safe. The cooperative banks will come under RBI supervision with immediate effect from the date of President’s approval of the ordinance. The proposal had been already announced in the budget this year.
3. YES BANK LAUNCHES MOBILE PAYMENT APP “YUVA PAY”: Yes Bank has launched its digital wallet app “Yuva Pay” in partnership with UDMA Technologies to enable contactless payments for its customers.The digital wallet issued under minimum KYC regulations to Yes Bank will offer bill payments via Bharat Bill Pay and provide Unified Payments Interface (UPI) facility to customers. Through the app, customers can pay their utility bills, make insurance renewals, FASTag recharges, EMI payments and use the app for making payments at retail outlets. The Customers can also use this as a normal banking app also.
4. BANKS GO FOR “STRESS TEST” TO ASSESS THE IMPACT OF COVID-19 ON NPAs: Banks have undertaken stress test to assess the level of bad loans (Non-Performing Assets – NPAs) caused due to the economic slowdown triggered by the outbreak of Covid-19 pandemic. Sine the financial year 2019-20 has ended and the first quarter of financial year 2020-21 is nearing completion, it is prudent to undertake the stress test to have a better view of the financial health. The exercise requires building and reporting worst-case scenario on asset quality side and subsequent capital requirement. This will help the management and the regulatory body (RBI) in taking proper steps.
5. MSME SECTOR GETS ANOTHER PUSH FROM THE GOVERNMENT, DISTRESSED MSMEs TO GET Rs 20,000 CRORE GUARANTEE COVER: The distressed Micro, Small & Medium Enterprises (MSMEs) got one more push from the government with the launch of a Credit Guarantee Scheme. The government, with an aim to bolster manufacturing sector, has rolled out a subordinate debt scheme to provide a Rs 20,000 crore guarantee cover to 2 lakh MSME units. This will entail a sub-debt facility to the promoters of those operational MSMEs that are distressed or have become Non-Performing assets (NPAs) as on 30/04/2020. It also guarantees cover to the promoters who can take loan from the banks to further invest in their stressed MSME units as equity.
6. FITCH RATINGS REVISES OUTLOOK OF MOST BIG INDIAN BANKS TO NEGATIVE: Global ratings agency Fitch has revised the ratings of 9 large Indian Banks to negative from Stable due to the impact of the escalating Covid-19 pandemic on the Indian economy. These banks include the country’s largest banks like SBI, ICICI Bank, Bank of India, Axis Bank, Bank of Baroda, Punjab National Bank among others. The negative outlook on Indian Banks reflects an increasing strain on the government’s ability to provide extraordinary support, due to the government’s limited fiscal space and significant deterioration in fiscal metrics due to the challenges from Covid-19 pandemic.
7. SUPREME COURT RULES OUT A COMPLETE INTEREST WAIVER ON LAONS DURING MORATORIUM PERIOD: The Supreme Court (SC) has rightly ruled out the possibility of a complete interest waiver on loans during the moratorium period. Considering the arguments by banks and RBI that the borrowers cannot pay while the banks need to pay to the depositors, the SC has given this ruling. However, the SC has asked the banks, RBI and the government to have a re-look on the issue as to how much benefit can be provided to the borrowers. This has left the window open for some relief to borrowers and now it may be left to individual banks to decide on this.
8. PAN-AADHAAR, TAX SAVING, FORM-16, BELATED ITR FILING DEADLINES EXTENDED: Several direct tax deadlines have been further extended. As per the new deadlines, linking of PAN with Aadhaar is extended till March 31, 2021. The deadline for filing belated or revised tax return for FY 2018-19 has been extended to July 31, 2020. The deadline for making tax saving investments to claim tax breaks under Section 80 C for FY 2019-20 has been further extended to July 31, 2020 and the date of issuance of TDS certificates (Form 16 and Form 16A) has been extended to August 15, 2020.
1. TOTAL MORATORIUM LOAN AMOUNT IN THE BANKS’ BOOK SLIDING DOWNWARDS: The total loan book under moratorium for banks and large NBFCs has come down as many customers have opted out after initially opting for it. This is as per a report by Macquarie Capital Securities. The report says that as per the feedback received by senior management of many banks, there has been a decline in the total loan book under moratorium by about 25%. Customers who had earlier opted for the moratorium without reading the fine print, notably the compounded interest that they will have to pay for the moratorium period, have changed their mind and have opted out.
2. NEARLY 15% OF MUDRA LOAN PORTFOLIO IN SBI HAS TURNED BAD: About 15% of State Bank of India’s Mudra Loan portfolio has turned bad. Reserve Bank of India had raised concerns over the growing stress on the government’s loan scheme for Micro enterprises. SBI had sanctioned Rs 33,800 crores of Mudra loans in Financial year 2019. The Shishu Mudra Scheme under which loans upto Rs 50,000 are disbursed have seen the highest delinquency ratio. Now the bank has adopted digital process for lending under the scheme and has tasted some success in containing non-performing assets. The new model is called e-Mudra.
3. FINANCE MINISTRTY ASKS BANKS TO CUT COSTS: The Finance Ministry has issued a stern order to Public Sector Banks (PSBs) to defer “avoidable” expenditure until the next fiscal. The ministry has directed these banks to place its order on spending on publicity and conferences before their boards. The Ministry said that in the context of Covid-19 pandemic, it is necessary that banks take appropriate measures to ensure productive use of their financial resources for core business activities. The banks have been asked to rationalise expenses by weighing their operational profitability and cost to income ratio.
4. DEPOSITORS SEEK RBI PROTECTION AGAINST WAIVER OF BANK INTEREST FOR MORATORIUM LOANS: The All India Bank Depositors Association (AIBDA) has expressed apprehension that banks will stop paying interest on deposits if the Supreme Court allows complete waiver of interest on moratorium loans due to Covid-19 pandemic effect. The Association feels that if the banks are not allowed to charge interest from borrowers on the loan amount for the moratorium period then they will not be in a position to fulfil their obligation towards depositors. Hence AIBDA has asked RBI to freeze interest rates on deposits at pre Covid levels.
5. INDIA’S FOREX RESERVES CROSS $ 500 BILLION: India’s forex reserves crossed $ 500 billion for the first time in the week ended June 5, 2020. Unlike 1991, when India had to pledge its gold reserves to stave off a major financial crisis, the country can now comfortably depend on its soaring foreign exchange reserves to tackle any economic scenario. Due to the Covid-19 pandemic effect the situation out there is gloomy on the economic front with GDP set to contract for the first time in 40 years and manufacturing activity is at all time low. Added to this, the current tussle with China on border issues may have adverse effects on the economy. But the soaring Foreign exchange reserves is one cheerful news. Since the lockdown in March 2020, the forex reserves have surged by $31.8 billion, hitting an all-time high of $ 501.7 billion on June 5, 2020.
6. NEW DRAFT NORMS—50% OF HFCs ASSETS MUST BE HOUSING LOANS: In a proposed review of the existing norms for Housing Finance Companies (HFCs), the Reserve Bank of India has now clearly defined the Housing Finance Business. As per the new norms, 50% of HFCs assets (loans) should be in the form of housing loans and 75% of that should be for individual borrowers. The proposed norms are formed after the blowout at DHFL, where chunk of retail loans was found to have been diverted to group companies. Housing Companies will be allowed to achieve this target in phased manner—60% by March 21, 2022, 70% by March 31, 2023 and 75% by March 31, 2024.
7. GOVERNMENT SHOULD HAVE A SAY ON PRUDENTIAL BANKING NORMS: RBI’s Central Board Director Mr Swaminathan Gurumurthy has suggested that the government should have a say on prudential norms, and that it should not be a viewed as something against RBI’s independence. He further opined that the government and RBI should sit together and offer a one-time restructuring option to all those accounts which are declared as Non-Performing Assets.
1. SBI LAUNCHES AADHAAR-BASED ONLINE SAVINGS ACCOUNT OPENING FACILITY: State Bank of India (SBI) has launched its Aadhaar-based instant digital savings account opening facility by using its YONO platform. YONO is SBI’s integrated banking platform. The “Insta Savings Bank Account” will offer a complete paperless and instant digital savings account opening with just PAN and Aadhaar number. The account thus opened will have all the regular features of a normal savings bank account. The bank will issue a basic personalised RuPay ATM-cum debit card to such Savings bank account holders.
2. BANKING THROUGH WHATSAPP IS THE NEW DIGITAL MEDIA BUZZ: As Indian banks are providing their branch banking services through digital media alternatives during lockdown, WhatsApp has sensed an opportunity in its biggest market to capture a new user segment—Retail Banking. The Facebook owned messaging platform has further scaled its existing partnerships with some of the biggest names in Indian Banking—HDFC Bank, ICICI Bank, Kotak Mahindra Bank Axis Bank etc. The Application Programming Interface (API) integration have allowed these banks to provide basic services such as balance enquiry, credit card statements and in some cases even opening of savings bank accounts as well through WhatsApp. WhatsApp has 2 billion users worldwide and 400 million users in India. It has availed the services of 10 developer platforms to backend API integrations.
3. BANK UINIONS DEMAND REGULAR SANITIZATION OF BRANCHES: The United Forum of Bank Unions (UFBU), an umbrella organisation of bank unions has demanded regular sanitization of branches. Worried about the health and safety of its employees and the death of as many as 11 of its employees so fardue to the Covid-19 pandemic, it says these additional steps are needed to ensure safety of staff. Besides this, UFBU is also demanding Rs. 1,000/- daily allowance and Rs 50 lakh insurance cover for bank staff as provided to health workers. The bank employees are facing problems due to non-availability of transport and reduced number of security staff and workers responsible for cleanliness of branch premises.
4. ICICI BANK REDUCES EMPLOYEE NOTICE PERIOD FROM 90 DAYS TO 30 DAYS: ICICI Bank in a communication to its employees said it has reduced the employee notice period from the existing 90 days period to 30 days.The reduced notice period, as per the communication will be applicable from June 17, 2020 and will apply to employees in Managerial posts of its internal MMII grade and below.
5. UNION BANK CREATES NEW ORGANISATIONAL STRUCTURE WITH 18 ZONAL OFFICES: Union Bank of India, with merged entities of Corporation Bank and Andhra Bank has created a new organisational structure having 18 zonal offices and 125 regional offices. The bank has established 4 new Zonal Offices in Chandigarh, Jaipur, Mangalore and Vishakhapatnam. Additionally, it has opened 32 new regional offices. Post amalgamation, Union Bank of India has become the 5TH largest Public Sector Bank. Now it has more than 9,500 branches and 13,500 ATMs. The bank has launched “Regional Heads Booklet” which will be a one-stop manual which comprehensively covers all roles and responsibilities of Regional heads.
6. IBC SUSPENSION WILL MAKE WAY FOR MORE FRAUDS: The government’s decision to suspend initiation of fresh insolvency proceedings for the next 6 months from March 25, 2020 might be a good move for companies truly impacted by Covid-19 outbreak and lockdown but it may also lead to certain frauds. As per the ordinance, proceedings under the Insolvency & Bankruptcy Code (IBC) cannot be filed for defaults during the suspension period of six months. The promoters of companies that have the capacity to pay the dues could force a default and never be held accountable and while the creditors cannot initiate cation under IBC and though they have other measures on hand outside IBC, the promoters will get sufficient time and may siphon off assets, manipulate the books or divert cash flows and exit the business.
7. RBI PLANS TO OVERHAUL CORPORATE GOVERNANCE STRUCTURE OF BANKS: The Reserve Bank of India plans to overhaul the corporate structure of Indian Banking system. The likely changes include limiting the terms of directors and Chief Executive Officers and placing more responsibility on the board of directors. Board of Directors would be responsible for remuneration and the performance and would be accountable for the risk taken by a bank.
8. GOVERNMENT ROLLS OUT FACILITY OF FILING “NIL” GST RETURN THROUGH SMS: The government has now allowed filing of “NIL” GST monthly return in FORM GSTR-3B through SMS. This would substantially improve the GST compliance for over 22 lakhs registered tax payers who had to otherwise log into their account on the common portal and file their returns every month. Now these tax payers with NIL liability may file their “NIL” returns through SMS mode.
1. BANKS SEEK RBI NOD TO RECAST Rs 3 LAKH CRORE LOANS MINUS DOWNGRADE: Banks have asked the Reserve Bank of India to allow them to restructure loans worth about Rs 3 lakh crores given to aviation, hospitality and commercial realty without downgrading these assets in their books. These sectors are among the worst-hit by the Covid-19 pandemic and subsequent lockdown. As on April 2020, banks had an exposure of Rs 2.3 lakh crores to commercial realty, Rs 45,862 crores to hospitality business and Rs 30,000 crores to aviation firms. Banks have told the RBI that without the restructuring relief, Non- Performing Assets (NPAs) in their balance sheet will swell.
2. COMPANIES KEEN TO CONTINUE “WORK FROM HOME”: Most of the Indian Companies are likely to encourage most of their employees to continue functioning from home for the next 2-3 months as they are not willing to let their employees expose to the Covid-19 risk immediately. And most of the companies have realised that since the present system of “Work from Home” concept is working well and hence don’t want to risk the health of their employees. Most of the companies are very cautious in their approach and don’t want their employees rushing back to office even though the lockdown has been eased in several parts of the country.
3. PSBs LURING MSMEs WITH PRE-APPROVED LOANS: Public Sector Banks (PSBs) are trying to reach out to Micro, Small & Medium Enterprises (MSMEs), which are their existing customers, for loans under the “Atmanirbhar Bharat” package that has promised Rs 3 lakh crores in Collateral free loan. Messages of Pre-approved loans on attractive interest rates are being sent to these MSME customers. In some cases, Pre-approved loan sanction letters are also being sent to the existing MSME customers. As per data available till May 2020, total sanctions touched Rs 13,000 crores while the disbursements stood at Rs 6,000 crores.
4. GOVERNMENT’S CREDIT SCHEME UNDER “ATMANIRBHAR BHARAT” ONLY ON PAPER, BANKS RELUCTANT TO EXTEND COLLATERAL-FREE LOANS: The government has launched the “Guaranteed Emergency Credit Line” loan scheme under which banks are supposed to sanction collateral-free loans to MSMEs, banks are not to insist on any collateral security from Micro, Small & Medium Enterprises (MSMEs). But All India Manufacturers Organisation (AIMO) has said that the Guaranteed Emergency Credit Line” without collateral security is only on paper as most of the loans extended to mostly those existing customers who have already availed loan from the bank by giving collateral security and whose value of the security is almost two times the present outstanding loan amount. AIMO says that this is as per the feedback received from companies that have applied for loan under the scheme.
5. BANKS TO INSTALL CONTACT-LESS ATMs TO CUT DOWN ON TOUCH: With reduced hand contact being the order of the day due to the Covid-19 pandemic, banks are all set to deploy “Contact-less ATMs”. A prototype has been developed by Payments Company AGS Transact Technologies, which uses the bank’s mobile app to interface with the ATM after scanning a QR code on the screen. To use the contact-less ATM, the customer has to use the bank’s smartphone app to scan a QR code on the screen and enter the amount and ATM Pin in his mobile, and collect the cash without touching the machine.
6. RBI TELLS SC--Rs 2 LAKH CRORE WILL BE LOST IF INTEREST IS WAIVED OFF DURING MORATORIUM, BUT SC BENCH HAS OTHER VIEWS: RBI has told the Supreme Court that it cannot waive interest on loans thus charged during the moratorium period, as it would affect the financial stability of the banking sector and this would jeopardise the interests of the depositors. It is estimated that the interest payable on these loans will be Rs 2.01 lakh crores or equivalent to 1% of India’s Gross Domestic Product (GDP). RBI has further clarified that the moratorium was only a deferral and not a waiver on payments. But Supreme Court has observed that such a stand was detrimental and sought a response from the Finance Ministry. The Supreme Court expressed that “while on one end you are granting moratorium, on the other there is no relief on interest which is more detrimental in such challenging times. The Bench said there were two aspects under consideration, no interest during moratorium and no interest to be charged on interest. SC has set the next hearing in the matter for June 12th.
7. MOODY’S INVESTOR SAYS RETAIL AND SME LOANS TO DETERIORATE NOW: Moody’s Investors Service said that the quality of retail and Small & Medium Enterprises (SMEs) loans will also deteriorate and the risks to the financial system will rise. Some sectors were already under strain before Covid-19 crisis. For NBFCs both assets and liabilities will come under strain now. NBFCs sector has an exposure of around 15% of the total bank loans. In the auto chain sector, the most exposed banks are private sector banks. The Moody’s report now says the quality of retail and SME sector will also deteriorate, which amounts to 44% of the total loans.
1. FITCH PROJECTS INDIAN ECONOMY TO CONTRACT 5% THIS FISCAL: Fitch Ratings has made a forecast of a 5% contraction of Indian Economy in the current fiscal. This is on account of slump in economic activities due to the Covid-19 pandemic lockdown. Fitch has also made further cuts to world GDP forecasts in its latest Global Economic Output (GEO) Report for May’20 but the biggest forecast cut was for India. But the report also points out that the Indian economy is expected to rebound to 9.5% in 2021-22. Meanwhile a SBI Research report has noted that the Indian economy faces a huge loss in June quarter of the present fiscal and the GDP could contract by more than 40% during this period.
2. OVER 6 LAKH STORES MAY BE SHUT DUE TO LOCKDOWN EFFECT: Leading consumer goods companies have predicted that over 6 lakh kirana outlets may have closed down during lockdown, hurt by liquidity crunch or return of the owners to their native villages and the fear is that these shops may not reopen. The stress could be seen also in mobile handset sector, with All India Mobile Retailers Association estimating that around 60% of the 1,50,000 stores selling smartphones have not opened after the sale of non-essential goods was allowed. These closures may further delay recovery of the market.
3. FISCAL DEFICIT WIDENS TO 4.6% OF GDP IN 2019-20: The fiscal deficit (Gap between the government’s revenue and expenditure) widened to 4.59% of Gross Domestic Product (GDP) for the fiscal year 2019-20, surpassing the government’s revised target deficit of 3.8%. The Fiscal deficit was at Rs. 9.35 lakh crores in March ’20, 22% higher than the targeted figure of Rs 7.66 lakh crores. The government’s net GST tax revenue was at Rs 21,412 crores in April’20, revealing a massive 70% decline as against a collection of Rs. 71, 637 crores in April last year. This will hugely impact the fiscal deficit for the next fiscal year.
4. INSTANT PAN CARD ONLINE THROUGH AADHAAR FACILITY LAUNCHED: Finance Minister Ms Nirmala Sitharaman has formally launched the facility of instant PAN Card through Aadhaar based e-KYC on real time basis. The process of applying for the instant PAN is very simple. The applicant has to go to the e-filing website of the Income Tax Department and provide his/her valid Aadhaar number and submit the OTP thus generated on the Aadhaar registered mobile no.
5. REVISED 26-AS FORM NOW INCLUDES REAL ESTATE, SHARE TRANSACTION DETAILS: The Income tax department has introduced the revised Form 26AS, which contains details of Tax Deducted at Source (TDS) which will also include information pertaining to property and share transactions. With this, the Form 26AS has been revamped to Annual Information Statement which will contain comprehensive information relating to specified financial transactions, payment of taxes, demand/refund and pending/completed proceedings undertaken by a tax payer in a particular financial year that has to be mentioned in the income tax returns. To implement this, the Budget 2020-21 had introduced a new section 285BB in the Income Tax Act.
6. SBI READY TO ENTER MICRO MARKET SECTOR, SOFT LAUNCH ON JUNE 1, 2020: State Bank of India is all set to enter Micro Market vertical from June 2020 onwards. It will enter the tiny financial vertical of Micro Financing and has asked SBI Life Insurance Chief Executive Mr. Sanjeev Nautiyal to head the initiative. SBI has decided to go ahead with its plan to launch the specialised cell for small borrowers despite the rising odds against that line of financing in the aftermath of Covid-19 outbreak. SBI will be using its strong network of 7,500 rural branches to venture into this initiative.
7. FITCH WARNS OF BIG HIT TO ASSET QUALITY OF INDIAN BANKS: Fitch Ratings has said that increased pressure to lend will erode the assets quality of Indian banks by 200 to 600 basis points for at least next two years. The latest measures announced by RBI, including an extension of 90-day moratorium on repayments of term loans and allowing banks to fund interest on working capital loans, will put a heavy burden particularly on state owned banks. The lockdown to contain the Covid-19 virus has taken a severe toll on businesses. The report said that the impact for micro, small & medium business sectors is structural and a meaningful revival is unlikely even when the lockdown ends.
8. US PRESIDENT TRUMP ANNOUNCES END OF RELATIONSHIP WITH WORLD HEALTH ORGANISATION: US President Donald Trump has announced that United States of America (USA) will terminate its relationship with World Health Organisation (WHO) and will be redirecting those funds to other worldwide and deserving, urgent global public health needs. Mr Trump has remarked that China had not properly reported information it had about the coronavirus to the World Health Organisation and further said that China had pressurised the WHO to mislead the world about the virus. Trump has launched a blistering attack on China, including a slew of retaliatory measures that will plunge US-China relations into deeper crisis.
1. RBI EXTENDS EMI MORATORIUM BY ANOTHER THREE MONTHS: The Reserve Bank of India (RBI) announced an extension of the moratorium on term loan EMIs by another three months till August 31, 2020. The earlier 3-month moratorium was ending on May 31, 2020. This makes it a total of 6 months moratorium on term loan EMIs staring from March 1, 2020. The interest shall continue to accrue on the outstanding portion of the term loan during the moratorium period. Availing such a moratorium however will not lead to a down grading of the borrower’s credit rating or affect the risk classification of the loan.
2. LOCKDOWN PERIOD CASH DEMAND ALMOST DOUBLE THE LEVELS OF LAST YEAR’S ELECTION PHASE: Cash demand during the lockdown period is almost double the amount of what was witnessed during last year’s election period. The currency circulation between April 1, 2020 and May 15, 2020 amounted to Rs 1.42 lakh crores. This is almost double the amount of Rs 72,984 crores which was in circulation during last year’s election phase. The recent increase in circulation during lockdown reflects higher cash withdrawals by customers and the fact is the cash thus withdrawn is not coming back to the banking system which indicates that customers have withdrawn cash and are holding cash with them envisaging certain emergencies during lockdown.
3. BANK OF BARODA TO APPOINT AGENCIES TO MONITOR Rs 4 LAKH CRORE NBFC LOANS: Bank of Baroda has taken the lead to monitor the entire Non- Banking Finance Companies (NBFCs) loan portfolio on behalf of all the banks. The NBFC sector (including some big ones like Bajaj Finance, Tata Capital, HDB Financial, Tata Motor Finance M&M Finance, etc) have an exposure of Rs 4 lakh crores to the banking system. Bank of Baroda will appoint an agency to monitor the said exposure. Monitoring agency would be assessing the asset quality, cash holdings, likely siphoning off transactions if any, flag non-business transactions among host of other requirements. Bankers are worried over the performance of these NBFC credit and they want an assessment of the actual credit quality of their books and see the potential stress build-up.
4. KOTAK MAHINDRA BANK BECOMES FIRST INDIAN BANK TO ALLOW VIDEO KYC: Kotak Mahindra Bank has introduced video-KYC (Know Your Customer) facility for customers opening new Savings account on the bank’s digital platform, thus becoming the first private bank to offer video based “zero-contact” account opening service. The initiative is presently being offered on a pilot basis for savings accounts. With video KYC, verification of documents and signature are completed via a video call with representative from the bank without any physical interface.
5. BAD LOANS IN BANKING SECTOR MAY RISE BY Rs 5.5 LAKH CRORE THIS FISCAL DUE TO COVID-19 EFFECT: With economic activities coming to a standstill due to the Covid-19 pandemic crisis, total slippages of loans to bad loans in the banking system may rise up to Rs 5.5 lakh crores in the current fiscal. The India Ratings and Research has said this in one of its report. While the slippages from the corporate sector may rise by Rs 3.4 lakh crores, for non-coroprate sector it may be Rs 2.1 lakh crore. The rating agency has further reported that most of the sectors in the country are likely to face varying degrees of revenue contraction due to demand and supply disruptions on account of pandemic crisis. This additional slippage of Rs 5.5 lakh crore is 5.7% of the gross bank credit.
6. GRAPPLING WITH FEAR OF COVID-19, INVESTORS START MOVING TOWARDS BANK FDs: Risk-averse investors are moving their money to state owned bank fixed deposits and top rated finance companies as stock market remains volatile and debt funds have become riskier after Franklin Templeton closed six of its credit risk fixed income schemes because of redemption pressure and liquidity problem caused by Covid-19 crisis. Panic-stuck investors have rushed to redeem their investments in credit risk funds of asset management companies. This indicates that investors are no longer willing to take risks in the debt portion of their portfolio.
7. MORATORIUM TO STRAIN NBFC LIQUIDITY EVEN FURTHER: The recent moratorium of term loans for customers is likely to cause a lot of hardship for Non-Banking Finance Companies (NBFCs) as these firms operate with very little short term liquidity and they normally manage the liquidity by matching cash inflows from loan repayments by customers with cash outflows to repay their liabilities. And moratorium on loan repayments will result in substantial decline in cash inflows over the next few months. Customers will also start defaulting even after the moratorium period.
1. 72% OF OUTSTANDING BANK CREDIT IN RED ZONE: The Ministry of Health & Family Welfare has classified the country into 3 zones—Green, Orange and Red based on the Covid-19 cases, with varying levels of restrictions on economic activity across the zones. Now a latest report has revealed that 72% of outstanding bank credit and 62% of bank deposits are in the Red Zone districts. Due to the severe restrictions on the level of economic activities there would be delay in the resumption of economic activity in red zone andthis could put pressure on the lenders’ asset quality. As of December 2019, the overall bank credit stood at Rs 100.70 Lakh crores while deposits were Rs 132.90 lakh crores. Out of this, the outstanding bank credit of Rs 72 lakh crore and deposits of 82.50 lakh crores are in red zone. This is as per a report by Care ratings.
2. BANKING LOBBY GROUP PROPOSES “BAD BANK” WITH TWO-TIER STRUCTURE: The Banking lobbyhas proposed formulation of “Bad Bank” in the form of an Asset Reconstruction Company (ARC) which could have a two-tier structure where the government would own 100% of the reconstruction company with an investment of Rs 10,500 crores. Banks may shift Rs. 70,000 crores of bad loans at a value net off the regulator determined provisions and would review the stressed accounts post the lifting of moratorium and could decide to shift more assets with additional capital from the government. This is as per the IBA proposal.
3. GOVERNMENT CHANGES DEFINITION OF MSMEs, REVISES INVESTMENT LIMIT: The government has revised the definition of Micro, Small & Medium Enterprise (MSME) sector by revising the investment limit and by adding an additional criterion of “Turnover” in the new definition. In the new definition, the government has also done away with the distinction between manufacturing and services sector. As per the revised definition, any firm with an investment of up to Rs. 1 crore and turnover under Rs. 5 crores will be classified as “Micro”, a company with investment up to Rs. 10 crores and a turnover up to Rs. 50 crores will be classified as “Small” and a firmwith an investment up to Rs. 20 crores and turnover under Rs 100 crores will be classified as “Medium”
4. WITH IBC SUSPENDED, THE NEW BUZZ IS “PRE-PACKED INSOLVENCY”: The Union Cabinet has decided to put the Insolvency & Bankruptcy Code, 2016 (IBC) in abeyance by suspending the admission of new cases into insolvency for the next 6 months to address the hardship of business houses being dragged into bankruptcy due to the pandemic fuelled distress. The move has resonated well with the lenders, who have already suggested a two-year suspension of IBC in light of what they estimate is going to be the time it would take for the markets to normalise. In place of IBC, a new system of Pre-Packaged Insolvency or “Pre-Pack” has come into replace. A pre-pack is a mix of an out-of-court restructuring scheme and formal insolvency process where the terms of sale are pre-negotiated and finalised with approvals of creditors prior to filing for insolvency with the court.
5. IMPS TRANSFERS IN APRIL’20 PLUNGE TO 2-YEAR LOW: The economic impact of the lockdown is reflected in the sharp drop in retail interbank transfers under the Immediate Payment System (IMPS) transactions platform. The total transactions under IMPS in April’20 was 12.2 crores, which is half of the transactions that were effected under this platform in February’20. The impact is also seen in Unified Payment Interface (UPI) platform as well in April’20.
6. FINANCE MINISTRY’S Rs 75,000 CRORE PACKAGE MAY LOWER COST OF FUNDS FOR NBFCs & MICROFINANCE COMPANIES:The Finance Ministry’s announcement of Rs. 75,000 crore package to help the NBFCs and Micro Finance Companies may see borrowing costs fall and liquidity increase for these NBFCs and Micro Finance Companies. The Ministry’s proposed special fund of Rs. 30,000 crores and partial credit guarantee scheme worth Rs 45,000 crores could ease fears that some lenders had due to tight liquidity position. The two schemes could help these firms raise money, and also lend to MSMEs. The government will guarantee all the securities under the Rs. 30,000 crores scheme while the Rs. 45,000 crores scheme comprises a guarantee of up to 20%.
7. RELIEF FOR TAXPAYERS AS ITR FILING DEADLINE EXTENDED: Tax Payers who are yet to file their income tax returns for FY 2019-20 can take a sigh of relief as the deadline for filing income tax returns has been extended till November 30, 2020. Likewise, the deadline for filing tax audit returns is also extended till October 231, 2020. The said extension will give the much-needed time for the tax payers to compile their data required for filing the tax.
1. KOTAK MAHINDRA BANK DECLARES 10% PAY CUT FOR STAFF WITH OVER Rs 25 LAKH ANNUAL SALARY: Kotak Mahindra Bank has decided on a 10% pay cut for its employees earning above Rs 25 lakhs per annum for the year 2020-21. This move comes after the top management of the bank voluntarily surrendered 15% of their pay for 2020-21. The Covid-19 pandemic is expected to have a heavy impact on the economy and many corporates have been cutting salaries. The moveto recalibrate the salaries is driven by the objective of business stability.
2. SBI SCOUTS FOR PR AGENCY TO DEVISE BRAND BUILDING STRATEGIES: State Bank of India is looking to engage with a public relations agency for building its brand value and help it become the preferred choice of customers for their banking needs. SBI has a network of 22,000 branches spread across India. The selected agency will be responsible for developing and implementing public relation activities to be organised by the bank. The selected agency will have to design and implement the bank’s corporate communication strategy with a long-term prospective.
3. WITH LARGE LOAN BOOKS UNDER MORATORIUM, ASSET QUALITY CONCERNS COULD RESURFACE: Banks may see a spike in bad loans after providing the 3-month moratorium which is about to end on 31ST May’20, as the Covid induced lockdown continues to exacerbate the repayment capabilities of the borrowers. Some banks have recently disclosed that at least 33% to 35% of their loan books are under moratorium at the moment. Experts point out that this could become a problem going ahead as borrowers who have availed of the deferment will find it difficult to repay all the accrued interest as soon as the relaxation are lifted. Due to this moratorium, bad loans in the banking sector are expected to rise to 11-11.5% of the total advances by March 2021.
4. GST COLLECTIONS MAY SHOW NEGATIVE GROWTH IN SEPTEMBER: Goods & Services Tax (GST) collections may likely to witness a slow or even negative growth for at least 6 months from March’20 due to the impact of Covid-19 pandemic. An analysis of different scenarios reveal that GST revenue for the past 30 months has been uneven, volatile and far below official targets. Since March’20 the economy is in doldrums due to the pandemic and the GST collections are going to be affected badly.
5. RBI CANCELS MUMBAI BASED CKP CO-OP BANK’S LICENSE: The Reserve Bank of India has cancelled the banking license of the Mumbai-based CKP Co-operative Bank Ltd. The said bank was under “All Inclusive Direction” of the RBI since 2014. As there was no scope for revival of the bank, its license has been cancelled. RBI however, has clarified that 99% of the depositors of the CKP Co-op Bank Ltd will get full payments of their deposits from the Deposit Insurance & Credit Guarantee Corporation (DICGC). As on November 2019, the bank had deposits aggregating to 485.56 crores.
6. DATE FOR FILING GST RETURNS FOR FY-19 EXTENDED TO SEPTEMBER 2020: Goods & Services Tax (GST) assesses are given relaxation on the compliance front. The Finance Ministry has extended the date for filing annual returns for financial year 2018-19 till September 2020. At the same time, “NIL” return can be filed through Short Messaging Service (SMS).
7. GOVERNMENT TO SUPPORT MSMEs MAKING “IMPORT SUBSTITUTE” PRODUCTS: The government is looking to introduce an import substitution policy to replace foreign imports and boost domestic manufacturing in the wake of the current economic scenario due to Covid-19 pandemic. Addressing the Association of Lady Entrepreneurs of India, MSME Minister Mr. Nitin Gadkari said there is a need to focus on import substitution to replace foreign imports with domestic production.
8. COMPANIES ALLOWED TO HOLD AGMs VIA VIDEO CONFERENCING: The Ministry of Corporate Affairs (MCA) has allowed companies to hold their Annual General Meeting (AGM) through video conferencing or other audio-visual means during calendar-year 2020. The move comes on account of the need for continuous adherence to social distancing norms put in place due to Covid-19 pandemic.
9. GOVERNMENT TO FAST-TRACK NEW DEFINITION OF MSMEs: The government is fast-tracking the move to amend the definition of Micro, Small & Medium Enterprises (MSMEs)to allow these entities to grow in size. The plan is likely to be a part of the stimulus package, that is expected to be announced shortly. There have been detailed discussions on the issue with Law Ministry, which is open to allowing the definition change. There are around 6.3 crore MSME units in the country, with over 99% categorised as small units.
1. DIGITAL PAYMENT VOLUMES ON MOST NPCI CHANNELS REPORT A DECLINE: Digital payments on fast growing channels such as Unified Payment Interface (UPI), Immediate Payment Service (IMPS), National Electronic Toll Collection (NETC) have recorded a plunge in volume and value during the month of April’20. Aadhaar enabled Payment System was the only digital channel which recorded increased transactions and this is due to the payouts of government’s relief fund to beneficiaries through this channel. The muted economic condition and the forced freezing of discretionary spends by people due to nationwide lockdown is the reason for the decline.
2. ALL PAYMENTS VIA CARDS CAN NOW BE CONTACT-FREE: The Reserve Bank of India has given the green signal to country’s payment networks like Visa, Mastercard and NPCI to allow contact-free (tap-and-go) functionality on card payments for all purchases at retail outlets and shopping centers. This is a move at making such transactions safer and contact-free during the ongoing Covid-19 pandemic. The banks and the service providers have to upgrade at their level after which the customers can avoid swiping their cards at retail outlets enabled with contact-less point-of-sales devices even for the purchases exceeding the current limit of Rs 2,000/-.
3. BANKS LEND A WHOPPING Rs 1.15 LAKH CRORES TO NBFCs IN MARCH’20: Bank’s lending to Non-Banking Finance Companies (NBFCs) surged in March’20, the highest in a month since 2008. Banks have disbursed almost 1.15 lakh crores to NBFCs in March’20. Credit growth in India has been sluggish for the past two years as demand has slumped due to economic slowdown and companies were getting adjusted to GST regime and also due to bankruptcy code coming in force. But March fiscal year end saw banks disbursing loans to NBFCs to reach their targets.
4. RBI MAY RAISE PROMOTER HOLDING CAP IN PRIVATE BANKS: The Reserve Bank of India is looking to raise the 15% ceiling on promoter shareholding in private sector banks as part of new rules that are being drawn up. The move to balance ownership and control comes as some private banks have sought a relaxation in licensing norm.However, the promoter voting rights may be capped at 15-20%.
5. AXIS BANK ENTERS INTO DEFINITIVE AGREEMENT TO BECOME JOINT VENTURE PARTNER IN MAX-LIFE: Axis Bank has entered into a definitive agreement with Max Financial Services Ltd to become a joint venture partner in Max Life Insurance Co Ltd. The move will make Axis Bank a significant stakeholder in a life insurance venture and will allow it to participate in its long-term capital appreciation. On completion of the transaction, Axis Bank will have 30% equity stake in Max Life and the balance 70% will be retained by Max Financial.
6. LOCKDOWN SCENARIO PUSHES CASH-IN-HAND TO HIGHEST LEVEL: As per a report by The Indian Express, the first two weeks of the lockdown period has pushed the country more towards cash-driven instead of adopting digital payments as urged by the Prime Minister and RBI Governor. During the first fortnight of the lockdown, the share of money in the form of currency being held by the banks and public hit the highest level since 2007-08. The increase is caused by weak demand for credit at the banks in a slowing economy and people’s desire to hold more cash-in-hand amid lockdown and looming economic uncertainty.
7. AUTO COMPANIES HEAD FOR “ZERO” SALES IN APRIL: The Indian automobile industry is set to post almost “zero” sales in the month of April’20, the first time in its history as factories and dealerships are shut due to the nationwide lockdown. Industry experts opine that they are not expecting much improvement in sales in the month of May’20 as well and have warned of a prolonged crisis in the sector because of the Covid-19 on the economy and consumer sentiment.
8. MOST SMEs HAVE RUN OUT OF CASH: As per a survey by community platform LocalCircles, nearly half of the country’s Small & Medium businesses have either exhausted their funds or are as close to doing so as the unparalleled demand crash due to almost stoppage of their businesses due to the extended lockdown have forced them to dig into their own reserves. Almost 50% of the Small & Medium businesses have either already run out of funds or have less than a month’s estimate on-hand before they exhaust their funds.
9. OVER Rs 68,600 CRORE LOANS OF WILFUL DEFAULTERS WRITTEN-OFF: Indian Banks have written-off Rs 68,607 crores of debt of top 50 willful defaulters till September 30, 2019. This has been revealed by RBI in response to a petition filed under RTI Act. The write-offs are technical or prudential in nature, which means the banks have made 100% provisions against the loans. This does not mean the banks have given up the right to recover the loans. As and when they recover the money, it directly adds up to banks’ profits and provisions also come down by that extent.
1. LOAN MORATORIUM MAY WIDEN BANKS’ CREDIT LOSSES: According to a report on the Asia Pacific Region by Moody’s Investor Service, the loan moratorium that India and other countries have implemented amid the Covid-19 crisis may give a temporary relief to the borrowers but it will widen banks credit losses once the directive is withdrawn as banks will restrain from taking proactive recovery action in such cases. It will also affect the asset quality and lower net interest margins.
2. MORATORIUM EFFECT--- 10% PROVISIONING MAY SHAVE OFF Rs 35,000 CRORE BANK PROFITS: The Reserve Bank of India’s directive to all banks to make 10% provision on all moratorium loans will shave at least Rs 35,000 crores off their profits in financial years 2019-20 and 2020-21. This is as per a report by Brickwork Ratings. The new provisioning requirement has to be made for March 2020 and June 2020 quarters and this will impact the banks’ profitability in 2019-20 and 2020-21. The rating agency said its assessment is based on the system-level banks’ ability to manage asset quality in the post-moratorium period.
3. PAYTM PAYMENTS BANK CROSSES Rs 1,000 CRORE IN SAVINGS ACCOUNT DEPOSITS: Paytm Payments Bank Ltd (PPBL) has crossed Rs. 1,000 crore mark in savings bank deposits. According to PPBL, this accelerated rise in savings deposits comes on the back of more people embracing digital banking during Covid-19. The bank has now implemented the option to avail benefits of direct Benefit Transfers ( DBT), which is a scheme by Government of India to transfer the subsidies of various social welfare schemes such as LPG gas subsidy, Old age pension etc directly to the beneficiary’s account.
4. INFORM THE EMPLOYER ABOUT YOUR CHOICE OF TAX REGIME: The government has introduced a revised income tax system in this year’s budget, wherein tax payers would be given the option to shift to new regime with lower tax rates but without the tax exemptions and deductions. Employers will soon start rolling out investment declaration forms, asking its employees to indicate their choice of tax regime. If one wishes to opt for the new tax regime, he/she has to inform the employer through this declaration form. If no declaration is submitted, it is presumed that you would be opting for old regime.
5. GOVERNMENT TO BUY STAKES IN MSMEs GOING FOR PUBLIC: Micro, Small & Medium Enterprises (MSMEs) Minister Mr Nitin Gadkari has said that Rs. 10,000 crores Fund of Funds proposed by the MSME Ministry has been approved by the Finance Ministry and will be placed before the Cabinet soon for clearance. The MSME Ministry has said that the government will buy 15% stake in those MSMEs who wish to go public for raising capital. This 15% stake will be invested from the Fund of Funds. This will be better than the bank lending for growth.
6. AROUND 10% AUTO DEALERS FACE CLOSURE DUE TO COVID-19 EFFECT: Many small and medium sized auto dealers are staring at the prospect of shutting down their shops or merging their businesses with larger dealers as auto sales remain uncertain even after the lockdown is finally withdrawn. There are currently about 15,000 auto dealerships which include 2, 3 and 4 wheelers across India. Last year around 275 auto dealerships were forced to shut their shops citing reasons of choked sales due to slowdown.
7. BANKS TO SEEK EXTENSION OF MORATORIUM ON LOAN REPAYMENTS BEYOND JUNE’20: Lenders are likely to seek extension of the moratorium on loan repayments beyond June’20 as a part of a comprehensive package to support borrowers and revive the economy. Presently the RBI has allowed banks to offer a moratorium of 3 months on payment of instalments of all term loans outstanding as on March 1, 2020. Many senior bankers have opined that it would be very tough for the banks as the onus will be on banks to revive the economy.
8. BIG RELIEF FOR MSMEs IN IT/ITeS AS GOVERNMENT WAIVES OFF RENT FOR UNITS BASED IN TECH PARKS AND EXTENDS INTEREST SUBVENTION SCHEME FOR MSMEs: The government has decided to provide relief to IT/ITeS MSMEs and start-ups based in Software Technology Parks of India (STPI) amid Covid-19 crisis and lockdown. The government will waive off payment of rentals for all small units housed in STPI premises for a four-month period between March 1, 2020 to June 30, 2020. This will provide relief to around 200 IT/ITeS MSMEs operating from these 60 STPI centres. Besides this, the government has also decided to extend the interest subvention scheme for Micro, Small & Medium Enterprises (MSMEs). The Interest Subvention Scheme for incremental credit to MSMEs 2018 which offers 2% interest subvention for all GST registered MSMEs on fresh or incremental loans was till March 31, 2020 but the same has been extended now.
1. BANKS GET RELIEF, THEY GET A FREEZE ON TAGGING OF NPAs FOR 3 MONTHS: Reserve Bank of
India has announced freezing of classification of Non-Performing assets (NPAs) for 3 months starting
March 1, 2020. Indian Banks’ Association was demanding the same and it has been granted by RBI.
This covers the three-month moratorium period on term loan repayments in respect of accounts for
which the banks have granted moratorium and which were standard assets as on March 1, 2020. The
90-day NPA norm shall exclude the moratorium period, this means, there would be an asset
classification standstill for all such accounts from March 01, 2020 to May 31, 2020.
2. DUE TO CORONA EFFECT THE GST FOR APRIL COULD FALL BY 40%: With the lockdown hitting almost all business activity, GST revenues for the month of April 2020 could be down by 40% of the annual monthly collections of around Rs 1 lakh crore. Currently the collections are just a fifth of the normal levels. FMCG firms will ensure that dip is not beyond 40%.
3. BANK CREDIT GROWS AT SLOWEST IN OVER 50-YEAR LOW IN FY-20: Even as RBI and the government are trying hard to push back credit in order to maintain liquidity in to the system, the bank credit growth fell to a more than a 50-year low in Financial year 2019-20 (FY-20). According to an RBI data, the bank credit for FY-20 grew at a mere 6.1%. The growth rate could have been much worse if banks had not disbursed almost 39% of the annual bank credit in the month of March’20. The growth rate till March 13, 2020 was only 3.8%. In the last fortnight of March 20, the banks disbursed Rs 2.3 lakh crores out of the total of Rs 6 lakh crores in the full year.
4. PUBLIC SECTOR BANKS OVERTAKE PRIVATE BANKS IN FRESH LOAN SANCTIONS: According RBI’s monetary policy report, public sector banks have stepped up loan sanctions, surpassing private sector banks. Notwithstanding a higher rate of NPA and lower Capital to Risk-weighted Assets Ratio (CRAR), the share of public sector banks in total fresh loan sanctions by public sector banks increased to 52.8% from a low of 39.7% in August 2019. The personal loan segment accounted for largest share. But the overall credit growth remained muted with a dip in economic activities.
5. GOVERNMENT PLANS TO SET UP A CHAIN OF 20 LAKH “SURAKSHA STORES” RETAIL SHOPS ACROSS THE COUNTRY: Ahead of extending restrictions on the mobility of goods and persons due to Covid-19 lockdown, the government is planning to set up a chain of 20 lakh retail shops to be named as “ Suraksha Store” across India which will provide daily essentials to all the people while maintaining stringent safety norms. The Suraksha Stores initiative will convert the existing neighbourhood kirana stores into sanitised retail outlets and adhere to safety norms as prescribed by the government.
6. LENDING START-UPS IN DEEP TROUBLE: India’s online lending start-ups that have been providing personal loans to workers and unsecured loans to small enterprises are facing lot of difficulties and a bleak future. Due to Covid-19 many of the small enterprises are shutting their business, these start- ups are facing recovery problems and they are expected to take a significant hit to their loan books with repayment collections slowing down.
7. BANKS KEEPING 3 TIMES MORE CASH IN BRANCHES TO AVOID WORSE SITUATIONS: Banks are keeping 2 to 3 times more cash across their branches to ensure that there is no dearth of currency at the branches or ATMs at a time when there is considerable uncertainty due to the Coronavirus pandemic.
8. BANKS STARE AT HUGE DEFAULTS IN AUTO SECTOR LOANS: The industry experts are predicting that the exodus of cab drivers from Indian metropolis cities to their native due to Covid-19 pandemic will trigger a massive default in vehicle loans. With nearly 60% of the cab drivers engaged by app-based cab riding companies being migrants, the segment represents a huge risk for lenders who have provided loans to nearly 85% of such cabbies.
9. NOW MICRO-FINANCE COMPANIES IN TALKS WITH RBI FOR MORATORIUM AND LIQUIDITY SUPPORT: Concerned about their cash flows in the current covid-109 lockdown period, Micro-Finance Companies are in talks with RBI and the government to include them in the 3-month moratorium and also provide a special liquidity fund.
1. RBI BOARD MEMBER Mr. SATISH MARATHE URGES FOR BANKING SECTOR PACKAGE: In the backdrop of the ill effects of Coronavirus pandemic on the economy, RBI board member Mr. Satish Marathe has urged Prime Minister Shri Narendra Modi for a larger package of sops for the entire banking sector including relaxing NPA recognition, provisioning and downgrades of accounts for an year at least. He said, if the loan account gets classified as NPA due to both lockdown and slowdown, chances of revival of such accounts would be very bleak. As such he has requested for abeyance of all norms relating to income recognition and asset classification, provisioning, downgrading of accounts and reporting to credit information companies for all such accounts that must have got classified as NPAs during the just concluded financial year 2019-20.
2. BANKS ASK CUSTOMERS TO BE CAUTIOUS ABOUT BANK FRAUDS IN RELATION TO LOAN MORATORIUM: Several banks have cautioned their customers against possible attempts by fraudsters as many of them have become active to exploit the 3- month loan moratorium offer. The cyber criminals pretending as officials of banks have been reaching out to borrowers, offering them assistance to avail the loan repayment moratorium scheme for phishing out account details. Banks are sending messages to its customers to be cautious against such frauds.
3. KOTAK BANK LEADERSHIP TO TAKE A 15% SALARY CUT IN FINANCIAL YAER 2021: Kotak Mahindra group’s leadership has voluntarily opted to take a 15% cut in its salaries for financial year 2020-21. Promoter and CEO Mr. Uday Kotak has personally opted to forgo his salary, and will receive only Rs.1/- as salary for the year. Earlier the bank had contributed Rs. 25 crores to PM Cares Fund.
4. MANY BANKS HAVE ROLLED OUT MOBILE ATMs ACROSS THE COUNTRY: Many public and private sector banks like Bank of Baroda, Punjab National Bank, Indian Bank, HDFC Bank, ICICI Bank have rolled out mobile ATMs across the country to help customers to withdraw cash in their localities as the country faces lockdown due to Coronavirus pandemic. Mobile ATM is yet another way of making banking easily accessible to customers in conducting basic banking transactions.
5. CASH PAYMENT COMPANY CMS TO OFFER CASH AT DOORSTEP TO SENIOR CITIZEN: To deal with the social distancing and address the cash withdrawal concerns from banks and ATMs, cash and payments solution company-CMS is offering free doorstep cash delivery to help senior citizen and disabled get cash safely at home and is tying up with many banks. CMS is planning to deploy its 20,000 strong field staff across the country to offer this service. It has already approached many prominent banks in this regard and many have expressed their intent and are working on internal approvals.
6. INDIA’S TOURISM SECTOR MAY LOSE Rs 5 LAKH CRORE AND 4-5 CRORE JOBS COULD BE CUT DUE TO COVID-19 EFFECT: The Coronavirus pandemic would have a huge negative impact on India’s tourism sector. The tourism industry is estimating an overall loss of Rs. 5 lakh crore and job cuts for 4 to 5 crore people. Of the total estimated losses, the organized sector (branded hotels, tour operators, prominent travel agencies) may be hit the hardest with an estimated loss of around 1.60 lakh crores. The union ministry of Tourism said the government is considering helping the sector with soft loans, working capital and deferment on loan repayments.
7. FPI’s PULL OUT RECORD Rs 1.1 TRILLION IN MARCH’20: Foreign Portfolio Investors (FPIs) have withdrawn a record Rs 1.1 trillion from the Indian markets in March 2020 as the Coronavirus pandemic dented investorsentiments worldwide. According to the latest data, FPIs pulled out a net of Rs 61,973 crores from equities and Rs 56,211 crores from bond market in March 2020 taking the cumulative net outflow to Rs 1,18,184 crores. The outflow in March’20 comes after six consecutive months of investments by FPIs since September 2019.
8. 25% OF RETAILERS MAY BE OUT OF BUSINESS AFTER LOCKDOWN IF GOVERNEMNT DOES NOT HELP: According to a report by Retailers Association of India (RAI), around 25% of retailers would require serious infusion of capital to help them deal with the impact of 21-day lockdown due to the Coronavirus pandemic. If not, then they would be out of business. It’s a tough situation and the government needs to interfere.
9. SBI CUTS SAVINGS BANK DEPOSIT RATE TO 2.75%: State Bank of India has lowered its savings bank deposit rate to 2.75% citing adequate liquidity. The rate cut will be effective from April 15TH. Other banks too are expected to follow suit soon.
1. OPTING FOR EMI MORATORIUM WILL COST YOU MORE: As per RBI instructions, banks are ready to
defer the loan instalments by three months for borrowers. If one chooses to defer the three equated
monthly instalments (EMIs), the same will get added to the loan amount but the interest for these
three EMIs would get compounded if not repaid at the end of the period. This could lead to the
borrower paying for several months more than his/her usual term depending on the length of the
loan if there are no pre-payments. In an illustration, State Bank of India has said that for a loan of Rs
30 lakhs with a remaining maturity period of 15 years, the net additional interest would be
approximately Rs 2.34 lakhs, which is equal to 8 EMIs.
2. NBFCs WANT BANKS TO PASS ON MORATORIUM BENEFITS: Non-Banking Finance Companies (NBFCs), have planned to approach RBI on directing banks to mandatorily pass on the benefits of the moratorium to NBFCs. While NBFCs will have to give a three-month moratorium to almost all of its borrowers, they feel as to what is the assurance they will get about the benefit of moratorium from their lenders? Hence, they are presenting their case to RBI and the Ministry of Finance for urgent redressal of their concern.
3. UNION BANK EXPECTS Rs 2,500 CRORE BENEFIT DUE TO AMALGAMATION: Union Bank of India which has amalgamated Andhra Bank and Corporation Bank with it, hopes to reap cost benefits to the tune of Rs 2,500 crore through rationalisation of branches and savings on technology on the combined entity. Union Bank said implementation of all the processes under amalgamation will happen without much disruption to customers and employees of Andhra Bank and Corporation Bank. The combined entity will have 9,500 branches and 12,000 ATMs across the country, out of which they have identified 700 plus branches that will be rationalised because of the proximity. They plan to rationalise around 300 branches in the first year. The technology integration will also take almost a year.
4. BANKS FACE THE SQUEEZE DUE TO LACK OF NEW BUSINESS ON ACCOUNT OF COVID-19: Indian banks will have to brace themselves for a prolonged period of lower profits resulting from a hit in revenues and almost zero new business due to disruptions induced by Covid-19. The banks will see a significant dip in their fee income and they are not expecting to make much business in the first quarter of Financial year 2020-21.
5. RBI GOVERNOR APPEALS PUBLIC TO GO DIGITAL AMID COVID-19 CRISIS: RBI Governor Mr. Shaktikanta Das has appealed all to promote digital transactions amid the Covid-19 scare which has impacted the economy very badly. He has asked the public not to panic and do cash withdrawals, instead he has asked them to do more digital transactions which is the need of the hour.
6. COVID-19: DEPOSITORS WITHDRAW Rs 53,000 CRORE CASH IN 15 DAYS: Indian public has been withdrawing cash from banks to prepare themselves for likely emergencies, with the Covid-19 induced shutdown putting spotlight on access to essential goods. Cash withdrawal from banks hit a 16-month high when public withdrew Rs 53,000 crores during the fortnight ending March 13, according to a data released by RBI. Even though digital transactions have been getting a push, economists say there tends to be a strong element of caution at times of such emergencies due which such huge pile of cash is being withdrawn.
7. REPAYMENT MORATORIUM COVERS ALL LOANS, INCLUDING CREDIT CARD DUES: Reserve Bank of India has clarified that the moratorium on loan repayment between March and May’20 is applicable to all types of retail loans including credit card outstanding balances.
8. RBI REJECTS LENDERS’ CALL FOR ASSET CLASSIFICATION PAUSE: The Reserve Bank of India (RBI) has rejected the request from bankers for standstill in Asset Classification dashing the hopes of bankers and also the companies seeking to avoid the defaulter tag. Bankers also wanted borrowers who have not paid in January-March 2020 period to be covered under this moratorium rule. The move is likely to increase the burden of bad loans on the books of the banks. RBI has said that if a borrower has been in default even before March 1, 2020, such a default cannot be said to be as a result of the economic fallout due to the COvid-19 pandemic, so the benefit of moratorium in respect of payments falling due during March 1 to May 31, 2020 will be extended to only those loans which are regular as on March 1, 2020.
1. SPECIAL LOAN SCHEME BY SBI TO VIRUS AFFECTED BORROWERS: SBI has drawn up a special loan scheme to provide additional funding to borrowers whose operations are impacted by corona virus. The scheme is called Covid-19 Emergency Credit Line (CECL) will be in force up to June 30TH and will be equivalent to 10% of the working capital limit, subject to a cap of Rs 200 crores and it will be available to all standard loan accounts which do not have overdues of over 30 days as on March 16th. It will be in the form of demand loan @ 7.25% interest rate and will not attract any processing fees. The repayment period will be 12 months and the borrower can avail the loan at one go and start repaying only after 6 months but has to be repaid within 12 months. The borrower however, needs to have stocks with enoughmarket value to cover the additional loan amount.
2. NBFCs SEEK MORE TIME, ONE TIME RE-CAST FOR ALL NPAs: Still reeling under the impact of the credit squeeze since late 2018, the NBFC industry has written to RBI and the Finance Ministry to relax bad-loan classification to 270 days and suspend the classification of Non-Performing Assets (NPAs) for two months. They have also sought a one-time restructuring of all loans and an increase in the limits for partial credit guarantee scheme. They are also requesting that all credit rating reviews be put on hold. A long-term line of credit from LIC and banks to larger NBFCs has also been sought.
3. RBI APPOINTS TWO ADDITIONAL DIRECTORS ON YES BANK BOARD: RBI has appointed two additional directors on the board of Yes Bank board. Former Deputy Governor Mr R Gandhi and Ananth Narayan, an associate professor at SP Jain Institute of Management & Research have been appointed as additional directors. The appointment will be for two years. Under the reconstruction scheme, which came into effect from March 4H, RBI can appoint one or more persons as additional directors on the board of Yes Bank.
4. BANK OF BARODA WAIVES DIGITAL TRANSACTION CHARGES FOR THREE MONTHS: Bank of Baroda has said it will not levy any charges on digital transactions for the next three months in the wake of the corona virus pandemic. This is to boost and provide enhanced and uninterrupted banking experience to its customers in these difficult times. To this effect, Bank of Baroda has rolled out the “STAY SAFE… BANK SAFE…” initiative to encourage more customers to avail banking services digitally without visiting branches.
5. Paytm BANK TO ISSUE VISA VIRTUAL DEBIT CARDS TO ITS CUSTOMERS: Paytm Payments Bank Ltd (PPBL) has announced Visa Virtual debit cards to its customers. PPBL said it is targeting to issue over 10 million new digital debit cards in 2020-21. Virtual debit cards would enable its customers to transact at all merchant establishments which are accepting payments through cards. For the first time, the bank’s customers would be able to make international transactions using their visa debit cards.
6. SBI TO INVEST Rs. 7,250 CRORES IN YES BANK: State Bank of India would invest Rs 7,250 crores in Yes Bank for a stake of up to 49%. It will buy 725 crores shares of Yes Bank at Rs 1-0/- per share. Other investors such as Kotak Bank, ICICI Bank, HDFC Bank, Rakesh Jhunjhunwala and R Damani together are expected to pick up a stake of up to Rs 5,000 crores in Yes Bank. Some foreign investors may be roped in at a later stage for additional infusion of capital.
7. MOST AIRLINES WORLD-WIDE MAY GO BANKRUPT BY END OF MAY’20 WITHOUT GOVERNMENT ACTION: Due to Corona Virus pandemic, most of the airlines in the world will be bankrupt by May’20 end and only a coordinated government and industry action can now avoid the catastrophe. This is as per a note by global aviation consultancy firm- CAPA. CAPA says many of the airlines might have probably been driven into technical bankruptcy, or are at least substantially in breach of debt covenants. Cash reserves of most of the airlines are running down as fleets are grounded and most flights which are operating, are not more than half full. Coordinated government and industry action is the need of the hour.
8. INDIAN BANKS SEEK EASIER LOAN REPAYMENT, NPA CLASSIFICATION: Indian Banks want the regulator to ease the rules on loan recovery timelines to give borrowers more breathing space and provide better monetary health they need to pay back, in the backdrop of economy choke-up by the lockdown mandated to contain the spread of Corona Virus. They have requested RBI to defer term-loan instalments for six months, extension of the time period for classification of NPAs on short term loans like cash credits and overdraft facilities from the present 90 days to 180 days.
1. SEVEN INVESTORS JOIN SBI TO PUT OVER Rs 12,000 CRORES INTO YES BANK: State Bank of India will be joined by private lenders ICICI Bank, HDFC Bank, Kotak Mahindra Bank, Axis Bank along with private investors Radhakrishna Damani, Rakesh Jhunjhunwala and Azim Premji Trust in the rescue plan for Yes Bank to invest Rs. 12,000 crores. As per the proposal sent to the Reserve Bank of India, these investors will together hold more than 49% stake. SBI also has recommended appointing of Yes Bank administrator Mr Prashant Kumar as the new CEO of the bank. Besides this, public sector banks will bring in Rs 30,000 crores as bulk deposits. SBI’s shareholding in Yes Bank will remain within 49% of the paid-up capital of Yes Bank.
2. DIGITAL PARCEL KIOSKS FROM INDIA POST TO BE LAUNCHED: India Post is ready to unveil digital parcel locker facility to customers who are not able to take delivery when postman visits them. The digital locker will help customers to get their parcels round the clock as per their convenience. The department will drop the parcels in the digital locker kiosks and inform the customer through SMS with a one-time password for collecting it. Initially the locker facility will be unveiled at two locations in Kolkata and if the same is successful then the same will be implemented in other locations as well.
3. OVER 1 MILLION USERS MIGRATE TO ICICI BANK’S UPI HANDLES: Payments platform Cashfree Payments India Pvt Ltd said that it has migrated over 1 million users from Yes Bank’s UPI (Unified Payments Interface) handles to that of ICICI Bank. The Company’s product, “Autocollect” which allows automatic generation of multiple UPI handles with QR codes had been affected by Yes Bank’s recent collapse. YesBank accounted for 39% of all UPI payments made in the country, the highest among any bank.
4. STATE BANK OF INDIA LOWERS TERM DEPOSIT AND SAVINGS BANK RATES: State Bank of India (SBI) citing adequate liquidity in the system, has lowered its retail term deposit rate by 10 basis points for one year and above tenors. The present term deposit rate for above one-year period stands at 5.90% which is the lowest since 2004. It has also reduced the rate by 50 basis points for deposits up to 45 days. The bank also lowered its savings bank interest rate to 3% for all customers. SBI however, has waived maintenance of average monthly balance charges for all savings bank accounts.
5. PRIVATE SECTOR BANKS ARE SAFE, RBI WRITES TO CHIEF SECRETARIES: Maharashtra government has issued an order asking all its departments and civic bodies not to have deposits in private sector banks in the backdrop of Yes bank fiasco. Now RBI has written to chief secretaries of all the state governments, advising them against transferring funds from private sector banks. The letter says that apprehension on the safety of deposits in private banks is highly mis-interpreted and has asked the respective governments to reconsider their decision. But government of Maharashtra has decided to go ahead and not to take note of the RBI advisory.
6. YES BANK FALLOUT, RBI’S MOVE TO WRITE DOWN AT-1 BOND WILL CAST A DARK SHADOW ON BOND MARKET: The Rs 1 trillion Additional Tier-1 (AT-1) bonds also called perpetual bonds is likely to see a heavy loss of investor appetite after RBI’s proposed announcement of writing- down the AT-1 bonds of Yes Bank. This will force the Yes Bank AT-1 bond holders to take a 100% haircut, would lead to losses to the tune of Rs 10,800 crores. Such a move can drive away investors from bond market in future. According to the Acuite Rating Agency, the bulk of the exposure to Yes Bank’s AT-1 bonds is by Mutual Funds and Banks’ treasuries. Several Mutual Funds have already marked down their exposure to “zero” which would impact investment of unit holders unless the stance taken by RBI changes.
7. LAKSHMI VILAS BANK SEEKS PERMISSION FROM RBI FOR ITS FUND-RAISING PLAN: Lakshmi Vilas Bank (LVB) with its capital adequacy well below the minimum required, has approached the Reserve Bank of India with a plan to raise $ 250-300 million (Rs 1,800-2,200 crores) from overseas investors through the sale of a 49-60% stake. The bank has been in talks with 3-4 overseas investors and one of them has tabled a very positive special deal. LVB management is ready to give up a controlling stake to a long-term investor. LVBs capital adequacy ratio is at 3.46% as against the regulatory minimum of 9%.LVB had raised Rs 1,430 crores in 2018 and 2019 and was all set for a merger with indiabulls Housing Finance, RBI struck it down in October 2019. Overseas investors are allowed to invest up to 49% under the automatic route without the permission of the regulatory but prior approval is required for investing more than 49%.
1. FORMER DMD OF SBI Mr PRASHANT KUMAR TAKES CHARGE AS YES BANK ADMINSTRATOR: Reserve Bank of India has placed Yes Bank under a moratorium. Customers cannot withdraw more than Rs. 50,000/- per account for a month. RBI has superseded Yes Bank board and has appointed Prashant Kumar, former Deputy Managing Director and CFO of SBI as the administrator of Yes Bank. Mr Kumar has taken charge as Yes Bank’s administrator in line with the notification issued by Department of Financial Services and RBI. Finance Minister Ms Nirmala Sitharaman has assured Yes Bank customers that their money is safe and that they need not worry.
2. WOMEN GETTING MORE CREDIT CONSCIOUS: As per a report from Credit Bureau, Women are turning out to be more cautious than men when it comes to borrowing and they are a safer bet for lenders to target as delinquencies by women borrowers too are relatively low. Women borrowers in the age group of 36-50 have risen by 33% since December 2017. As the number of women borrowers has grown, awareness and credit consciousness amongst women borrowers has also improved. For home loans and auto loans, the delinquency of women borrowers is at 0.63% and 0.96%, which is better off by 15 and 10 basis points respectively over the delinquency of male borrowers.
3. SBI TO PICK UP 49% IN YES BANK: State Bank of India is all set to pick up a 49% stake in the crisis hit Yes Bank as Reserve Bank of India stepped in with a “reconstruction” scheme to bail out the country’s fourth largest private sector bank. As per the Draft Reconstruction Scheme 2020, the authorised capital of Yes Bank will be altered to Rs 5,000 crore and the number of equity shares will stand altered to 2,400 crores of Rs 2 /- each, aggregating to Rs 4,800 crore. In this, SBI will have to buy 49% at Rs 10/- per share and it cannot pare down its stake below 26% for three years. SBI will have two nominees to the reconstituted bank’s six-members board. Meanwhile Finance Minister Ms Nirmala Sitharaman has asked the RBI to undertake a comprehensive probe on what went wrong at Yes Bank and fix individual responsibility.
4. MOODY’S DOWNGRADES BANK OF BARODA’S BASELINE CREDIT ASSESSMENT: Moody’s Investor Service has downgraded the baseline credit assessment of Bank of Baroda (BOB) to reflect weakening in asset quality and risk from deteriorating operating environment in India. It has downgraded BOB’s Baseline Credit Assessment (BCA) to “ba3”. BCAs are essentially an opinion on the likelihood of an issuer requiring extraordinary support to avoid a default on its debt obligations. Further, deterioration in asset quality poses risks to BOB’s profitability and capital. Moody has said that bank’s asset quality in Micro, Small and Medium Enterprises (MSMEs) and agriculture portfolio has deteriorated and will continue to weaken further. Another risk factor is BOB’s exposure to Non-Banking Financial Institutions (NBFIs) which is at 16% of its total loan book, is highest among Moody’s rated banks in India.
5. BSNL LOSS WIDENS OVER 2.5 TIMES TO Rs 39,000 CRORE: State-owned telecom firm BSNL’s loss widened by over 2.5 times to Rs. 39,089 crores during April-December 2019. The public sector telecom sector had recorded a loss of Rs. 14,904 crores in the previous financial year 2018-19. The government in October 2019 had approved a Rs 69,751 crores revival package for BSNL and MTNL, including 4G spectrum allocation and Voluntary Retirement Scheme (VRS). The Union Cabinet has already approved the merger of MTNL with BSNL.
6. YOU MAY BE FINED Rs. 10,000/- IF YOU FAIL TO LINK PAN WITH AADHAAR BY THE END OF THIS MONTH: If you do not link your PAN with your Aadhaar by March 31, 2020, then your PAN will become inoperative from April 1, 2020 and you will be fined Rs 10,000/- if you use an inoperative PAN under section 272B of the Income Tax Act. An individual having an inoperative PAN may face trouble in several financial transactions like banking transactions, buying or selling of a property, investments in Mutual funds and stocks. An inoperative PAN is the same as not having a PAN.
7. AROUND Rs 10.52 TRILLION CORPORATE LOANS AT RISK OF DEFAULT OVER SLOWDOWN OF ECONOMY: As per a report by the National Statistical Office (NSO), close to Rs. 10.52 trillion of the corporate debt is at the risk of default over the next three years. This is due to the grapplingslowdown in the economy. The GDP growth has slowed down to nearly seven-year low of 4.7% in October -December 2019. The NSO has pegged the economic growth at 5% for FY 2019-20. India ratings and Research has also reported that the profiles of most of the corporates are likely to remain under pressure due to the sluggish economic growth.
1. GOVERNMENT’S NEW RULES SEEK MORE DISCLOSURES IN AUDIT REPORT: The government has issued new norms for auditors, seeking more disclosures in reports. This comes after a series of corporate scams and frauds surfaced over the past few years. Under the new rules, the auditor needs to provide specific details on whether during at any point of time of the year the company has been sanctioned working capital limits in excess of Rs 5 crore in aggregate from banks or financial institutions on the basis of security of current assets. Also, he has to ensure whether the quarterly returns or statements filed with the banks are in line with the books of account of the company. End use of Term loans availed have to be scrutinised and if any divergence is observed, the same needs to be reported.
2. SLOWING CREDIT OFFTAKE ONE OF THE MAJOR CHALLENGES FOR BANKS: Reserve Bank of India Governor Mr Shaktikanta Das has said slowing credit growth is one of the major challenges for banks. Loan growth in banking system is hovering at around 7% at present. He also asked the banks to be more prudent in lending and highlighted that the quality of appraisal is important. He also said that RBI proposes to take thematic studies across financial institutions.
3. US FIRM HUGHES NETWORK SYSTEMS FEARS CLOSURE OVER UNPAID FEES: US broadband provider Hughes Network Systems may have to shut down its Indian operations due to unpaid levies owed to the government, which could put thousands of banking services at risk. The Supreme Court late last year ordered a number of telecom companies including Hughes to pay billions of dollars owed to the government. Hughes Network Systems provides services to defence, education and banking sectors in the country and it owes Rs 600 crores as dues to Indian government for which it has written to the government that it is facing bankruptcy and can’t pay the said amount. The closure of the company could disrupt connectivity at more than 70,000 banking locations and many critical satellite networks in the Indian Navy, army and railways.
4. BAD LOAN SALE TO ARCs IS AN OPTION AND NOT A PRIORITY NOW: A Reserve Bank of India framework to deal with stressed loans and a Central Vigilance Commission’s (CVC’s) circular pointing out certain irregularities in sale of bad loans to Asset Reconstruction Companies (ARCs) has changed the whole scenario of sale of bad loans by banks to ARCs. Earlier, the ARCs used to pay only 15% cash of the loan amount and the rest through Security receipts (SRs) which were redeemed only after the recovery. Now banks are insisting on 100% cash settlement and bankers feel that now the bad loan sale to ARCs is an option rather than a priority. Data Collated by ARCs shows that banks have put up Rs 46,690 crores of bad loans on sale to ARCs so far in this fiscal, down from Rs. 1.30 lakh crores in the fiscal ended 31STMarch 2019.
5. BANK ATMs START DISPENSING MORE OF Rs 500 NOTES INSTEAD OF Rs 2,000: Bank ATMs have started dispensing more Rs 500 notes than Rs 2,000 denomination notes. Although there is no dictate to banks from the finance ministry, banks on their own have decided to fill their ATMs with smaller denomination notes for the convenience of the customers. According to RBI’s reply to an RTI application, Rs 3,542 million notes of Rs 2,000 denomination were printed during 2016-17,Rs 111.50 million notes during 2017-18 and Rs 46.70 million notes of Rs 2,000 during 2018-19. This indicates that while these high denomination notes would continue to be legal tender but eventually will be phased out.
6. HDFC BANK LAUNCHES CO-BRANDED CREDIT CARD WITH IndiGo: HDFC Bank has joined hands with IndiGo Airlines to launch a co-branded credit card, which will effectively work like a loyalty programme for the air carrier. Labelled as “Ka-Ching”, the card will offer many benefits like complimentary air tickets, lounge access, 5% cashback or reward points on IndiGo bookings and 3% cashback on dining, grocery and entertainment. With over 14 million active cards, HDFC Bank hopes to add 1 million “Ka-Ching” cards over the next two years. The bank also had a similar tie-up with the now defunct Jet airways. And it also has a similar tie-up with Walmart and Times Group.
7. INDIA POST PAYMENTS BANK CROSSES2 CRORE CUSTOMER MARK: India Post Payments Bank (IPPB) has garnered over two crore customers in less than two years of being operational. It had reached the landmark of one crore customers in August 2019, in its first year of operation. On an average IPPB has been opening or maintaining a rate of 33 lakh customers per quarter. With the launch of Aadhaar Enabled Payment System (AePS) in September 2019, IPPB has now become the single largest platform in the country for providing interoperable banking services to the customers of any bank. With AePS services, any person with a bank account linked to Aadhaar can perform basic banking services irrespective of the bank he holds his account with.
1. CHIEF LABOUR COMMISSIONER TELLS IBA AND BANK UNIONS TO RESOLVE THE DIFFERENCES IN 15 DAYS: Indian Banks’ Association (IBA) and bank unions have failed to finalise the wage revision despite several rounds of talks over the years. The 11Th bipartite settlement (wage revision for banks) is due from November 2017. The bank unions are on a continuous agitation, demanding many other things along with wage revision like five-day banking, merger of special allowance with basic pay and updation of pension. The bank unions have called for a three-day strike in March and indefinite strike from April onwards if their demands are not met. The Central Chief Labour Commissioner (CLC) has advised IBA and the agitating bank employees’ unions to resolve their differences over wage negotiations in the next 15 days.
2. GOVERNMENT TO INFUSE Rs 1,300 CRORES IN EXIM BANK NEXT FISCAL: The government has decided to pump Rs 1,300 crores into state-owned Export-Import Bank of India (Exim Bank) to fund its business growth. Last year the government had doubled the bank’s authorised capital from Rs 10,000 crores to Rs 20,000 crores. The present infusion of Rs 1,300 crores will give an impetus to the bank to take new initiatives such as supporting Indian textile industries, likely changes in the concessional finance scheme. Exim Bank, established in 1982, is the apex financial institution for financing, facilitating and promoting the country’s international trade.
3. YONO IS THE LARGEST CONSUMER PLATFORM OUTSIDE e-COMMERCE COMPANIES: State Bank of India’s (SBI’s) digital banking platform YONO (You Only Need One) is the largest consumer platform outside of the E-commerce companies in India. YONO has launched many shopping festivals and offerings such as cardless cash withdrawal at SBI ATMs. In less than 24 months since its launch it has close to 20 million registered users. Mr Rajnish Kumar, the Chairman of SBI said that the bank is already seeing returns on its Rs 800 crore investment in the platform. They have garnered a business of Rs 14,000 crores personal loans which is paying the bank almost the entire cost of building the YONO platform. Mr Kumar adding further on competition front from other digital platform companies said that SBI has fared well and the advantage for SBI is that whereas other companies have to look for customers, SBI is already having a customer base.
4. ZERO UPI INTERCHARGE,PSP FEES MAY HURTPhonePe AND GOOGLE PAY: The National Payments Corporation of India (NPCI) said that it is revising the UPI interchange and payment service provider fees to “zero” for all domestic UPI merchant transactions with retrospective effect from January 1, 2020. The move to do away with these transaction fees comes after abolishment of the Merchant Discount rate (MDR). However, the move may hit revenues of digital players like PhonePe, Google Pay and Amazon Pay which have spent heavily to grab a greater market share in the UPI ecosystem.
5. GOVERNEMNT CONSIDERING STRESS FUND FOR DISTRESSED TELECOM SECTOR: The government is considering the possibility of setting up a stress fund for the telecom sector that could lend to companies to help them meet AGR dues as part of a comprehensive relief package. Other measures being discussed include a deferment of licence fee and spectrum usage charge (SUC) payments. The government is considering whether banks could be asked to create this fund. The telecom industry has also underlined the critical need for a further rise in tariffs to strengthen the long-term health of the sector.
6. FARM LOAN WAIVERS ADD Rs 60,700 CROES TO STATE-RUN BANKS’ BAD LOANS: State-run banks (Public Sector Banks) are facing lot of problems with the bad loans scenario. Now farm loan waivers in Uttar Pradesh, Maharashtra, Tamilnadu and Punjab has added an additional Rs 60,762 crores gross bad loans to the books of banks. Banks like SBI, Punjab National Bank, Bank of Baroda ands Bank of India have increased their Non-Performing Agriculture Credit by at least 30% in December 2019 quarter as compared to last year.
7. ENORMOUS GOLD RESERVES FOUND IN UTTAR PRADESH: With virtually no domestic production, India meets its entire gold demand through imports and this pressures India’s current account. But now the Geological Survey of India and Uttar Pradesh Directorate of Geology & Mining have discovered huge gold reserves to the tune of almost 52,800 tonne in SonaPahadi&Hardi Village areas which is twice the country’s present household stocks.
1. BANKS CONTINUE TO BLEED DUE TO FRESH NPAs: Indian Banks, particularly Public Sector Banks (PSBs) which had reported healthy growth figures in recent quarters, continue to be plagued by high slippages especially from corporate loan book. Top banks like SBI, Punjab National Bank, Bank of Baroda & Bank of India have reported a sharp rise in slippages in the December 2019 quarter. This shows that the trouble is still brewing on the asset quality front. SBI has almost doubled its bad loans to Rs.16,525crores, as it had reported slippages of Rs.8,800 crores in September 2019 quarter. Its slippage ratio increased to 2.94% from 0.87% on an annual basis.
2. RBI ISSUES NOTIFICATION ON CRR LEEWAYFOR NEW RETAIL & MSME LOANS: The Reserve Bank of India said that banks need not maintain the Cash Reserve Ratio (CRR) on new loans (Retail and MSME) for a period of 5 years disbursed between January 31, 2020 to July 30, 2020. The RBI also sought to lower the interest rate for MSME loans by asking banks to link the interest rate to an external benchmark rate. It has also asked the banks for extending the forbearance on asset classification on their MSME portfolios till December 2020.
3. COMMON PORTAL FOR HEALTH INSURANCE CLAIM SETTLEMENTS: The Insurance Regulatory & Development Authority of India (IRDAI) is planning a common portal for health insurance claims. IRDAI is seeking to bring all the stakeholders in the health insurance space--- the insurers, the insured and the hospitals under one roof with an aim to standardise the claim settlement procedure and ensure payment in a time-bound manner. IRDAI has already formed a committee for this and the platform will be developed by Insurance Information Bureau (IIB). This will bring a paradigm shift in the claim settlements.
4. PMO SUGGESTS TO REFER ONLY THOSE NPA CASES ABOVE Rs.200 CRORES TO NCLT: Banks, specially the Public Sector Banks have a tendency to routinely push bad loans to National Company Law Tribunal (NCLT) for resolution which has clogged and overburdenedthe NCLT. In order to de-clog the NCLT, the Prime Minister’s Office (PMO) has suggested that banks need to refer cases to the tribunal only in case the loan amount is above Rs.200 crores. For loans lower than Rs.200 crores the PMO wants the banks to work with the promoters to find long-term solution to prevent closure of the unit and also job losses. It may even offer a One Time Settlement (OTS). But banks normally feel safe to refer the cases to NCLT as they fear that resolutions through OTS or sale to an Assert Reconstruction Company (ARC) could invite scrutiny from investigative agencies.
5. MERGER OF 10 PUBLIC SECTOR BANKS MAY BE DELAYED: The Finance Ministry has announced merger of 10 Public Sector Banks (PSBs) in August 2019. But now the government is treading caution even though the deadline of April -1, 2020 is fast approaching. Prime Minister Mr.NarendraModi wants to see the outcome of the amalgamation of Bank of Baroda, Vijaya bank and Dena Bank. He wants to review and to know in detail as to what benefit it has entailed before taking a final call on the merger of further 10 banks. At the backdrop, Bank of Baroda has reported a loss of Rs.1,407crores for December’19 quarter as total provisions jumped by 54% to Rs.6,365 crores. The bank had posted a profit of Rs.436 croresin December’18 quarter.
6. RBI’S NEW ASSET RECOGNITION NORMS FOR REALTY SECTOR IS CREDIT NEGATIVE: Rating agency Moody’s has said that the RBI’s new asset recognition norms for bank loans to real estate sector is credit negative as it would defer the recognition of such loans. As per the new norms, RBI has allowed banks to extend the repayment period by one year if the project is delayed for reasons beyond the control of the developers. Moody’s report said that while this will alleviate near-term asset quality risk to the banks, it will not address the credit issues faced by the real estate sector as a whole.
7. RBI MAY SOON DECIDE TO SYNC ITS ACCOUNTING YEAR WITH GOVERNMENT’S FISCAL YEAR: As of now the RBI’s accounting year runs from July to June every year while the government follows the April-March fiscal year. RBI may soon decide on aligning its accounting year with the fiscal year of the government. The BimalJalan panel set up to review the economic capital framework of RBI, had recommended both accounting years of RBI and the government should be in sync beginning 2020-21. So, the same is being examined and very soon a decision may be taken on the same.
1. CABINET CLEARS AMENDMENT TO BANKING REGULATION ACT TO STRENGTHEN CO-OPERATIVE BANKS: In order to protect the interest of the depositors, the Union Cabinet has approved certain amendments to Banking Regulation Act to strengthen co-operative banks. At present there are 1,540 co-operative banks with a deposit base of Rs.8.60 lakh crores and having a total savings account balance of about Rs.5 lakh crore.The proposed amendment seeks to enforce banking regulation guidelines of the RBI in co-operative banks, while the administrative issues will be guided by Registrar of Co-operative. Some of the changes will be like appointment of CEO with the permission of RBI, auditsas per the RBI guidelines and RBI can also supersede the board if any co-operative bank is under stress.
2. ORIENTAL BANK OF COMMERCE REQUESTS GOVERNMENT TO GIVE A NEW NAME FOR THE MERGED ENTITY: Oriental Bank of Commerce which will be merged with Punjab National Bank and United Bank of India. The bank’s CEO and Managing Director Mr.Mukesh Kumar Jain has said that “this is an amalgamation of equals” and hence requested Finance Ministry that a new name to be given to the merged entity, which can be a different name altogether or it should reflect all the three old identity of all the three banks so that a sense of equal participation appears in the name. The idea of giving a new name to the merged entity will also boost the morale of all the staff.
3. BANKS MAY TAKE UP TO 2% HIT ON THEIR PROFITSDUE TO HIKE IN INSURANCE COVER ON BANK DEPOSITS: The Finance Ministry, in its latest budget has announced a hike in deposit insurance coverage from Rs.1 lakh to Rs.5 lakhs. A Credit Suisse report estimates an increase in the insurance premium of $ 4 billion (approximately Rs.28,400crores) for the banking system as a whole due to the hike in the deposit insurance coverage. Due to this, banks are likely to take a hit of 0.5 to 2% on their bottom line (profits) from the next financial year. The impact will be more on public sector banks as private banks would find a way to offset their operating costs.
4. EMPLOYER’S CONTRIBUTION TO EPF, NPS OVER Rs.7.5 LAKHS TO BE TAXED: The employer’s contribution over Rs.7.5 lakhs in a financial year to retirement funds such as Employees Provident Fund (EPF), National Pension System(NPS) or any other superannuation fund is proposed to be made taxable in the hands of the employee. This will impact higher basic salary earners negatively. This is another move to tax high income earners. This is bad news for such employees as currently such contributions are tax-exempt in the hands of an employee.
5. NOW FORM 26-AS TO SHOW MORE DETAILS OTHER THAN JUST TDS: The present Union Budget has proposed rationalisation of provisions relating to Form 26-AS as tax payers will now gat a detailed information statement beyond the Tax Deducted at Source (TDS) such as sale/purchase of immovable property, share transactions etc. This will help in filing of Income Tax Returns (ITR) easier. A new Section 285BB has been included which requires to upload a comprehensive annual information statement in respect of the tax payers and such information will include sale/purchase of immovable property, share transactions etc.
6. RBI TO INTRODUCE PAN-INDIA CTS BY SEPTEMBER 2020: Reserve Bank of India is now planning to implement a Pan-India Cheque Truncation System (CTS) from September 2020 due to which the cheque clearing system across India is going to be faster. CTS which is currently operational in major clearing houses of the country, has stabilised and has made large efficiency gains. In view of this, a Pan-India CTS will be introduced and will be made operative by September 2020. Those who are using cheques can expect clearing to become faster and safer across the country.
7. INVESTORS MAY LOOK FOR DIVIDEND YEILDING MUTUAL FUNDS TO ESACPE TAX ON DIVIDEND:Well placed investors usually prefer putting their money in stocks directly rather than investing in mass products like mutual funds. But, after the proposal in the recent budget to tax dividends at the hands of the investors, they may consider investing in dividend yielding mutual funds. This is because the dividends that mutual funds receive on their equity portfolio from investee companies are not taxed. For a High Net Worth investor investing directly in stocks, the dividend thus earned will be taxed as per his tax slab with the highest rate being 42%. There is a tax arbitrage in favour of mutual funds.
8. GOVERNMENT’S DECISION TO DILUTE ITS STAKE IN IDBI BANK IS A CLUE FOR FUTURE OF PUBLIC SECTOR BANKS: Dilution of holdings in banks has been a long-cherished desire of successive governments, despite it being a controversial one. But selling down the remaining 47% stake in IDBI Bank may be just a trickle for now. Given the government’s over 90% stake in most of the banks, it may not be a immediate move for bringing down the stake in all the banks but disinvestment may become the order of the day in the near future.
1. NOW EMPLOYER HAS TO DEDUCT 20%TDS FROM THE SALARY IF PAN AND AADHAAR DETAILS ARE NOT SUBMITTED BY THE EMPLOYEE: The latest rule of Central Board of Direct Taxes (CBDT) which came into effect from January 16Th2020, the employer has to start deducting Tax Deduction at Source (TDS) at the rate of 20% of the salary if the employee does not submit details of the PAN and Aadhaar. This will be applicable for all those who are earning a salary above Rs. 2,50,000/-per annum. Presently 37% of the total direct taxes collected comes from TDS. This as per the Section 206-AA of the Income Tax Act.
2. GOVERNMENT BLOCKS Rs. 40,000 CRORES GST CLAIMS ON RETURN MISMATCH: The Central Board of Indirect Taxes & Customs (CBIC) has frozen tax credits of around Rs. 40,000 croresas the returns did not match, exposing alleged fraud by around 2000 entities. This is apart from the cases where returns were not filed. Companies are entitled to refunds on tax paid by them on inputs in the production chain so that there is no cascading effect of taxes. Major discrepancies in returns and instances of a large number of frauds has prompted the government to take this step.
3. GOVERNEMNT FACES FIRST FALL IN DIRECT TAXES IN TWO DECADES: Amid a sharp fall in economic growth and cut in corporate taxes, the income tax collection for the current year is likely to fall for the first time in last two decades. The government was targeting a direct tax collection of Rs 13.5 trillion for the year ending March 2020, a 17% increase over last year’s collections. However, sharp decline in demand and low economic growth has forced the businesses to cut investment and jobs which has dented the tax collections, thereby prompting the government to lower its target to 5% growth over last year. But it is gauged that despite the best efforts by the tax officials, the tax collection for the current financial year may fall below Rs. 11.5 trillion collected during the financial year 2018-19.
4. BANK DEPOSIT INSURNCE COVER NOW WILL BE Rs. 5LAKHS: The government has proposed the insurance cover on bank deposits to Rs. 5lakhs in the current budget. The move comes after the government and the Reserve Bank of India faced flak over their handling of the closure of Punjab & Maharashtra Co-operative Bank (PMC) leaving thousand of depositors high and dry. Currently, the DICGC Act 1961, provides deposit insurance of Rs 1 lakh and this was last fixed more than 25 years ago.
5. PUBLIC SECTOR BANK EMPLOYEES MAY GET ESOPS IN FUTURE: Public Sector Bank (PSB) employees are paid a fixed-salaries, which does not encourage risk-taking and innovation. Although the PSBs control 70% of India’s banking market, they lack considerably in performance metrics when compared to private banks. Now it is proposed to give Employee Stock Options (ESOPs) to performing employees. Capable employees across all levels in the organisation could be rewarded with ESOPs which will pave the way for working more efficiently for the performing employees and will create a mindset of enterprise ownership for employees.
6. ECONOMIC SURVEY 2020—PSBs NEED A “TECHTONIC” SHIFT: Public Sector Banks (PSBs) that are presently troubled by soaring bad loans and poor performance can look forward to improvise on this with the help of Fintech by using tools like GPS to conduct better due diligence on borrowers to play a meaningful role. This is as per an Economic Survey 2020. With data and analytics taking centre stage in all the industries, PSBs can pool all their data into one entity like in the case of GST Network to improve their analytical capabilities that could provide them an edge over their private peers. Data Science, machine learning and artificial intelligence could help the banks to make a difference to the economy.
7. GOVERNMENT MAY INFUSE FRESH CAPITAL INTO REGIONAL RURAL BANKS: The government is looking to infuse fresh capital into Regional Rural Banks (RRBs) to help them to meet the minimum capital requirement of 9% . The size of the capital infusion may be in the range of Rs. 10,000 to 15,000 crores, which could be spread over a period of five years. Capital infusion to RRBs assumes importance as the government is finding ways to boost credit flow to farm sector. It may also put National Bank for Agriculture & Rural Development (NABARD) at the centre of its effort to address rural and farm distress.
8. STRICTER REPORTING NORMS COMING SOON FOR AUDITORS: The Ministry of Corporate Affairs (MCA) is planning to take major steps to revamp the auditor’s report that accompanies the company balance sheets. The onus will be on statutory auditors to fulfil their professional responsibilities. Besides modifying the Companies Auditors Report Order (CARO), the government is also likely to make changes to the secretarial audit reporting that is mandated under the company law. The entire effort is to provide early-warning signals to policy makers and regulators of the forthcoming disasters in companies.
1. URBAN CO-OPERATIVE BANKS TO REPORT EXPOSURES ABOVE Rs. 5 CRORES TO RBI: Urban Co-operative Banks (UCBs) will now have to report their individual loan exposures exceeding Rs 5 crore, to RBI every quarter. The Central Bank has issued detailed guidelines for reporting such exposure by UCBs to CRILC (Central repository on Information of Large Credits) every quarter. Banks need to submit the said data on large credits within 30 days from the end of each quarter through XBRL reporting platform of RBI (portal for digital business reporting managed by global consortium-XBRL). RBI has also warned about the data accuracy and integrity while submitting the data, failing which they will face panel action.
2. SUSPECTED BIG BANK FRAUD CASES TO BE VETTED BY A PANEL BEFORE PROBE: All suspected big bank fraud cases have to be vetted by a panel before handing it over to agencies such as CBI, to initiate action. The framework has been designed to allow bankers to take decisions without fear and enhance credit flows. The Advisory Board on Banks & Financial Frauds has been set up by the Central Vigilance Commission (CVC) to examine complaints against bankers in consultation with RBI and NitiAayog. The five-member board will act as the first level of examination for all alleged fraud cases involving Rs 50 Crore or more.
3. GOVERNMENT ASKS BANKS TO OPEN 15,000 MORE BARANCHES IN FINANCIAL YEAR 2020-21: The Finance Ministry has asked banks (both public and private sector banks) to open around 15,000 branches in the coming year to reach the un-banked areas. The government has handed over a list of locations where there are no bank branches. The mandate is to open a branch within 15 km radius of a village where there are no banking facilities available. The government wants to meet its financial inclusion agenda so that it can push cheap credit to the unbanked rural areas. As of March 2019, India had more than 1,20,000 branches and a little over 2 lakh ATMs. Of these, only 35,649 branches were in rural areas.
4. DEBIT/CREDIT CARDS TO BE DISABLED FOR ONLINE TRANSACTIONS IF NOT USED FOR LONG:The Reserve Bank of India has introduced new rules to enhance the security features of debit and credit cards. While issuing and re-issuing the debit and credit cards, banks must ensure that all the debit and credit cards are enabled only for domestic transactions at ATMs and Point-of-Sale (PoS) terminals. If any individual has not used his/her card for online/international/contactless transactions before, such cards will be disabled for these services and if the customer so wishes to use his/her card for online, international and contactless transactions, he/she has to separately apply for these services.
5. RBI SEEKS GOVERNMENT RELIEF FOR TELECOM DUES TO AVOID BAD LOANS: Alarmed by the risk of telecom dues arising out of Adjusted Gross Revenue (AGR) created for large telecom bank exposure, the Reserve Bank of India has requested the government to provide some relief to the telecom players on clearance of dues. RBI has voiced its concerns to the Finance Ministry to consider a moratorium on the AGR. For the banking sector, loans outstanding to the telecom sector stood at Rs. 1.1 lakh crore, or 1.3% of total loans. The total dues from the 15 telecom companies to the government is pegged at Rs 1.47 lakh crores towards Adjusted Gross Revenue (AGR), additional licence fees, spectrum usage charges, penalties and interest.
6. RBI SHOULD ACT AS “LENDER OF LAST RESORT” AND PROVIDE LIQUIDITY TO NBFCs: Expert economists at State Bank of India have opined that Reserve Bank of India should play its role as the “Lender of the Last Resort” and provide liquidity to Non-Banking Finance Companies (NBFCs) against the assets held by the lenders. The NBFC sector has been badly impacted since August 2018 after the collapse of IL&FS and many analysts have blamed the current slowdown in lending by the liquidity starved NBFCs as the reason for the fall in consumption, which is one of the factors resulting in dip in GDP growth.
7. PRIVATE BANKS LAG PUBLIC SECTOR BANKS AND FOREIGN BANKS IN PASSING ON RATE CUT BENEFITS TO ITS BORROWERS: Private banks were the slowest in passing on the falling interest rate cut benefits to their customers. The one-year Marginal Cost of Lending Rates (MCLR) for private banks fell by a meagre 12 basis points to 9.18%, as compared to 45 basis points to 8.3% for Public Sector Banks and 75 basis points to 7.9% for Foreign Banks. The figures were compared between January and December 2019. The reason private banks are less eager to pass on the said benefits to its customeris because of their high cost of funds.
1. SBI LAUNCHES NEW PRODUCT FOR HOME LOAN CUSTOMERS: The State Bank of India has launched a new scheme for its home loan customers. The bank guarantees refund of the principal amount if a builder fails to complete the project within the stipulated time. The scheme is available for apartment projects wherein SBI is the sole lender. The scheme will serve the purpose of boosting the stressed real estate sector and will also give confidence to the buyers as well.
2. MERGER OF COPROPRATION BANK AND ANDHRA BANK WITH UNION BANK OF INDIA—ACCOUNT NUMBERS TO REMAIN SAME AFTER MERGER: Union Bank of India is all set for the merger with Corporation Bank and Andhra Bank wherein its business will double after the merger. April 1, 2020 is the tentative date for the merger. Union Bank of India MD & CEO Mr. Rajkiran Rai spoke on the issue and expressed that they have learnt from Bank of Baroda’s amalgamation which has helped them save several months in implementing the merger process. He said the individual account number will not change when bank branches are merged but the IFSC codes of the merged branch ceases to exist and the new IFSC Code will be informed to the customers.
3. YOU CAN SOON DEPOSIT CASH AT ANY ATM: The National Payments Corporation of India (NPCI) is pushing top banks to make cash deposits an interoperable feature at their ATMs and branches. NPCI believes that an interoperable cash-deposit system enabled through its National Financial Switch (NFS), could help reduce the cost of currency handling for the entire banking system. This will also help ATM operators reduce costs to replenish cash at ATMs as the currency deposited through the machines can be recycled for withdrawal as well. All the major private and public sector banks have been asked to join the interoperable network. However, for banks the major hurdle will be tackling counterfeit currency deposits through this mode.
4. 15,000 STAFF QUIT IN AXIS BANK IN A FEW MONTHS: Axis Bank is witnessing a wave of resignations with at least 15,000 employees leaving the organisation in the last few months as mid and branch level executives are struggling to cope with the management’s new growth drive which is pushing the limits of its employees. Some exits were at the senior level while most of the resignations were at the branches which could hamper its business growth. But Axis bank has clarified that though many have resigned, it has already hired 28,000 people in this fiscal and it would hire another 4,000 in the last quarter of this fiscal.
5. RBI PERMITS KYC PROCESS THROUGH MOBILE VIDEO: The Reserve Bank of India has amended its norms to allow the Know Your Customer (KYC) process to be completed through a mobile video conversation. RBI has also facilitated e-KYC and digital KYC by allowing use of Aadhaar or other e-documents in the customer due diligence process. This makes India one of the rare markets to allow video KYC through an amendment to RBI rules. The amendment is a huge positive step towards achieving the goal of Digital Financial Inclusion.
6. RBI ISSUES ITS FIRST LICENCE TO AN URBAN CO-OP BANK TO CONVERT INTO SMALL FINANCE BANK: The Reserve Bank of India, for the first time has granted an “in-principle” approval to UP based multi-stateUrban Co-operative Bank (UCB)—Shivalik Mercantile Co-Op Bank Ltd to convert into a Small Finance Bank (SFB). Shivalik Mercantile Co-op Bank Ltd which has business operations in UP, Uttarakhand and MP, has a total business size of Rs 1,766 crores and a net worth of Rs 77 crore. The “In-Principle” approval granted will be valid for 18 months to enable the applicant to comply with the requirements as per the scheme. The SFB to start its operations has to have a minimum net worth of Rs 100 crores and minimum promoters’ contribution of 26% of the paid-up capital.
7. UPI TRANSACTION VALUE CROSSES Rs 2 LAKH CRORE MARK: The value of the transactions made using the Unified Payment Interface (UPI) channel has crossed Rs 2 lakh crores in December 2019. The UPI recorded 1.3 million transactions in December 2019 with Rs 2.02 lakh Crores, up from 1.89 lakh crores in the previous month.
8. SIMPLE ITR-1 FORM FOR FILING INCOME TAX RETURNS, NOT FOR INDIVIDUALS PAYING Rs 1 LAKH IN ELECTRICITY BILL AND OWNING A HOUSE JOINTLY: In a significant changes in income tax return filing forms, any individual tax payer owning a house property in joint ownership and those who have paid a total of Rs 1 lakh in electricity bill in a year or incurred Rs 2 lakh expense on a foreign travel cannot file his/her annual income tax return using simple ITR-1 form.
1. SBI, NPCI SEEK PARITY FOR RuPay CARDS: State Bank of India (SBI) and National Payments Corporation of India (NPCI) have sought parity for the RuPay debit cards with the likes of Visa and Mastercard on waiver of processing charges, claiming that otherwise it would put the banks in a disadvantageous position. SBI and other state-run banks are the main issuers of RuPay cards and their worry is that the government’s decision to scrap the processing fees of RuPay cards would cause them revenue loss. According to NPCI, this would discourage the banks to issue RuPay cards and they would instead prefer issuing international cards.
2. PSU BANKS MAY ADOPT NEW LENDING PRACTICE: PSU banks may soon migrate to cash-flow based lending for working capital loans from the existing asset-based funding model. For decades now since the 1970s, Public Sector Banks (PSBs) have given most of the working capital loans on the basis of net current assets of the corporate borrowers and in most of the cases it has resulted in over-funding to some and under-funding to others. The outdated model may soon change as most of the PSBs are proposing a transition from asset-based lending to cash-flow-based lending which may reduce misuse of funds by borrowers and enable banks to figure out ability of the borrowers to service loans on time. The shift will require borrowing entities to share cash flow statements more frequently with banks. SBI has already announced that it would soon start using the model from April 2020.
3. BAD LOAN PROVISIONING MAY TOUCH Rs.30,000 CRORE IN Q-3 OF THIS FINANCIAL YEAR: Indian Banks could be staring at bad loans provisions of an estimated Rs.30,000 croresin the third quarter of the present financial year. This is due to DHFL, Reliance Home Finance and Coffee Day Enterprises loans where resolution has not been finalised. This means the banks may have to fall in line with more provisions in December’19 quarter of this financial year. The bulk of the provisions would be on account of DHFL, which entered the bankruptcy process in December.
4. BANK OF BARODA TIES UP WITH JM FINANCIAL FOR CO-LENDING: Bank of Baroda (BOB) has entered into a strategic co-lending agreement with JM Financial Home Loans Ltd (JMFHL) for offering retail loans to home buyers. The association is expected to create a lending model synergising the expertise of both BOB and JMFHL in providing home loan products. The partnership is expected to accelerate credit delivery to home buyers. Such co-lending alliances will enable Non-Banking Finance Companies to penetrate deeper into home loan market.
5. RBI LAUNCHES “MANI” APP FOR VISUALLY CHALLENGED TO IDENTIFY CURRENCY NOTES: Reserve Bank of India (RBI) has launched a mobile app “MANI” to identify currency notes. The visually challenged persons can identify the denomination of a currency note by using the application, which can also work offline once it is installed. MANI app is an acronym for Mobile Aided Note Identifier, and one has to scan the notes using the camera and the audio output which is in Hindi or English will announce the result. The App is available both on Android and IOS operating systems. However, the App does not authenticate a note as either genuine or counterfeit.
6. IRDAI CONSIDERING CAPITAL INFUSION OPTIONS FOR INSURANCE COMPANIES: The Insurance Regulatory & Development Authority of India (IRDAI) is considering new capital-raising options for insurers if RBI follows on its proposal for banks to cap their stakes in insurance companies to 30%. The proposal made by RBI is aimed at fencing banks from systematic risks arising from non-core businesses. This would also allow banks to focus on increasing credit flow amid slowing economic growth.
7. CBDT TO FINE BUSINESSES WITH Rs.5,000/- PER DAY FOR NOT USING DIGITAL PAYMENT FACILITIES: Central Board of Direct Taxes (CBDT) will fine business houses with Rs.5,000/- per day if they fail to accept payments through digital payment facilities. This is applicable to companies with an annual turnover of over Rs.50 crores. The move is to encourage digital transactions and boost cash-less economy. To make this mandatory, a new section (Section 269SU) has been inserted in the Income Tax Act, 1961.
8. RBI ASKS CO-OPERATIVE BANKS TO CONSTITUTE BOARD OF MANAGEMENT: The Reserve Bank of India has released the final guidelines on the constitution of the Board of Management (BoM) for Urban Co-operative Banks (UCBs). The guidelines provide that Board of Directors of UCBs with more than Rs.100 crore deposits will constitutean BoM and the BoM will have exclusive powers for exercising control over the banking related functions of UCBs. This is the result of the impact of PMC Bank scam which has shaken public confidence in Co-operative banks.
1. SBI TAGS AROUND 24 COMPANIES AS WILFUL DEFAULTERS IN 2019: State Bank of India (SBI), being the largest bank in the country is a lead banker in most of the lending to the corporate sector. SBI has tagged over two dozen corporate borrowers as “Wilful Defaulters” in 2019. Wilful Default cases are the cases where the bank suspects borrowers have not paid up despite having capacity to pay, have diverted bank funds for purposes other than stated initially, have siphoned off funds, or have disposed of the charged assets bought from Bank funds. The bank has already filed suits in the court for recovery of money. SBI has so far reported 163 cases of wilful defaulters and the amount involved was Rs 13,718 crores. This amount is not the total outstanding debt amount from defaulters but the amount identified as diverted or siphoned off.
2. NON-FILING OF GST RETURNSMAY LEAD TO ATTACHMENT OF BANK ACCOUNTS AND ASSETS: Non-filing GST may lead to attachment of bank accounts and assets besides cancellation of registration. This is a part of the Standard Operating Procedure (SOP) issued by Finance Ministry to be followed in case of non-filing of GST returns. Finance Ministry has instructed field officers to provisionally attach assets of the registered GST assesses, including bank accounts, in cases where they think it is needed to protect the revenue interests of Central and State authorities. Such attachments will be resorted to in cases where businesses do not file returns even after a notice is issued to them asking them to file the returns within 15 days.
3. PMC BANK DID NOT CLASSIFY WADHWAN ACCOUNT PROPERLY: The Economic Offence Wing (EOW) has charged the PMC Bank’s management with failing to report the account of Rakesh Wadhwan with an outstanding amount of Rs 1,671 Crores and filing false statements with RBI. The EOW has filed a 32,000-page chargesheet in connection with the multi-crore scam at PMC Bank. The charge sheet says Rakesh and Sarang Wadhwan hatched a criminal conspiracy to cause wrongful gains for their company (HDIL) by taking loans from PMC bank against mortgage facilities without providing security.
4. SLOWDOWN IN ECONOMY MAY WORSEN BAD LOANS SCENARIO:India’s slowing economy could cause gross bad loans in the banking sector to rise again after the first signs of reduction after eight long years. Reserve Bank of India’s Financial Stability Report (FSR) said that the slowdown could cause the Gross Non-Performing Asset(GNPA) ratio of local lenders to increase to 9.9% in September 2020 as compared to 9.3% in September 2019. Because of the slow down, the stress on public sector banks showed that GNPA may rise to 13.5% by September 2020 from 12.7% in September 2019. Private banks could see increase in GNPA to 5.4% from 3.9 % and Foreign Banks to 4.2% from 2.9% in the same period.
5. BANKS FRAUDS RISE TO RECORD Rs 1.13 LAKH CRORE IN THE FIRST HALF OF THIS FINANCIAL YEAR: Frauds reported by banks during the first half of the current financial year touched an all-time high amount of Rs 1.13 lakh crores, owing to delay in detection by bankers. According to RBI report, 4,412 cases of Rs 1 lakh and above were reported during this period. In financial year 2019, banks had reported 6,801 cases of frauds worth Rs 71,543 crores. RBI financial Stability Report (FSR) said that the frauds reported during the year shows a significant time-lag between the date of occurrence of a fraud and its detection.
6. RBI RED FLAGS BANKS’ RELIANCE ON RETAIL LOANS: Reserve Bank of India has red flagged banks’ reliance on retail loans over slowing economy and negative consumer sentiments. Lenders have shifted their focus away from large industrial loans and are concentrating on increasing their retail loan portfolios. RBI feels this diversification strategy, while helpful as a risk mitigation tool, has its own limitations because the slowdown in consumption and overall economic growth may affect the demand for retail loans and will have a diminishing effect on the quality as well. RBI also said that the need of the hour is to kick-start industrial credit and use that to regenerate a successful cycle of capex, investment and growth.
7. RBI MAY SOON ASK BANKS TO CAP STAKE IN INSURANCE FIRMS TO 30%: RBI has expressed concerns about the volatility in financial and insurance sectors. In a bid to shield banks from the risks arising out of their non-banking businesses and boost liquidity in the slowing economy, RBI has directed banks to cap their stakes in insurance companies at 30%. The stake will be capped at 50% for Non-Banking Financial Companies (NBFCs). However, RBI is yet to issue official communication in this regard. The proposed move will have severe impact on banks like SBI, ICICI Bank and Kotak Mahindra Bank as they derive huge chunk of income from their insurance units. The move will also impact insurance companies as majority of them have banks as promoters.
1. UNDER PARTIAL CREDIT GUARANTEE SCHEME GOVT IS PLANNING TO APPROVE PROPOSALS WORTH Rs.20,000 CRORE FOR NBFCs: Over the next two weeks the government is planning to approve proposals worth Rs.20,000 crores under the partial Credit Guarantee scheme for Non-Banking Finance Companies (NBFCs) and Home Finance Companies (HFCs). This will be done with an aim to boost consumption in the economy which presently is seeing a six-year low growth. And this will also support the NBFCs and HFCs. Along with this proposal, the government is also pushing for credit expansion of public sector banks, clearing dues of public sector units, reforms in capital market and speedier refund of taxes. These measures are intended to bring more cash flow and foster consumption which will boost the economy.
2. MANDATORY TO LINK PAN WITH AADHAAR BY DECEMBER 31, 2019: It is mandatory to link your PAN with Aadhaar by December 31, 2019. The Income Tax Department has said that this is being pushed so as to reap seamless benefits of income tax services. If the PAN is not linked with Aadhaar, then the PAN will be invalid after December 31. 2019.
3. SBI TO SHIFT TO CASH-FLOW BASED LENDING BY APRIL 2020: State Bank of India (SBI) will shift to a cash-flow based lending from April 2020 onwards. The bank has the framework ready and some technical developments are underway as the same needs certain changes. The new framework for loan sanctions will apply to large borrowers and as well as to small enterprises. Banks in India have traditionally lent to companies against the assets. Cash-flow based lending is considered to be a more efficient and safe way of mitigating risk as it reduces discretion on the part of the lender.
4. GST COMPENSATION TO 9 STATES AMOUNTS TO Rs.70,000 CRORE IN 2020 FISCAL: The Goods & Service Tax compensation requirement of 9 major states could be as much as Rs.70,000 crore in fiscal 2020. This is as per a estimation report submitted by rating agency ICRA. This could put significant pressure on central government’s accounts which are already under stress from the cut in corporate taxes and other stimulus measures. Considering lower-than-expected GST collections, ICRA estimates this revenue to fall short by Rs.3.5 lakh crore of the target. Apart from this the timing of the release of GST grants to state governments pose a key risk to the cash flows of these states.
5. BANK OF BARODA UNDEREPORTED BAD LOANS BY Rs.5,250 CRORE IN FINANCIAL YEAR 2018-19: Bank of Baroda has under-reported bad loans by Rs.5,250 crores for the financial year 2018-19 (as on 31.03.2019). This is as per RBI’s risk assessment report. There was also divergence in provisioning for bad loans in FY18-19 to the tune of Rs.4,090crores of which the bank has alreadymade provisions of Rs.1,475 crores during the current financial year. Due to this the bank’s net loss for the year ending 31 March, 2019 widened to Rs.10,998 crores from Rs.8,339 crores.
6. BANKS LIKELY TO GET $7.6 BILLION BOOST FROM IBC RECOVERY: India’s banks are set for a $ 7.6 billion (Approximately Rs.54,000crores) gain this month as the country’s bankruptcy court has made sudden progress in clearing the backlog of large advances. Banks are expected to benefit from the recovery of 4 failed companies—Essar Steel India Ltd, Prayagraj Power Generation Co, Ruchi Soya Industries and Rattan India Power Ltd. This is a welcome news for banks which are at present facing further increase in their pile of bad loans. SBI, IDBI Bank, Bank of India, Canara Bank and Bank of Baroda will be the largest beneficiaries among all the banks.
7. DEBT MUTUAL FUND EXPOSURE TO NBFCs FALLS BY 24.43% IN NOVEMBER: As per SEBI data, Debt Mutual Funds continued to cut back on debt instruments issued by Non-Banking Finance Companies (NBFCs). Debt mutual fund exposure towards NBFC sector fell by 24.43% on a year-on-year (y-o-y) basis in November 2019 to Rs.1.83 lakh crores. Debt mutual fund exposure to short-term debt instruments of NBFCs like commercial papers (CPs) stood at Rs.86,701crores, lower by 32.05% on a y-o-y basis.
8. ADVANCE CORPORATE TAX COLLECTION DROPS BY 5.2% IN DECEMBER QUARTER: Advance tax paid by corporates fell by 5.2%in October-December quarter of this fiscal to Rs.73,000crores. Corporates had paid Rs.77,000crores in the same period last year. The drop in advance corporate tax collection is attributed to the economic slowdown and also because of reduction in tax rates. Where-as the advance personal income tax collection rose to Rs.33,000crore from Rs.24,000 crore in the same period last year.
1. INDIA’S FOREX RESERVESCROSS $ 450 BILLION: India’s foreign exchange reserves crossed $450 billion for the first time ever. This is due to the strong inflows which enabled RBI to buy dollars from the market which also helped in checking any sharp appreciation of rupee. As on December 3, 2019 the country’s foreign exchange reserves touched $ 451.7 billion. The country’s import cover now is of 11 months.
2. INDIA POST PAYMENT BANK COMES OUT WITH MANY FEATURES TO MATCH OTHER BANK SERVICES: India Post Payments Bank (IPPB) has come out with several services to match the customer services of all other banks. For savings account they have three variants—regular, digital and basic savings account. They have services for doorstep banking. One can open zero balance accounts as well. And there is no monthly average balance requirement and no limit on cash withdrawal. Anyone above 10 years with proper KYC can open an account with India Post Payments Bank.
3. FDI LIMIT IN INSURANCE COMPANIES MAY BE INCREASED TO 74%: The government may raise the overseas investment (Foreign Direct Investment-FDI) limit to 74% in the February 2020 budget, up from 49%. The Insurance Regulatory & Development Authority of India (IRDAI) has sought views from various stake holders on the matter. This has been planned with a view that the sector wants long-term stable money to be invested in the country. IRDAI is seeking inputs from industry level people on the government instructions and a report is expected to be submitted soon.
4. BANK AUDITORS HAVE TO BE MORE VIGILANT IN FUTURE: Auditing banks is not going to be easy anymore and will become one of the trickiest and most demanding jobs. According to Reserve Bank of India advisory to all banks, banks will have to carry out a more intensive examination of large-advance accounts, the nature of security provided by the borrowers as well as financial statementsof the borrowers. RBI believes that this will lend greater insight into determination of Non-Performing Assets (NPAs)and other areas of concern like frauds. Under the new framework, the bank auditors should display a greater degree of scepticism and independence in scrutinising banks’ exposure to large advances.
5. NBFC GROWTH TO HIT THE LOWEST IN A DECADE:Growth in Assets Under Management (AUM) of Non-Banking Finance Companies (NBFCs) is likely to fall to the lowest in a decade to around 6% to 8%, year-on-year in FY 2020 as a result of high funding costs, recalibration of loan books and slowing economy. Crisil rating agency further states in its report that the growth rate in FY 2019 was 15%. The crisis of confidence in NBFCs which was initially focussed on mismatch in asset-liability (ALM) profiles, has now shifted to concerns over asset quality.
6. LENDERS MEET RBI, MULL 4-MONTH PROGRAMME TO RESOLVE DHFL CASE: Banks have proposed a 4-month programme to resolve the Dewan Housing Finance Ltd ( DHFL) case, the biggest bankruptcy case in financial services after the introduction of Insolvency & Bankruptcy Code (IBC). Lenders have discussed a “timeline” with RBI in this regard. Lenders are looking to rework previous equity investments plans from outsiders with little involvement from the promoters. But they are fighting to retain and incentivise the existing staff who know the borrowers better so that the recovery is faster.
7. DHFL PROMOTERS GAVE PERSONAL GUARANTEES UPTO Rs 80,000 CRORE LOANS: DHFL became the first financial services company to be admitted to the bankruptcy courts after rules were changed last month. The promoters of Dewan Housing Finance Ltd have given personal guarantees to more than Rs 80,000 crore of loans on the firm’s books as on March 2019. Personal guarantees are normally given by the promoters but they assume a new significance in light of the changes to the Insolvency and Bankruptcy Code (IBC) last month. The Ministry of Corporate affairs has extended the scope of IBC to personal guarantees to corporate debtors and this became effective from December 1, 2019. This means personal guarantees can also seek resolution under insolvency process and this will facilitate faster resolution and disposal of cases.
1. INDIAN BANKS NEED $7 BILLION ADDITIONAL CAPITAL TO SUPPORT GROWTH: Fitch ratings has reported that Indian Banks require additional USD 7 billion (Rs 50,000 Crores) equity by 2020-21 to support loan growth and cover bad loans. The report further says that a slowing economy could worsen the asset quality of these banks already grappling with weak recovery and aging provisions. The rating agency has maintained a “negative” outlook on Indian Banks based on its expectations of continued weak performance by the banks.
2. NEFT TRANSACTIONS TO BE MADE AROUND THE CLOCK ON ALL DAYSTHROUGHOUT THE YEAR: RBI has announced that Bank customers will be able to transfer their funds through NEFT (National Electronic Fund Transfer) around the clock on all days including weekends and holidays from December 16, 2019. These transactions after usual banking hours are set to be automated using “Straight Through Processing” modes by banks. But the existing procedure of crediting to the beneficiary’s account or returning the transaction within 2 hours of settlement to the originating bank will continue.
3. PANEL TO ASSESS VALUE OF ASSETS MORTGAGED BY PMC BANK BORROWERS: A co-ordination committee comprising of officials from RBI, the Enforcement Directorate( ED) and Economic Offence Wing (EOW) of the Mumbai Police is working with professional valuers to assess the realistic value of assets mortgaged by corporate borrowers from the failed Punjab & Maharashtra Co-op Bank Ltd ( PMC Bank) with a view to monetising these assets. The bank is currently undergoing a forensic audit which is expected to be finalised by this month end.
4. RBI INVESTIGATING “NET BANKING” BREAKDOWN AT HDFC BANK: A team of experts constituted by RBI is in the process of investigating the reasons for the breakdown of HDFC Bank’s digital banking channels which caused inconvenience to millions of HDFC Bank’s customers who were locked out of their net banking and mobile banking accounts for over 48 hours earlier this week. HDFC Bank has reported that the problem occurred due to some technical glitches and the resolution process took more time. HDFC Bank is the largest private Bank with a customer base of around 50 million, of which over 90% transact through the internet.
5. DATA SHOWS 16% OF REALTY DEBT EXPOSUREIN SEVERE STRESS: Indian real estate’s debt exposure stands at USD 93 billion including advances by Non-Banking Finance Companies (NBFCs) and Housing Finance Companies (HFCs). Of this, around USD 58 billion (62%) is completely stress-free. Additional 22%, ie USD 21 billion is under some stress but has potential to get resolved with due and timely steps. The stress in this segment is largely on recovery of interest and not on principal amount. However, 16% (USD 14 Billion) is under severe stress as they have either limited or extremely poor visibility of debt servicing due to a combination of factors. This is as per a report by Anarock Property Consultants.
6. RBI POLICY REVIEW---- WEAK CREDIT FLOW BIGGEST PROBLEM: Loan growth has been slowing down sharply and remains the biggest problem of RBI. Between March 2019 to November 2019, loans to companies and individuals have increased by just 0.43% to Rs 97.67 lakh crores. That is despite the fact that liquidity is ample and the surplus has averaged to Rs 2 lakh crores over the past many months. Considering these facts, RBI, in its latest credit policy has decided to maintain its accommodative stance and keep repo rates unchanged.
7. MAHARASHTRA GOVERNMENT WANTS PMC BANK TO BE MERGED WITH MSC BANK: The Maharashtra government has suggested merging of Punjab & Maharashtra Co-op Bank Ltd (PMC Bank) with Maharashtra State Cooperative Bank (MSC Bank). State Minister Mr Jayant Patil said that the state’s apex cooperative banking entity, the MSC Bank’s financial health is sound and the merger could definitely help the beleaguered PMC Bank’s aggrieved depositors. He further added that if required, the government will make a recommendation on this possible merger with RBI and if approved, it could take around a couple of months to complete the entire process.
8. INCOME TAX DEPARTMENT REPORTS 23% GROWTH IN TAX REFUNDS: The Income-Tax Department has processed refunds worth Rs 1.46 lakh crores till November 28, 2019, a growth of nearly 23% compared with the same period last year. The number of refunds also has increased to 2.1 crore refunds as compared with 1.75 crore refunds during the same period. The department also expedited more refunds this year as 68% of refunds have been issued within 30 daysof e-verification of I-T Returns.
1. PMC BANK PROBE FINDS ANOTHER GHOST ACCOUNT OPERATOR: Investigations into the Punjab & Maharashtra Cooperative Bank fraud have detected another borrower--- Abchal Group, concealed its identity through password-protected accounts, same as the manner which Housing Development & Infrastructure Ltd (HDIL). These “ghost accounts” are suspected to have been operated by entities with the knowledge of arrested bank officials. Abchal Group loans with Rs 300 crores have gone bad and not much information seems to be publicly available on Abchal Group or its promoters. According to details available with Registrar of Companies (RoC), Abchal Property Investment Pvt Ltd was incorporated in 1992 and the Company is currently stuck off by the RoC.
2. CORPORATE FRAUDS SEE A MASSIVER SURGE: The number of frauds at State Bank of India (SBI) has nearly trebled in the first seven months of the current fiscal in comparison with the whole of FY 18-19. As per a data disclosed in this respect shows that large ticket corporate frauds worth Rs. 26,757 crores were reported to regulators between April to November 2019 as compared with Rs 10,725 crores were reported in FY 18-19. The comparison appears even starker when compared with FY 17-18 when only Rs 146 crore were declared as fraud.
3. GOVERNMENT ASKS STATE-RUN FIRMS TO CLEAR OVER $ 1 BILLION, OWED TO GREEN ENERGY FIRMS: Government has asked state-run firms to provideover $ 1 billion to government power distribution companies to clear long standing debts to green energy firms that could hinder further investment. The Central Government has asked state lenders—Power Finance Corporation Ltd, REC Ltd and IREDA to extend short-term securitised loans to the distribution firms at preferential rates. Adding to the problems of the power generators, the new government of Andhra Pradesh which owes renewable energy firms more than any other state, wants to renegotiate its contracts saying the price it pays are inflated. Commercial banks are unwilling to lend to these firms because of their high outstanding debt.
4. RBI DEPUTY GOVERNOR RED-FLAGS RISING STRESS IN MUDRA LOANS: Reserve Bank of India Deputy Governor Mr M K Jain has raised red flags over rising Non-Performing Assets (NPAs) in loans disbursed under the government’s Mudra Loan Scheme and urged the banks to monitor the repayment capacity of borrowers before disbursement. Mudra, a Government of India loan scheme under which small business can avail collateral-free working capital loan up to Rs 10 Lakh was flagged off in 2015 to ease the credit flow to MSME Sector.
5. LOANS OR BONDS, INDIA’S BANKS ARE GOING SLOW: Frauds, errant borrowers, stretched recovery process and stubborn promoters have shaken Indian banks’ confidence in lending to commercial sector. Due to this, bank loan growth has decelerated sharply over the past six months. What should also worry is the drop in banks’ non-SLR (Statutory Liquidity Ratio) investments. Non-SLR investments are the commercial papers, bonds, debentures and sharesthat banks buy from companies. Earlier companies found it cheaper to issue bands and short-term commercial papers to banks instead of taking loans. This has changed drastically after the collapse of Infrastructure Leasing & Financial Services (IL&FS).
6. HDFC BANK’S SHARE IN OUTSTANDING CREDIT CARDS COMES DOWN TO 25%: HDFC Bank’s share in number of outstanding credit cards dropped to 25% at the end of September 29019 from 30% in March 2016. Rivals SBI and ICICI Bank have increased their share over the same period. A report compiled by Citi Research from RBI data shows that the share of SBI in the number of credit cards stood at 18% as on 30Th September 2019, up from 15% in March 2016, while that of ICICI Bank was 15% with nominal change. But in terms of volume and value of transactions made using credit cards, HDFC Bank continues to be the market leader with share of 26.4%.SBI leads the market share in outstanding debit cards between March 2016 and September 2019 with 30%.
7. GDP GROWTH FALLS BELOW 5% TO 4.5%, LOWEST SINCE MARCH 2013: The country’s economy grew at its lowest in past six-and-a-half years, in July-September 2019 quarter, dragged down by contraction in manufacturing, construction, financial services sector even though public spending has increased from 8.5% to 11.6% in the same period. Data released by National Statistical Office (NSO) showed Gross Domestic Product (GDP) grew by 4.5% in July-September 2019 quarter, slower than 5% in the previous quarter. The slowest reported till now was 4.3% in January-March 2013.
1. 15 FOREIGN BANKS KEEN TO OPEN BRANCHES IN INDIA: As per RBI data, presently 46 foreign banks are already operating in India including 2 banks operating in Wholly Owned Subsidiary (WOS) mode. Foreign Banks require prior approval from RBI for opening branches in India. Now RBI has informed the Finance Ministry that 15 more foreign banks have shown interest in opening their branches in India.
2. FOREIGN EXCHANGE RESERVES TOUCH NEW HEIGHT: Indian Foreign Exchange reserves continue to surge ahead as it stands at USD 447.81 billion as on November 8Th. As per a data released by RBI, the reserves surged by USD 3.51 billion in the first week of November to reach USD 446.81 billion. The increase was mainly on account of a rise in foreign currency assets, a major componentin the overall reserves.
3. FULLY AUTO-POPULATED INCOME TAX RETURNS ON THE CARDS: The government is planning for a fully auto-populated income-tax returns. It is working on the modified form which will include information on tax liability on gains from stock trade, dividends from mutual funds and interest earned from savings bank account. The income tax department has had several rounds of talks with depositories, mutual funds and banks to ascertain the feasibility of more comprehensive returns.
4. NON-FILERS OF GST RERTURNS MAY FACE CANCELLATION OF GST REGISTRATION: The Goods & Servicers Tax (GST) administration is planning to act tough with non-filers of GST returns. It may cancel the GST registration of those non-filers. Filing of returns helps tax authorities to estimate the tax liability and find out how much tax has been paid. The data shows that nearly 20% of the assesses do not file their returns, which affects GST collection. Hence the Central Board of Indirect Taxes (CBIC) has decided to cancel registration of those assesses who have not filed GSTR 3B (Showing tax payments) returns for 6 or more than 6 returns periods and are liable to action as per GST law.
5. PERSONAL GUARANTEES MAY AID BAD LOAN RECOVERIES: An amendment made to the Insolvency and Bankruptcy Code (IBC) last week to include personal guarantees issued by corporate promoters will quicken the recovery process, improve chances of bad loan resolution and more importantly give lenders a strong leverage against erring promoters. In a notification given by the Ministry of Corporate Affairs(MCA), personal guarantees on corporate loans under the bankruptcy code will be effective from December 1ST. This means the assets of promoters who have given personal guarantees to corporate loans can be attached along with the insolvency proceedings against the company.
6. SEBI SAYS LISTED COMPANIES MUST DISCLOSE DEFAULT IN 31 DAYS: The Securities Exchange Board of India (SEBI) has instructed listed companies that they should disclose any defaults in respect of principal or interest within 31 days of such default. The new rule comes into effect from January 2020. The SEBI board has also decided that top 100 listed companies based on market capitalisation will now have to include business responsibility reporting as part of their annual reports. SEBI also decided to reduce the time taken to process a rights issue to T+31 days from T+55 days.
7. GLOBAL INVESTORS MAY NOW SHOW INTEREST FOR BUYING BAD LOANS: The Supreme court judgement in favour of the world’s top steel maker Arcelor-Mittal taking control of debt-ridden Essar Steel is expected to provide a new lease of life for India’s distressed asset market with an estimated fund flow of $3 billion. International investors were watching this case and the judgement clearly lifted global investors sentiment. Now it needs to be seen as to how banks open up to sell their sticky assets.
8. LENDERS SEEK PRIORITY TAG FOR LOANS UNDER REAL ESTATE FUND: Lenders want senior and secure charge on the assets they fund under the recently proposed Rs.25,000crore real estate fund announced by the Government. Out of the Rs.25,000 crores, Rs.10,000 will come from the Government and the rest will be by banks and other financial institutions. The lenders want to ensure that if these projects fail to take off despite the intervention/help, and if the asserts have to be monetized to recover dues, their money will have priority status. In other words, the fund is expected to have a priority charge as compared to existing investors. RBI has always seen commercial real estate exposure by banks as a riskier affair compared to other segments. It has therefore mandated banks to set aside more money as standard asset provisions between 0.75% to 1% for these loans. Typically, banks have to set aside 0.4% of a loan as per provisions for most of the loans.
1. GOVERNMENT PROPOSES TO RAISE INSURANCE COVER ON BANK DEPOSITS: Finance Minister Nirmala Sitharaman said the government will bring legislations on raising insurance cover on bank deposits from the current Rs 1 lakh and regulating multi-state cooperative banks amidst a crisis in PMC Bank which has affected lakhs of depositors. These legislations will be brought during the winter session of Parliament starting on 18TH November. The legislation will amend the necessary Acts and laws to make sure that banking functions undertaken by cooperative banks will be brought under Banking Regulation Act for complying with prudent norms. Also Deposit Insurance is static at Rs 1 lakh since 1993 and this needs a change.
2. BANKS MAY BE GIVEN INCENTIVES TO EXTEND LOANS IN BACKWARD AREAS: RBI Governor Mr. M K Jain has said that there will be incentives to banks to extend loans to poor in backward areas in a bid to promote Financial Inclusion. Mr. Jain said despite impressive growth in agriculture lending, there are still several challenges which need to be tackled. For this the banks need to be given incentives to lend in most backward areas so that demand and supply side issues will be addressed. He also asked NABARD to think of steps by which funds like Rural Infrastructure Development Fund (RIDF) can be earmarked to the most backward credit-starved regions of the country to ensure faster development.
3. BANDHAN BANK MAKES MORE PROFIT THAN 17 PSU BANKS COMBINED IN SECOND QUARTER OF THE CURRENT FINANCIAL YEAR: The aggregate profit of 17 Public Sector Banks was lower than the net profit of Bandhan Bank Ltd alone in the September quarter of the current financial year. While the combined profit of these 17 public sector banks stood at Rs 466.4 crores during the said period, Kolkata based Bandhan Bank alone reported a net profit of Rs 971.8 crores. The consolidated net profit of 17 private sector banks stood at Rs 7583.16 crores during the same period. The PSU Banks saw the growth fall from 8% to 5% year-on-year, while the private banks growth was down from 22% to 14%. The burden of Non-Performing assets (NPAs) continues to take heavy toll on the profitability of these banks.
4. RBI TO CONSIDER ALLOWING e-MANDATES ON UPI : The Reserve Bank of India, in a notificationissued on Friday has said that it will consider allowing electronic mandates on Unified Payments Interface (UPI) soon. RBI also said that it will ask banks not charge its savings bank customers a fee on NEFT transactions from January 2020. In terms of the number of transactions, digital payments have grown at a compounded annual growth rate of 61% over the last 3 years --- from around 680 crores transactions between October 2015 to September 2016, to mare than 2,840 crores of transactions between October 2018 to September 2019.
5. FINANCIAL SERVICE PROVIDERS LIKELY TO BE BROUGHT UNDER INSOLVENCY CODE AMBIT: Ministry of Corporate Affairs (MCA) is in talks with Reserve Bank of India to devise a separate framework to bring NBFCs under the insolvency process. The Centre is exploring the possibility of bringing certain financial service providers within the ambit of Insolvency and Bankruptcy Code (IBC) to help deal with exceptional cases and make them go through the insolvency and liquidation proceedings. In recent years, many top notch NBFCs have had to face severe crunch, causing concern among investing fraternity, especially retail investors. The lenders too were put to a lot of hardship with their inability to recover their exposure to such entities.
6. UNION ABNK OF INDIA POSTS Rs. 1,194 CRORES LOSS: Union Bank of India slipped into the red, reporting a net loss of Rs. 1,194 crores in September quarter of the current financial year, due to jump in provisions, including towards bad loans and divergence in provisioning. Bad loan provisioning jumped by 95% year-on-year to Rs. 3,328 crores, of this, the divergence in provisioning was Rs. 1,588 crores. Union Bank said it has made 15% provisions towards the bank’s exposure to DHFL in the reporting quarter. The bank may make more provisions in the third quarter towards the said account.
7. DEBT RECOVERY TRIBUNAL STOPS DHFL FROM MAKING PAYMENTS: The Pune bench of Debt Recovery Tribunal (DRT) has stopped DHFL from making any further payments to any of its un-secured creditors. A day earlier, Bombay High Court allowed DHFL to make payments to banks and NBFCs that have securitization arrangements with DHFL. Now the banks will have to go to DRT to seek clarification since DRT has appointed a commissioner to monitor and supervise the affairs of DHFL.
1. EOW ARRESTS TWO AUDITORS IN CONNECTION WITH PMC BANK SCAM: The Economic Offence Wing (EOW) has arrested two auditors in connection with PMC Bank scam. The two auditors are JayeshDhirajlalSanghani and KetanPravinchandLakdawala. Both were called for investigation at EOW Office at Mumbai but since they could not provide convincing explanation regarding their alleged role as statutory auditors of PMC Bank, hence both were arrested for further investigation. EOW has sought their police remand.
2. JUST 4 BANKS CLAIM MORE THAN 45% OF UPI’S BIG BILLION OCTOBER FEST: State Bank of India (SBI), HDFC Bank, Axis bank and ICICI Bank are dominating the retail digital payments business, riding high on Unified Payments Interface (UPI) wave which crossed a billion transactions in October 2019. These four banks together account for more than 45% of the total transactions reported on UPI last month. An Economic Times analysis of the trends over the past 4 months showed that these 4 banks have consistently achieved close to 40% share of overall UPI payments. Industry experts say that while the trend is showing healthy signs but the fact that only 4 major banks getting the major share of UPI transactions was a worrying trend.
3. FACTORY OUTPUT SHRINKS TO 4.3%, LOWEST IN ALMOST LAST 8 YEAR: As per the Index of Industrial Production (IIP), factory output shrank to 4.3% in September 2019, the lowest in almost 8 years in this series. It is the lowest since October 2011. The factory output had contracted to 5%in October 2011. This indicates that the economy has further slumped in the second quarter of the current financial year. Industrial Production in the corresponding last year was 4.6%.
4. INDIA’S BAD DEBT PILE EASED DUE TO WRITE-OFFS, UNDERLYING PROBLEM FAR FROM RESOLVED: Indian banks wrote off more than $30 billion worth of bad loans for the past two financial years, helping to lower stressed loans in their books by 8.5%. This is as per Central bank data. The write-offs illustrate the urgent problem of bad loans as borrowers struggle to service the loans in a stuttering economy. As of June 30, 019 the total stressed assets in the books of Indian Banks were at $137.50 billion, down from $150.22 billion a year ago. Moreover, the analysts warn that the shaky NBFC industry could worsen the bad loans scenario in future.
5. GOVERNMENT’S MASSIVE Rs 25,000 CRORE RELIEF TO REAL ESTATE SECTOR: The Finance Ministry has announced a massive Rs 25,000 crore relief to real estate sector to meet the funding requirements of 1,600 stalled projects where money of 4.58 lakh homebuyers are stuck. A special window which will function as an Alternative Investment Fund (AIF), would provide priority debt financing for the completion of stalled housing projects in the affordable and middle-income housing sector. While the government will put Rs. 10,000 crores in AIF, the remaining would come from SBI and LIC, and others may also join too. The fund will also cover Non-Performing Assets (NPAs)and those that have ongoing NCLT proceedings. What classifies as affordable and middle-income housing is those houses that do not exceed 200sqmt carpet area, Homes that are upto or less than Rs 2 crore in Mumbai Metropolitan Region, Homes that are upto or less than 1.5 crore in National Capital Region, Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad and upto Rs 1.00 crore in the rest of India.
6. LENDERS MAY ASK RBI TO EASE FRAUD CLASSIFICATION NORMS: Banks are considering asking RBI to ease the classification norms for fraud-hit loan accounts, amid a surge in such cases. Banks currently set aside capital worth the full value of their dues from a fraud-hit loan account over a period of four quarters to cover the risk factor. Now banks are considering to ask the RBI to allow the banks to classify only that part of the loan amount as fraud where fraudulent transactions have been detected, as a forensic audit now helps the bank to identify such transactions where fraud has been committed.
7. ONLY 15% OF THE CASES RESOLVED UNDER BANKRUPTCY LAWS: As per a report by rating agency ICRA, only 15% of the cases have been resolved under the new bankruptcy laws, while the rest have gone for liquidation. Of the 2,542 cases admitted under IBC till date, 1,497 cases are admitted under Corporate Insolvency Resolution Process (CIRP). Only 15% CIRPs have yielded a resolution plan whereas 56% of the cases ended up going for liquidation. ICRA has made a strong case for strengthening the NCLT Infrastructure where timely completion of Corporate Insolvency resolution process initiated under the Insolvency and bankruptcy Code (IBC) continues to remain a challenge.
1. SEBI ASKS BANKS TO DECLARE NPAs DIVERGENCES ON A CONTINUOS BASIS: The Securities Exchange Board of India (SEBI) has asked all banks to disclose any material divergences in their Non-Performing Assets (NPAs) on a continuous basis. The market regulator said that banks must disclose such NPA divergences within 24 hours. Currently such divergences are disclosed by banks in their quarterly financial results. The new rules will apply in situations where the additional provisioning for NPAs assessed by RBI exceeds by 10% of the reported profit before provisions and contingencies. In recent months, there have been several instances of under-reporting of bad loans by lenders, prompting regulatory action by RBI.
2. THREE BANKS REPORT NPA DIVERGENCE A DAY AFTER SEBI ISSUES DIRECTIVE: A day after market regulator SEBI put in place tighter norms regarding reporting of divergence of NPAs, Three banks-- Lakshmi Vilas Bank Ltd, Indian bank and Union Bank reported divergence in their bad loans for the last fiscal ended march 2019. Indian bank has reported a divergence of Rs. 820 crores in its net NPA for 2018-19, while Union bank has reported a divergence of Rs. 998.70 crores. Lakshmi Vilas bank has reported a divergence of Rs 54.90 crores. Thus, the reporting of the said divergence in NPAs has had an impact on the profit/loss metrics of the respective banks for the fiscal ended March 2019.
3. RELIEF FOR PMC BANK DEPOSITORS AS RBI-APPOINTED ADMINISTRATOR MOVES TO SELL ATTACHED ASSETS: The Reserve Bank of India appointed administrator has asked the Economic Offence Wing of Mumbai Police to release properties attached in the Punjab & Maharashtra Cooperative Bank (PMC bank) case so that they can be auctioned. This is a positive move that could provide some relief to aggrieved deposit holders of the bank. The city police will soon seek court approval to hand over the attached assets to RBI administrator. If auctioned, the proceeds of the sale could be infused in the bank and distributed among the depositors on a pro rata basis.
4. 1.3 MILLION INDIAN PAYMENT CARDS DETAILS UP FOR SALE ON “DARK WEB”: Nearly 1.3 million debit and credit card data of Indian banking customers are available on “Dark Web” for open sale. According to ZDNet, the cards’ details is available on Joker’s Stash—one of the oldest card shops on the Dark Web which is known to be the place where major hackers/cyber criminals sell card dumps. The debit and credit cards belonging to multiple Indian banks and are being sold for $100 each, that can fetch up to $130 million for cyber criminals. Security researchers have said that this is one of the biggest card dumps in recent years. Data analysis suggest that the card details may have been obtained via skimming devices installed either on ATMs orPoint of sale (POS) machines.
5. DILUTING GOVERNMENT STAKE BELOW 50%IN PSBs IS NOT THE SOLUTION: Noble laureate Mr. AbhijitBanerjee has opined that the government should privatize Public sector banks (PSBs) to tackle the crisis in the banking sector. But Association of bank unions have expressed disagreement on this issue. The association of bank unions have expressed that diluting the government stake in PSBs is “no Solution”. instead, the unions said, ensuring proper governance in the system and removing political interference will address the problem of NPAs that has weakened the financial health of the PSBs. The bank unions opined that the present problems with the banks is mainly due to economic slowdown, increase in NPAs due to political interference and bad governance in the system.
6. GOVERNMENT CONSIDERING 5-YEAR EXTENSION OF INCOME TAX BENEFITS FOR SEZ UNITS: With exports and investments on a slide and considering the economic conditions prevailing in the country at present, Commerce Ministry is considering a five-year extension of tax benefits for units in Special Economic Zones (SEZs) by extending the clause beyond March 31, 2020. This is to boost the investor sentiments. Removing Minimum Alternate Tax (MAT) on the export turnover is also being considered.
7. CO-OPERATIVE BANKS ARE NOT IN FAVOUR OF CONVERTING INTO SMALL FINANCE BANKS: Urban Co-operative Banks (UCBs) are not in favor of the scheme of RBI to allow them to voluntarily convert into Small Finance banks(SFBs), as it would mean that they would have to give up their “ Universal bank” status and become “Narrow banks”. As Universal banks, UCBs can undertake all banking activities as permitted to commercial banks. SFBs are required to extend 75% of their loans to sectors eligible for Priority Sector Lending (Loans to agriculture, MSMEs, housing and education). Further, at least 50% of SFBs’ loan portfolio should constitute of loans up to Rs.25 lakhs.
1. SBI/OBC EMPLOYEES TO GET DIWALI GIFTS:The top management of State Bank of India and Oriental Bank of Commerce are planning to give Diwali gifts to its employees. The two banks have announced Diwali gifts of sweets/dry fruits/chocolates for their staff worth Rs 1000/- each. Both the banks have instructed branch offices to debit the expenditure in respective branches/offices.
2. BANKS NEED TO RAPIDLY REINVENT TO STRENGHTEN PROFITABILTY: The Mckinsey’s Global Banking Annual Review Report says that at a time when growth in banking sector is sluggish, productivity gains are fading and digital pressures are on the rise, the banking sector should look at implementing radical measures, both organic and inorganic so as to strengthen profitability and boost their returns. The report warns that banks need to rapidly reinvent their business models in the face of continued threat posed by fintech companies and big technology companies that are taking stakes in banking businesses. The report said that growth within India’s Banking Sector has dropped from 22% during 2002-07 to 10.3% from 2010-18.
3. RESERVE BANK BANS USE OF DIRECT SELLING AGENTS TO SOURCE RETAIL LOANS: Now banks, that too private sector banks will have to change the way they have been chasing retail loan customers all this time. The Reserve Bank of India has banned the use of Direst Selling Agents (DSAs) to source retail loans and carry out physical verification of documents of borrowers. RBI believes that agents should playa limited role. KYC procedures, involving verifying borrower’s original documents should be performed by the bank officials and it cannot be outsourced. RBI’s this decision is aimed at reducing incidents of data theft and minimising operational risk for banks.
4. NOW HDFC WEBSITE IN 6 OTHER INDIAN LANGUAGES: Housing major HDFC Ltd has said that it has localized its website in six other Indian languages other than English. The website content is now also available in Hindi, Marathi, Tamil, Telugu, Malayalam and Kannada. Thus, HDFC Ltd is the only Corporate in the financial sector to offer contents on its website in six Indian languages. The growing use of internet and smartphones and rising base in regional language users, particularly in smaller towns has made it important to focus on building digital properties and content.
5. CONTAGION RISK IN FINANCIAL SECTOR—30% OF BANK’S NBFC EXPOSURE COULD TURN BAD: India’s Financial Sector faces heightened risk of contagion, with many finance companies having lost over 50% of their equity value in the past one year. Standard & Poor’s (S&P) report follows a similar warning from Fitch Ratings, which has projected that roughly 30% of banks’ exposure to NBFCs could turn bad and this would be a worst-case scenario, putting further pressure on their capital adequacy and will reverse the ongoing recovery process on Non-Performing Loans.
6. GOVERNMENTTO INTRODUCE ONLINE PROFICIENCY ASSESSMENT TEST FOR INDEPENDENT DIRECTORS: The government has said that it will introduce an online proficiency self-assessment test for independent directors. The test will be conducted by Indian Institute of Corporate Affairs (IICA) from December 2019. The requirement will not be applicable for certain categories of individuals, including those who have served for atleast 10 years as Director or key managerial personnel in a company. Other than those exempted, have to pass the testy within one year from the date of inclusion of their names in the independent directors’ data bank maintained by IICA.
7. HDFC BANK Q-2 PROFIT UP BY 26.7% :During the time where the entire banking sector is lurking under pressure and NPA crisis, HDFC bank has reported a net profit of Rs 6,345 crores for September 2019 quarter of the current financial year, up by 26.7% on year-on-year basis. This is despite the bank witnessing 48% year-on-year jump in total provisions to Rs 2,700 crores. Besides this, the bank also wrote-off loans worth Rs 1,589 crores during the said quarter.
8. INTRODUCING E-INVOICING IN GST WILL BE A GAME CHANGER: The GST Council has approved the introduction of “E-invoicing” or Electronic Invoicing for Business to Business (B2B) transactions from January 2020. Once implemented, it can help arrest tax evasion as it enables pre-populating of GST returns with e-invoice details. Return filing will also become simpler with reconciliation becoming easier. A detailed write-up/note has been released and made available on the GSTN website on “E-Invoicing”.
1. ONLY 17% OF BANKS HAVE SCALED MAXIMUM DIGITAL USE TO ACHIEVE BUSINESS TARGETS: As per a report by Infosys-Finacle, only 17% of the retail banks have deployed maximum digital technology usage. The report says that banks expect mobility and advanced analytics to impact their business the most, but are not ready to apply these technologies to create expected business outcome. Optimal use of digital deployment needs a whole new way of thinking, designing and execution to increase the business. Banks need to transform culture, organisation design, operations and technology ecosystem. The report also mentions that in the next 5 years, the biggest threat to the banking industry would be from large technology companies and fintech start-ups. And whoever makes the maximum use of digital technology would be the winner.
2. SBI SEEKS FINANCE MINISTRY’S INTERVENTION FOR DHFL RESOLUTION: State Bank of India has approached the Department of Financial Services (DFS), seeking its intervention to end the impasse over the resolution plan for Dewan Housing Finance Corporation (DHFL). DFS is a division of Finance Ministry that covers the functioning of banks, financial institutions and insurance companies. SBI has written a letter to DFS, highlighting the relevant points on the issue for speedy process. SBI is a bit apprehensive over a systemic risk if on- going efforts to finalise the resolution plan does not go through then the DHFL funding has to be marked as NPA (Non-Performing Asset) which requires further provisioning.
3. NUMBER OF INCOME TAX PAYERS JUMPS BY 13.8%: The number of income tax payers rose to 84.5 million in assessment year 2018-19, a jump of 13.8% from the previous year. The data released by the Income Tax Department showed that since the introduction of GST in June 2017, the share of income tax receipts also has gone up.
4. FORMER SBI CHIEF CALLS FOR SPECIAL CADRE OF BANK OFFICERS FOR RISK MANAGEMENT: Ms.Arundhati Bhattacharya, the former Chairperson of SBI has expressed that there is a need to create a special cadre for compliance and risk management in every bank. The comment comes at a time when banks’ lending practices have been repeatedly questioned due to many alleged scams, the need for an increased level of attention from the regulator and investigating agencies and a very high quantum of bad loans. She feels that the time has come to create a special cadre for risk and compliance management.
5. AXIS BANK LAUNCHES NEW FIXED DEPOSIT SCHEME: Axis Bank Ltd has launched a new Fixed Deposit Scheme— “Express-FD Scheme”. Express-FD is a digital fixed deposit product which allows even the non-customers of the bank (Those who are not the account holders of the bank) to create a fixed deposit. Anyone can invest in Axis Bank Express-FD by using any savings account from any bank through net banking, debit card or via UPI. A valid PAN and Aadhaarproof is required to open Express-FD online. The customer’s mobile number should be linked with the Aadhaar number as Aadhaar-based OTP is essential to invest in Express-FD. Axis Bank is offering free withdrawal of up to 25% of the fixed deposit amount without any penalty charges. Customers can opt for automatic renewal of the FD or if once the FD is matured, the entire amount will be credited to the customer’s bank account from where it was originated.
6. SBI TOPS CORPORATE LOAN WAIVER LIST: State Bank of India leads the list of Scheduled Commercial Banks who have written-off loans of big borrowers, mostly in the last three years. As per an RTI query, SBI has written-off Rs 76,600 crores of bad loans of 220 defaulters, who owed the bank more than Rs 100 crore each as on March 2019. The RTI query gave the list of Scheduled Commercial Banks with break up of waiver in 2 categories – Rs 100 crore and more, and Rs 500 crore and more. The total waiver of bad loans comes to a staggering Rs 2.75 Lakh Crores. The query also reveals that Rs. 37,700 crores waiver belonged to just 33 borrowers with loans of Rs 500 crore or more.
7. INDIAN BANK TO ROLL OUT PORTALS INVITING CUSTOMERS’ VIEWS ON MERGER: Indian Bank will soon roll out portals inviting customers to share their views on the merger with Allahabad Bank. Indian Bank MD Mrs PadmajaChunduru told that best banking practices of both the banks would be taken for business growth and more benefits will be available to customers through customised products and service offer. She also assured that the amalgamation process would be very smooth without any discomfort to customers of both the banks.
1. RBI OVERHAULS CO-OPERATIVE BANKS’ OLD EMAIL BASED REPORTING SYSTEM: After the PMC Bank debacle, Reserve Bank of India has overhauled the daily reporting system through e-mail by the cooperative banks. In a circular addressed to the Chief Executives of all cooperative banks, RBI has asked all cooperative banks to replace the existing e-mail-based reporting system with a web-based central system. They will have to now make use of RBI’s Central Information System for Banking Infrastructure (CISBI) which is an online portal that presently allotsBasic Statistical Return (BSR) code to branches and offices of all banks. Under the new system, all cooperative banks are required to submit their information in a single proforma online on CISBI portal.
2. GeM SIGNS PACT WITH UNION BANK OF INDIA TO AVAIL VARIOUS SERVICES: The Government e-Marketplace (GeM) has signed a pact with Union Bank of India under which the bank will offer several services to it including transfer of funds. The Commerce Ministry has launched GeM which is a procurement portal which will increase transparency in public procurement of goods and services, which is estimated at about Rs. 8 lakh Crores per year. Union Bank of India will be able to offer an array of services including transfer of funds through GeM pool accounts, advising of performance, bank guarantees and earnest money deposit to the registered userson the portal. Till now, 2,88,212 sellers and service providers have registered with GeM portal to sell 13,48,380 products and 17,627 services.
3. RBI GIVES NOD FOR “KERALA BANK”: The Kerala Government’s long pending dream of setting up its own bank, by merging all its District Co-operative banks is all set to become a reality with the Reserve Bank of India giving the final approval for the move. With its formation, “Kerala Bank” will be the largest banking network in the state. Kerala Bank will be formed by amalgamating all District Co-operative Banks (DCBs) with Kerala State Co-operative Bank. There are 13 DCBs at present. Setting up of the new bank would also be in accordance with the final verdict of some cases pending before the court in this regard.
4. RBI TURNS DOWN INDIABULLS HOUSING FINANCE MERGER WITH LAKSHMI VILAS BANK: RBI has rejected the planned merger between Indiabulls Housing Finance and Lakshmi Vilas Bank after examining the proposal for more than six months, during which multiple approaches were considered to ensure compliance with strict banking sector takeover rules. The much-awaited merger would have given a lot of relief to Indiabulls which has $16 billion in mortgages, advances against property and commercial real estate loans. The Indiabulls group owes as much as $4 billion to the Indian banking system.
5. PSBs START LENDING LOANS BASED ON CUTOMER’S RISK PROFILE: Three Public Sector Banks (PSBs), Bank of Baroda, Union Bank of India and Syndicate Bank have taken the first step in transparently segregating retail loans into their respective versions of prime and subprime risk exposure by using third-party credit scores of potential buyers to offer them different home-financing rates. Under the new external benchmarking regime, Bank of Baroda for example, will be using three credit score slabs from the Credit Information Bureau India Ltd (CIBIL) to price its new home loans. Customers with a high credit score of more than 760 will pay 1% lower (8.1%) rate. Customers with a score between 725-759 will be offered 8.35% interest rate and those with scores between 675-724 will be offered a rate of 9.1%. These rates are linked to external benchmark rate.
6. FOREX RESERVES AT A NEW LIFE TIME HIGH AT $ 437.83 BILLION: The country’ foreign exchange reserves touched a record high of $437.83 billion in the week ending October 4, 2019. This is as per the latest data from RBI. The increase in reserves in the reporting week was on account of rise in Foreign Currency Assets (FCA), a major component of the overall reserves. FCA increased by $3.99 billion to $ 405.61 billion in the reporting week. The country’s reserve position with the IMF also increased by $ 9 billion to $ 3.61 billion as per the data shown by RBI.
7. NATIONAL e-ASSESSEMENT CENTRE LAUNCHED BY INCOME TAX DEPARTMENT: The Income Tax Department has launched the National e-Assessment Centre. With this launch, the Income Tax department would undertake its first phase of faceless assessment. The scheme is expected to result in better quality of assessment orders while reducing potential harassment to tax payers. In the first phase, the department has selected 58,322 cases for scrutiny, for which e-notices have already been served. These cases belong to Assessment year 2018-19.
1. PMC BANK FRAUD TO BE INVESTIGATED BY FORENSIC AUDITOR GRANT THORNTON: Government’s Economic Offences Wing (EOW) has instructed PMC Bank to appoint one forensic auditor to investigate the recent fraud that has been committed in PMC Bank. Accordingly, PMC Bank has roped in Grant Thornton to carry forensic investigations. Grant Thornton is tasked to look into the allegations made by the former Manging Director of the bank on how the bank managed to flout RBI norms. The firm will also look into the modus operandi of the fraud and will see if any employee has been benefitted from it. The firm would work closely with EOW.
2. SBI & BANK OF BARODA SQUEEZE MICRO-ATM TRANSACTIONS OF OTHER BANKS: State Bank of India and Bank of Baroda have limited the cash withdrawals of customers using micro-ATMs of other banks in their ATMs. Now they can use the same only four times a month. This could cause a fall in the transactions undertaken through the Aadhaar-enabled Payment System (AePS) route. AePS recorded 201 million transactions in September, a nearly 9% drop from 220 million transactions in July. Through AePS, depositors use biometric credentials to withdraw cash from retail agents instead of swiping their debit cards at ATMs.
3. FACELESS ASSESSMENT OF I-T RETURNS IS NOT MANDATORY FOR TAX PAYERS WITHOUT e-FILING ACCOUNT/PAN CARD : The Income tax department is starting faceless assessment of tax returns from 08TH October 2019. But this is not mandatory for tax payers who do not have an e-filing account. Further, in cases where the department has initiated or conducted raids and instances categorised under “extraordinary circumstances” will not be covered under the e-assessment system.
4. IRDAI ISSUES NEW NORMS TO CURB LIFE INSURANCE MIS-SELLING, MAKES ILLUSTRATIONS MANDATORY: The Insurance Regulatory Development Authority of India (IRDAI) has directed all insurance companies to mandatorily issue benefit illustrations based on two different assumed rates of return as per prescribed format and get these signed by the policy holder and agent/insurer. It should be made part of the policy, write a warning-type advisory/alert about the non-guaranteed portion of the returns and ensure that all terms and conditions are displayed on the main screen in case of digital sales. Insurance Companies have to comply with this norm by December 1ST 2019. This is a strong effort to increase transparency and curb mis-selling of insurance policies.
5. PSU BANKS PUT Rs. 25,000 CRORE NPAs ON SALE: Since there is a lot of delay occurring in resolution process of bad loans under Insolvency Law, some of the public sector banks have sought to sell bad loans worth Rs. 25,000 crores. Bankers are losing money in cases which are awaiting a decision in the National Company Law Tribunal (NCLT), the appellate court or even in the Supreme Court with the process dragging on and on. But on the other hand, Asset Reconstruction Companies (ARCs) also have become more vigilant in buying these NPAs but banks are trying hard to sell these bad assets toARCs to recover their money.
6. NBFCs ARE LIKELY TO BE BROUGHT UNDER INSOLVENCY CODE AMBIT: The government is exploring the possibility of bringing Non-Banking Finance Companies and other Financial Service Providers within the ambit of Insolvency and Bankruptcy Code (IBC). In recent years several top notch NBFCS are facing severe financial and liquidity crunch, causing concern among the investing fraternity, especially retail investors and the lenders who are put to a lot of hardship to recover their exposure to such entities. Hence the government is looking to move to cover such situations and bring these financial service providers within the ambit of IBC which allow the creditors (both secured and unsecured) to drag such companies to the National Company Law Tribunal (NCLT).
7. 4.50 LAKH CRORES WORTH OF REAL ESTATE PROJECTS STALLED: All these years most of the real estate developers were relying on loans from Non-Banking Finance Companies (NBFCs), which has come to a halt a year ago as most of the NBFCs have stopped lending to these real estate developers due to severe liquidity crunch. As a result, most of the developers are unable to complete their projects and many of them have filed for bankruptcy. There are approximately Rs. 4.50 Lakh Crores of un-completed or halted projects in the country and most of the developers are unable to repay their existing loans, leading to more real estate loans to turn sour. Because of this scenario, even banks are reluctant to lend fresh loans to real estate developers. This will have a cascading effect on the economy as a whole in the near future.
1. SBI TO ROLL OUT CO-LENDING MODEL WITH 4-5 NBFCs: State Bank of India is launching a co-lending business model with 4-5 medium and large Non-Banking finance Companies (NBFCs). Once the present hurdles relating to the integration of technology with these NBFCs are removed, the model of co-lending will be launched. It will be completely automated without any manual intervention from customer on-boarding to loan disbursement and monitoring. Under this model, SBI will have an exposure of 70 to 80% while rest will be borne by the NBFCs. Initially this arrangement will be only for priority sector loans. The model is in line with RBI guidelines.
2. MSMEs WILL GET ANOTHER CHANCE TO RECLAIM BANKRUPT COMPANIES: Promoters of Micro, Small & Medium Enterprises (MSMEs) going through insolvency proceedings can take another shot at running their companies. This is based on a Supreme Court ruling which has led to expeditious resolution of insolvencies in this sector. As per the Supreme court ruling, promoters of MSMEs are permitted to be considered for resolution of their own company unlike in the case of other companies as they are exempt from Section 29(A) of the IBC Code, which debars individuals who have defaulted on debt obligations from bidding for stressed assets during the corporate insolvency resolution process.
3. RBI FORMULATES NORMS TO RESOLVE DISPUTES RELATED TO FAILED DIGITAL TRANSACTIONS: RBI has formulated framework on harmonization of Turn Around Time (TAT) for resolution of customer complaints related to failed digital transactions across all authorized payment systems and compensation for such failed transactions.This will boost the customer confidence and will bring uniformity in the processing of failed transactions across the country. In an ATM if a transaction is failed and the customer’s account is debited then the timeline for auto reversal of the failed transaction is 6 days (Including the date of failed transaction). The compensation payable there after is Rs 100/- per day of the delay.
4. RBI INITIATES PROMPT CORRECTIVE ACTION ON LAKSHMI VILAS BANK: Reserve Bank of India has initiated Prompt Corrective Action (PCA) on Lakshmi Vilas Bank Ltd. The Economic Offence wing of Delhi Police is probing allegations of cheating and criminal breach of trust against its directors of the bank board. The bank has taken note of the same for necessary compliance with progress to be reported to RBI from time to time. RBI’s crackdown was on account of high NPAs, insufficient Capital to risk weighted assets ratio and negative return on assets (ROA) for two consecutive years.
5. A SINGLE LOAN ACCOUNT PULLED DOWN 35-YEAR-OLD PMC BANK: Reserve Bank of India has put severe restrictions on Punjab & Maharashtra Co-operative Bank Ltd citing several regulatory lapses, primarily massive under-reporting of Non-Performing Assets (NPAs). A single account is responsible for the downfall of the bank. PMC Bank had granted a loan of Rs 2,500 crore to the now bankrupt real estate firm, Housing Development & Infrastructure Limited (HDIL). PMC Bank’s auditors did not classify the loan to HDIL as NPA despite HDIL defaulting on payments. RBI finally put the restrictions and termed the loan as a complete loss asset. In such cases the bank must make full provision for the loss but in this Case, the bank’s cash reserves stand at Rs 1,000/- crores, well short of Rs 2,500 crore loan granted to HDIL.
6. AS NPA RESOLUTIONS CRAWL, BANKS STARE AT SPIKE IN CREDIT COST: With slower pace of resolution of bad loans, banks are staring at a spike in their credit cost, which is set to rise in the range of 1.9% to 4.6% for the second half of current fiscal. This is as per a report tabled by India Rating. But the report also said that any pickup in stressed asset resolution may result in lower net credit costs. The report also states that further incremental NPA generation for fiscal 2020 and 2021 may come from the agriculture and MSME sectors.
7. RBI LAUNCHES MOBILE APP YONO IN UNITED KINGDOM: State Bank of India has launched its digital banking App ‘YONO” in the United Kingdom. Chairman of SBI Mr. Rajnish Kumar said that “YONO SBI UK” is one of highlights of SBI’s technological capabilities. The app is available both on Apple’s App Store and Google Play Store. YONO SBI UK is described as an enhanced mobile app which is simple, intuitive and user friendly. Customers in UK can carry out almost all their banking needs through this app. SBI is also planning to launch this app at its other operations worldwide.
Indian Economy is passing through a lean patch which is alarming. The current GDP registering a very
low growth rate of around 5% is a real cause of concern. Economists and strategists need to gauge
whether the slow-down is cyclical, structural or sociological. In simple words, a cyclical slowdown is a
part of business cycle having its ups and downs. On the other hand, sometimes the problems of the
economy can go deeper, impeding and affecting the production of goods and services and a
monetary or fiscal stimulus is not enough to revive the economy. Here the Government has to
undertake certain structural policies to revive the economy. But the third dimension of looking at
the economic slowdown is sociological, in the sense that the economy suffers due to decline in
private consumption which is purely due to low salaries or no salary hikes. Here the income of
salaried persons is not growing to outpace price inflation in services sector. Or we can say the
wage increase is not compensating or not matching the price inflation in services sector.
There are various factors that can be analyzed to support this sociological cause for decline in economic growth. Firstly, urbanization has resulted in more Nucleus families from Joint family pattern. In Joint Families there were many hands working to earn income and also there was collective consumption of costs and services whereas in nucleus family the costs and services have become concentrated.
Secondly, we do not measure services inflation properly. The weighs of services inflation in consumer price index is inappropriate, demand elasticities do not seem to be worked in at all or perhaps it cannot be done. According to the latest CPI, since August 2014, Healthcare costs have grown by 30%, Recreation cots have grown by 25%, Communication (which includes telephone, mobile, internet etc) costs have grown by 30%, Education by 30%, Personal care by 24% and Domestic aid (Maid servants/drivers etc) has almost grown by 30%.
While inflation in prices of goods may not been much but for services sector it has been abnormal. Had the incomes been rising equally, this may not have mattered much, but they have not. In fact, since 2014, average salary growth has been around 5 % for the last three fiscals and at the same time these very people are also paying taxes (Both Direct and Indirect) to the tune of 55%. So, the salaried person is running from pillar to post to match his earnings with that of the services sector inflation. As a result, he is left with less purchasing power which has resulted in low demand for goods which has affected the economy very badly.
WHAT NEEDS TO BE DONE?
Private consumption has been the main driver for India’s economic growth, contributing about 60% to GDP, and its fall is dragging economic growth further down. Decline in private consumption is mainly due to the fact that there is not much increase in wages for the last three fiscals and at the same time the services sector inflation has grown by leaps and bounds. The focus of the Government needs to be on improvement in wage structures, create more employment which will spur demand and savings. The latest survey by SBI also points out a substantial decline in both urban and rural wage growth as the most crucial factor for low economic growth.
To sum up, we can say that the economic slowdown is more sociological than cyclical or structural. The Government has already made certain structural changes in Corporate taxes which, to some extent will improve manufacturing sector, thereby may result in more employment, better wages and more purchasing power. The Government needs to be more patient now, as it will take some time for the positive results.
1. I-T RETURNS (E-ASSESSMENT) NOW ONLY IN “FACELESS” MODE: The government has notified that henceforth the assessment of Income-Tax Returns (ITR) will be completely “faceless”, which means the assessee and the assessing official would be anonymous to each other. However, the E-assessment Scheme 2019 would provide the assessee to seek a personal hearing but the same would be conducted exclusively through video conferencing. The Income Tax Department would set up a Nationale-Assessment Centre which would serve notices to the assessee specifying the issue for identifying them to issue notice for assessment. The assessee will get 15 days’ time to respond to the notice and file a reply.
2. GOVERNMENT WAIVES 3 YEAR LOCK-IN PERIOD ON INVESTMENTS MADE BY NRI IN IDFBONDS: The government has now waived the 3-year lock-in period on investments made by Non-Resident Indian (NRI) in Infrastructure Debt Funds (IDFs). This has been done to promote funding in infrastructure sector, with an aim to accelerate and enhance flow of long-term debts in infrastructure projects. To attract off-shore investments into IDFs, any amount of interest received by an NRI or Foreign Company from investment in such IDFs will be now taxed at a reduced rate of 5% only.
3. SOON LANDS WILL HAVE AADHAAR LIKE UNIQUE ID NUMBERS: The government will soon start issuing unique numbers for land holdings as part of an exercise which will bring transparency and end dubious land ownership. The Rural Development Ministry has started working on this and soon a standardised unique number for each surveyed plot will be issued. The unique number will have all the details such as State, District, Tehsil or taluka, block level and street information wherever possible along with the information about the plot including the plot size and ownership details. This could subsequently be linked to Aadhaar and revenue court system.
4. RBI PLANS TO STRUCTURE LOAN INTEREST RATES FOR NBFCs AND HFCs: After mandating banks to link their new retail loans to an external benchmark rate, the Reserve Bank of India is now looking at structuring the interest rate regime for Housing Finance Companies (HFCs) and Non-Banking Finance Companies (NBFCs). Unlike banks, at present NBFCs and HFCs do not have any “anchor rate” or a uniform interest-rate determining structure as they do not have any mandate from RBI. But before mandating the interest rates of NBFCs and HFCs, RBI needs to consider the fact that HFCs and NBFCs do not operate in the same market as banks, in the sense that their clientele base is totally different from that of the banks.
5. BANKS EXPOSURE TO POORLY RUN NBFCs WILL HAVE TO TAKE LARGER HAIRCUTS: Reserve Bank of India Governor Mr. Shaktikanta Das has warned that banks that have exposure to poorly run Non-Banking Finance Companies (NBFCs) will have to take more haircuts while resolving the stressed loans given to these NBFCs which are poorly run and who are found wanting on the corporate governance front. The Governor’s comment on NBFCs comes at a time when banks are grappling with resolution of stressed NBFC cases like the case of DHFL which has dues of over Rs. 50,000 crores where in the promoters of DHFL are accused of corporate governance lapses in the past.
6. GOVERNMENT HAS SELECTED BANKS FOR MERGERS ON THE BASIS OF THEIR IT COMPATIBILITIES: The government while choosing banks for mergers, has selected the banks on the basis of their IT compatibility instead of geographic reach. Punjab National Bank, United Bank of India and Oriental Bank of Commerce are using Infosys’s “Finacle Software”, Allahabad Bank and Indian Bank are on TCS’s “BaNCs software”, Canara Bank and Syndicate bank are on “iFlex” platform, while Union Bank, Corporation Bank and Andhra Bank are on “Finacle” Platform. These banks have formed 23 committees covering every aspect of the merger to ensure success of the exercise.
7. BOLD REFORMS IN CORPORATE TAX AFFECTED: The government has announced some bold corporate tax rates to boost the economy which may reverse the slowdown. Aiming to lift business sentiments and spur investments, the corporate tax rate has been slashed to 22% from 30%. Proposed a competitive 15% rate for new investment in manufacturing. CSR funds are made available for incubators, Universities and Research bodies. All these measures may boost exports, further investment expected to create more jobs and rise in demand from fiscal boost may induce companies to hire. Though good measures it may lead to further increase in fiscal deficit from 3.3 to 3.7% of GDP.
1. FUND TO OFFER GUARANTEE FOR HOME LOANS: As a part of proposed housing sector package which is burdened by heavy debt, the government is considering a fund that will provide guarantee for those who won’t otherwise be eligible for a housing loan, allowing them to avail a loan to own a home. This fund will essentially support borrowers who are not rated well and not eligible for a housing loan from any bank. The guarantee could also help lower interest rates for those who are eligible for housing loans. It is hoped that this credit enhancement fund could bring more buyers into the housing market which at present is saddled with high unsold inventory.
2. GOVERNMENT TO ANNOUNCE MEASURES TO BOOST REAL ESTATE SECTOR: The Central Government is likely to come out with major announcements to boost the real estate industry. The package for real estate industry would include additional funds for Housing Finance Companies (HFCs) and norm relaxation for developers seeking bank loans. The government is also considering to create a fund to the tune of around Rs. 8,000 crores to help complete the stalled projects. It is also likely that the ambit of affordable houses will be increased from Rs. 45 lakhs to Rs. 70 lakhs. The government is keen on reviving the real estate sector, which has a multiplier effect on other sectors as well such as cement, steel, hardware besides generating employment.
3. PRIVATE BANKS NOT KEEN ON LINKING RETAIL LOANS INTEREST RATES TO REPO RATE:Private banks are unhappy with Reserve Bank of India’s mandate to link floating rate loans given to retail and MSME sector to an external benchmark rate. Currently only two private banks are offering repo-rate linked retail loans. But from October 1, 2019 onwards all other private lenders will have to offer rates linked to an external benchmark rate. Most of the private banks feel that this effectively suits only the public sector banks which follow one rule to all the customers as per the scheme guidelines but that is not so with the private players which offer different rates to each individual based on his/her liability profiles.
4. SWITZERLAND SHARES FIRST TRANCHE OF ACCOUNT DATA:Switzerland under an automatic information exchange framework MOU has shared account details to Indian Government. But the data pertains to most of the accounts that are already closed due to fear of action. However, the data prepared by all Switzerland -based banks under a direction from the Swiss government for dispatching further to Indian authorities provides full details of the entire flow of funds to and from all the accounts that were active for even a single day in the year 2018. The data can be very useful to create a strong prosecution case against those who had un-accounted money.
5. BANK OF INDIA LAUNCHES "QR" BASED CASH WITHDRAWAL SYSTEM: Bank of India has introduced a new “QR” based withdrawal system from ATMs which does not require an ATM card to withdraw cash. With this the bank has achieved two objectives, an attempt to curb ATM cloning, skimming, ATM-related frauds and also promote card-less cash withdrawal. There will be a “QR Cash” option on the ATM screen, when you select this option it will ask you to enter the amount. Now a QR code will appear which you need to scan through the mobile app on your smart phone. Once confirmed, you are required to insert your M-pin, after which cash will be dispensed by the machine. Presently a maximum limit of Rs. 2,000/- has been set for cash withdrawal which will be enhanced later.
6. RBI PANEL SUGGESTS STANDARD FORMAT OF DOCUMENTS TO PROMOTE HOME LOAN SECURITIZATION MARKET:Securitization involves pooling of loans and selling them to a special purpose institution which then issues securities called Pass-Through Certificates (PTCs) backed by this loan pool. Well-developed securitization market can emerge as a reliable support to other sources of funding. A Reserve Bank of India Committee has suggested standardization of loan documents and setting up of a government sponsored intermediary under the National Housing Bank (NHB) for development of the home loan securitization market. It is also suggested that the government should exempt mortgage-backed securitization from stamp duty.
7. RBI MOOTS NEW RULES FOR SMALL BANK LICENCE: Reserve Bank of India has issued new guidelines for setting up of Small Finance Banks. In a bid to get more participants in this small banking finance space, RBI will only permit small private entities, payment banks, NBFCs, MFIs and cooperative banks to apply and convert into Small Finance Bank (SFB). The government would not entertain proposals from large entities, large industrial houses, public sectorentities, or autonomous bodies. Joint ventures from two or more promoter groups will also not be allowed to apply. While the promoters of universal banks will not be allowed to start an SFB, promoters of Payment banks will be allowed.
1. RBI INSTRUCTS BANKS TO LINK LOANS TO BENCHMARK RATES: The Reserve Bank of India has made it mandatory for banks to link loans (Loans to retail customers and Micro, Small & Medium Enterprises—MSMEs) to external interest rate benchmarks. These external rate benchmarks could be RBI’s repo rate, 3-month or 6-month treasury yield or any other benchmark published by Financial Benchmarks India Pvt Ltd (FBIL). FBIL is owned by Fixed Income Money Market &Derivatives Association of India, Foreign Exchange Dealers’ Association of India and IBA. Further, banks can decide risk premium based on borrower’s credit profile. Interest rate must be reset at least once in 3 months. These new rates will come in to effect from October 1, 2019.
2. UNIFIED PAYMENT INTERFACE (UPI) TRANSACTIONS JUMP SIX TIMES IN 2018-19: According to the Reserve Bank of India’s Annual Report the Unified Payments Interface(UPI) transactions have surged nearly six times in the financial year 2018-19. The spike in UPI transactions comes amid “Robust Growth” in payments and settlement systems. The transactions volume has jumped by 54.3% and in terms of value the increase is 14.2%. The instant payment system-UPI is developed by National Payments Corporation of India (NPCI) which is regulated by RBI.
3. GOVERNMENT SET TO BAIL OUT IDBI BANK: The troubled IDBI Bank is set to get a fresh lifeline of Rs. 9,000 crores of which the government is planning to pay its share of the bailout money that Life Insurance Corporation has been seeking from the government for the past several months. While LIC, which is the majority owner of IDBI Bank, will have to cough up Rs. 4,500 crores as its share, the government is expected to chip in with a matching contribution. The money thus released by the government will be a part of the Rs. 70,000 crore bank recapitalisation plans, of which Rs. 55,000 crores has already been earmarked for state-run banks. The fresh capital thus infused will help IDBI Bank to tide over the latest financial crisis, given that it has a massive pile of NPAs.
4. BANKS UNLIKELY TO SHARPLY TRIM LENDING RATES DESPITE NEW NORMS: The Reserve Bank of India’s move to mandate lenders to link all new floating rates of retail and MSME loans to external benchmark from October 1, 2019 is unlikely to achieve expected results in trimming down the lending rates. Rates may come down by a few basis points, but there will not be any drastic reduction. This is because banks are going to increase their spreads to manage their cost of funds. The government and RBI has stressed the need for passing rate cuts faster to customers and RBI since February 2019 has reduced its benchmark repo rate by 110 basis points but banks are reluctant to reduce their interest rates to such an extent as they grapple with high deposit costs and are also burdened with about $150 billion in stressed assets.
5. RBI’S INCOME SOARS BY 147%: The Reserve Bank of India’s income for the year ended June 30, 2019 grew by 146% year-on-year, allowing it for a record transfer of Rs. 1.76 lakh crore to the government for FY 2019. According to the report the size of RBI balance sheet grew by 13.42% and total income rose by a whopping 146.5%. The gain in income was primarily on account of the foreign exchange gains due to higher yield on securities and change in the method of valuation.
6. BANK FRAUDS RISE TO Rs 71,543 CRORE IN 2018-19: RBI’s annual report showed a jump of 15% in the bank frauds in financial year 2018-19 as compared to last year. The amount involved in fraud cases increased by 73.8%. In Financial year 2018-19, banking sector reported 6,801 frauds involving Rs. 71,543 crores as against 5,916 cases involving Rs 41,167 crores reported in the financial year 2017-18.
7. PSU BANKS LIKELY TO REVAMP MUDRA SCHEME: The Finance Ministry has asked state-run banks to review their Mudra Loans, with an aim to launch a revamped version of the said scheme. All aspects of the Mudra scheme including the geographical reach, bad loans, need for better features, enhanced access to the intended beneficiaries are being reviewed by PSBs. This is part of the ongoing brain storming exercise by the bankers to ease the flow of credit and support the government in its efforts.
8. GDP GROWTH DROPS TO 5% FROM 5.8%: The Gross Domestic Product (GDP) growth for the first quarter of the financial year 2019-20 dropped to 5%, a sharp decline of 0.8% points compared to the last quarter of financial year 2018-19. The GDP growth numbers come at a time when the Indian Economy is going through a very rough patch, which has particularly hit the auto, manufacturing and real estate sectors. Some factors behind the slowdown are substantial drop in consumption in the domestic market, decline in purchasing power and an uncertain world economy. While the government is announcing steps to address the concerns of the Indian Economy, experts have said that measures taken so far are not enough to boost the economy.
1. DHFL WANTS ITS LENDERS TO TAKE 35% HAIRCUT: Dewan Housing Finance Limited (DHFL) which is in troubled waters due to acute liquidity crunch has proposed a 35% haircut to all its lenders as part of its resolution plan. DHFL has submitted the plan under the new resolution framework circular issued by Reserve Bank of India, according to which, 60% lenders by number or 75% by value should approve of an inter-creditor agreement to be effective. Banks are working towards resolving the issue and are also considering further lending for restarting the company’s operations. Out of the exposure of about Rs. 1 lakh crore of DHFL, 38% is in the form of bank loans and remaining is through debt markets, mutual funds, insurance companies and deposits.
2. BANKS ARE PLANNING TO REDUCE ATM TRANSACTIONS: As per a report from Times of India, banks are planning to reduce ATM transactions in view of rising ATM frauds. The report says that the banks want to allow just one ATM transaction pera certain period, between 6 to 12 hours. Further, banks want to strengthen the security system in ATM which will include a two-way communication. Canara Bank has already started the system of sending OTP to the registered mobile number for any withdrawal above Rs. 10,000/-
3. BANKS SUGGEST EASIER FARM LOAN RULES TO REMOVE STRESS: The Finance Ministry had asked all banks to collate suggestions from branch level officials, as any suggestions from grass root level would be more practical in nature. As per the suggestions from banks’ branch level consultations, public sector banks are likely to make a request to the government for allowing farmers to borrow afresh even before clearing their previous bank loan, which would help these farmers to de-stress and gain access to bank funds seamlessly even during natural calamities. Banks also want a more robust loan guarantee architecture for Mudra Loans and are in favour of an umbrella cyber security framework for the entire sector.
4. RBI TO TRANSFER Rs. 1.76 LAKH CRORE FROM ITS SURPLUS RESERVE TO GOVERNMENT: The Reserve Bank of India has approved the transfer of a record Rs. 1.76 lakh crore dividend and surplus reserves to the government. RBI will be transferring Rs. 1,76,051 crores to the government comprising of Rs.1,23,414 crores of surplus for the year 2018-19 and Rs. 52,637 crores as per the revised Economic Capital Framework (ECF). The excess reserve transfer is in line with the recommendation of former governor Mr. Bimal Jalan-led panel constituted to decide the size of capital reserves that the Central Bank should hold.
5. E-COMMERCE NORMS TO BE MANDATORY UNDER CUSTOMER PRETECTION LAW: The government has drafted the E-commerce guidelines under the new Consumer Protection Act, under which stringent action has been prescribed against violators. The proposed guidelines entail a 14-day deadline to effect refund request mandate, e-tailers to display details of sellers supplying goods and services on their website, and moot the procedure to resolve consumer complaints. The companies are required to submit a self-declaration to the consumer affairs ministry stating that they are confirming with the guidelines.
6. BANKS WARY OF INTEREST RATE CUTS: Banks are wary of stashing retail deposit rates beyond a certain basis points, as doing so would make it tougher to garner deposits in a competitive market where incremental savings are hard to come by. Bankers have expressed concerns over the falling deposit rates, especially for senior citizen who largely depend on their interest earnings. Banks are protecting small depositors who account for around 80% of their total deposit portfolio.
7. GOVERNMENT ANNOUNCES MEGA MERGERS OF PUBLIC SECTOR BANKS: The Government has announced four major mergers of public sector banks, bringing down their numbers to 12. This move is aimed at converting state-owned banks to global sized banks. Oriental Bank of Commerce and United Bank of India will be merged with Punjab National Bank, Syndicate Bank will be merged with Canara Bank, Allahabad Bank will be amalgamated with Indian Bank and Corporation Bank, Andhra Bank will be merged with Union Bank of India. 8. GOLD PRICES BREACH THE RECORD OF Rs.40,000 MARK AS RECESSION FEARS DEEPEN : Gold prices breached the record of Rs.40,000per 10 gram for the first time at the bullion market on strong demand from the investors amid growing fears of global economic slowdown.
1. SHADOW BANKING CRACKDOWN BY RBI: Reserve Bank of India is stamping out “ShadowBanking Financiers” at a very fast pace in recent years. In simple terms “Shadow Banking” system refers to unregulated activities by regulated institutions. RBI has cancelled registrations of 1,851 Non-Banking Finance Companies (NBFCs) in FY 2018-19 which is 8 times more than the previous year. RBI has cancelled the permits of these NBFCs as they could not even raise 20 million rupees to meet the regulatory requirements. RBI has also tightened regulations this year by putting in place rules requiring to appoint a Chief Risk Officer and proposing stringent liquidity requirements. The government also plans to bolster RBI’s authority over shadow banking as it has transferred the regulation of Housing Finance Companies to RBI from National Housing Bank.
2. PUBLIC SECTOR BANKS SHUT MANY BRANCHES/ATMs: Public Sector Banks are shutting many of their branches and ATMs in major cities to cut expenses as urban customers are increasingly using digital channels for their banking needs, rendering the costs for maintaining these physical infrastructures as unviable. Economic Times analysis in this regard shows that top 10 state-run banks with largest branch network have shut nearly 5,500 ATMs and 600 branches across the country over the past one year. The biggest of these lenders, SBI has shut 420 branches and 768 ATMs between June 2018 to March 2019. These closures are happening only in metro cities and not in rural or semi-urban areas. Amongst all PSBs, Indian Bank is the only exception which has increased both its ATM and Branch network.
3. LOANS TO DEVELOPERS FROM NBFCs HAS REDUCED TO HALF IN FY-2018-19: The liquidity crisis in NBFC sector is so grave that the net loan disbursal by NBFCs and Housing Finance Companies (HFCs) to Realty Sector (Loans to Developers) has declined by nearly 50% in Financial Year 2018-19 on a year-on-year basis. The net disbursals by NBFCs and HFCs to real estate developers declined from Rs. 52,000 crore in Financial Year 2017-18 to Rs. 27,000 crore in Financial year 2018-19.
4. SBI PLANS TO ESTABLISH NEARLY 10 LAKH “YONO” CASH POINTS: State Bank of India is planning to establish nearly 10 lakh “YONO” cash points in the country in about 18 months’ time. The YONO platform is secure and will eliminate the requirement of using debit cards. A customer can make bill payment and can do digital transactions by using the YONO cash feature. The bank has no plans to discontinue debit cards but increased use of digital platform will itself reduce the requirement of the debit cards.
5. PSBs TO SUGGEST STEPS TO BOOST ECONOMY: At present many a factor such as high GST rates, subdued farm product prices, stagnant income levels, low job generation and natural calamities have led to economic slowdown which has affected almost all the sectors of economy. In a step to shield the country from the onslaught of the ongoing general economic slowdown, the Central government has asked Public Sector Banks (PSBs) to recommend ways and ideas to prop up growth. PSBs have several thousand bank branches across the country and their assessment is necessary as they directly deal with MSMEs and other customers. PSBs have been asked to analyze the ground level economic situation and come out with valid suggestions.
6. FINANCE MINISTRY AMENDS PMLA ACT TO OFFER CLARITY ON DIGITAL KYC: The Finance Ministry has amended the Prevention of Money Laundering Act, 2002 to clarify the various modes of capturing customer details electronically. This would potentially change the way regulated entities such as banks and telecom companies capture these details completely. The move clears the path for RBI and other regulators to come out with precise guidelines. Further, the changes in the ACT will also enable customers to submit Aadhaar details voluntarily, thereby paving the way for remote onboarding, which had stopped after a Supreme Court order last year.
7. SOON ITR FORMS WILL HAVE PRE-FILLED INVESTMENT DATA: The tax payers maysoon get Income Tax Return forms filled with their respective investment data like the dividends from mutual funds, loss on equities and interest income. We have to just check the details for the correctness, pay tax if any and file our returns. Keen to take the pre-filled tax return forms to the next level, the revenue department has initiated talks with market regulator SEBI to explore the idea of getting details of investment in the IT return forms.
1. FINANCE MINISTRY INSTRUCTS PSU BANKS TO DISCUSS ROADMAP FOR BANKING SECTOR: Finance Ministry has asked Public Sector banks (PSBs) to initiate a month-long consultation process with its officers starting at branch level to seek suggestions for preparing future road map of the banking sector. The move comes in the backdrop of a meeting held by the Finance Minister with PSU Bank and Private Sector Bank Chiefs recently. The Department of Financial Services has also circulated papers on 9 subjects including digital payments, corporate governance, MSME credit, Loan Recovery etc. For the first time suggestions and inputs from the branch level officials have been sought which is a positive move and these will be more practical and realistic.The suggestions and inputs from branches will be used to chalk out a strategy for future growth of the banking sector.
2. RBI ASKS BANKS NOT TO COUNT NON-CASH WITHDRAWAL TRANSACTIONS AS “FREE ATM TRANSACTIONS”: Banks provide certain number of transactions at ATMs to their customers and beyond that charges are imposed. Reserve Bank of India has asked banks not to count failed transactions at ATMs due to technical reasons and non-availability of currency in ATMs as part of “free ATM transactions”. Besides this, use of ATMs for non-cash withdrawal transactions such as balance enquiry, fund transfers, cheque book requests, payment of taxes etc also should not be the part of free transactions facility given to the customer.
3. COMMITTEE FINALISES REPORT ON TRANSFER OF RBI’S SURPLUS FUND: The Bimal Jalan Committee, constituted to assess the adequate size of capital reserves that the RBI should hold, has finalised its report. As per the report the transfer of excess RBI funds to the government would be in phased manner as is in practice. The Finance Ministry wanted the central bank to follow global best practices and transfer more surplus to the government which would help the government to meet its fiscal deficit as it will come as a windfall to the exchequer.
4. AADHAAR-ENABLED TRANSACTIONS CROSS 200 MILLION MILESTONE ON NPCI PLATFORM: The umbrella body of digital transactions, NPCI has reported that Aadhaar enabled Payment System (AePS) crossed the milestone of over 200 million transactions during July 2019. AePS is a bank led model which allows basic interoperable banking transactions at Point of Sale (PoS) through the business correspondent of any bank by using Aadhaar authentication.AePS has become instrumental in driving the financial inclusion program in India. A total number of 6.65 crore Indian citizens used banking services through AePS platform in July 2019.
5. SEBI WANTS MUTUAL FUNDS TO INVEST ONLY IN LISTED SECURITIES: Securities & Exchange Board of India (SEBI) wants all Mutual Fund houses to shift all their investments to listed or to-be-listed equity and debt securities in a phased manner and reduce their exposure to un-rated debt instruments from 25% to only 5%. This is suggested with an intension to safeguard mutual fund investors from high-risk assets. SEBI is making efforts to enhance its regulatory safety net against any such risks.
6. HOUSING FINANCE COMPANIES TO BE TREATED AS NBFCs, TO COME UNDER RBI OVERSIGHT: Housing Finance Companies (HFCs) will be treated as one of the categories of NBFCs for regulatory purposes and will come under RBI oversight. The National Housing Bank Act, 1987 has been amended and as per these amendments, certain powers for regulation of HFCs will come under the purview of RBI. The RBI direction comes after the notification issued by the Finance Ministry in this regard.
7. PSU BANKS POST PROFITS IN Q1 OF FY 2019-20 AFTER 2 YEARS GAP: Public Sector Banks (PSBs) turned in a collective profit in Q1 of financial year 2019-20, the first time in more than 2 years. Out of the 19 PSBs, 15 banks reported an aggregate profit of Rs 3,948 crore. But this was well below that of private player HDFC Bank which has reported a profit of Rs 5,568 crore for the same period. Four of the PSBs, Syndicate Bank, UCO Bank, Indian Overseas Bank and Punjab National Bank reported loss for the said period.
1. NEFT TRANSACTIONS TO BE ROUND-THE-CLOCK: Currently the NEFT (National Electronic Fund Transfer) operated by Reserve Bank of India as a retail payment system is available for customers from 8 am to 7 pm on all weekdays. NEFT system is used for fund transfers up to Rs.2.00 lakh. Now RBI has decided to allow NEFT transactions round-the-clock from December’19 onwards in order to promote digital transactions. This decision will revolutionize the retail payments system in India.
2. LENDING NORMS, EXPOSURE LIMITS EASED FOR NBFCs: The Reserve Bank of India has relaxed bank lending norms to Non-Banking Finance Companies (NBFCs) and has also eased bank’s exposure limits. This will help the NBFC sector which is already under stress due to liquidity crunch. The bank’s exposure to a single NBFC has now been raised to 20% of the Tier-I capital of the bank against the current 15%. And this can be extended up to 25% by banks’ boards under exceptional circumstances. Now the banks on-lending to priority sectors through NBFCs will also be considered as priority sector lending by these banks. Hence the bank’s on-lending through NBFCs to agriculture (up to Rs 10 lakhs), MSME (up to Rs.20 lakhs) and housing (up to Rs.20 lakhs) will be treated as priority lending by these banks.
3. RETAIL LOAN GROWTH SLUMPS TO 5-YEAR LOW IN FIRST HALF OF 2019: As per RBI’s latest data, Banks have disbursed retail loans at the slowest rate in five years in the first half of 2019. As per RBI’s monthly sectorial deployment data, the retail loans disbursement growth in the first half of 2019 was only 7.3%, which is the lowest for the past five years. Sales slowdown in Auto sector and signs of preliminary stress building up in several retail portfolios such as credit card and personal loans is the main reason for such a slow growth.This is due to the sluggish consumption demand and rising unemployment which has pegged down the country’s economic growth.
4. SEBI STRENGTHENS DISCLOSURE NORMS ON ENCUMBERED SHARES: Securities Exchange Board of India (SEBI) has already mandated disclosure on encumbrance of shares. But now the norms have been strengthened so that the promoter of every listed company shall specifically disclose the detailed reasons for encumbrance by the promoter in a prescribed format along with Persons Acting in Concert (PACs) with him, if the combined encumbrance exceeds 50% of their shareholding in the company or 20% of the total share capital. And such encumbrance should be reported within 2 working days to the company and to the stock exchanges where the shares are listed.
5. GOVERNMENT EYES Rs.3 LAKH CRORE PROCEEDS BY SALE OF PUBLIC SECTOR TRANSMISSION LINES, TELECOM TOWERS AND AIRPORTS: Government think tank, in consultation with many ministries and NITI Aayog has drawn up a list of assets that can be sold which includes electricity transmission lines of Power Grid, towers of BSNL & MTNL, pipelines of Gail India Ltd and airports in some cities. The said sale may fetch the government around Rs.3 lakh crore. The idea is to use these proceeds to fund greenfield projects.
6. NHB TO PUMP IN Rs.10,000 CRORE INTO HOUSING FINANCE FIRMS: The National Housing Bank (NHB) will infuse an additional Rs.10,000 crores into eligible Housing Finance Companies (HFCs) in this financial year which will extend up to June 2020, to shore up liquidity and improve flow of funds for affordable housing loans for individuals. The infusion will be over and above what the NHB would normally provide to these HFCs through its existing refinance schemes.
7. IN 3 YEARS, BANKS COLLECTED Rs.10,000 CRORES FINE FOR NOT MAINTAINING MINIMUM BALANCE: 22 scheduled commercial banks collected nearly Rs.10,000 crores as penalty from its customers for not maintaining minimum balance in their savings bank accounts in the last three years.
8. SEBI ISSUES TIGHTER NORMS TO ENSURE FULL DISCLOSURE ON LOAN DEFAULTS WITH RATING AGENCIES: Amid concerns over banks citing “client confidentiality” to resist sharing of information on delayed loan repayments and a possible loan default by the borrowers, Security Exchange Board of India (SEBI) is planning to issue stricter norms to make it mandatory for companies to provide data regarding delayed repayments of its loans to credit rating agencies.
1. RBI UPDATES NEW AND PROPER CRITERIA FOR APPOINTMENT OF DIRECTORS OF PSU BANK:
Reserve Bank of India has come out with new criteria for appointment of Directors of Public Sector
Banks. As per the new guidelines, Member of Parliament, State legislature or local bodies cannot be
members of the board of Public Sector Banks (PSBs). Likewise, partners of any CA firm which are
engaged as a Statutory Central Auditors of any PSBs cannot join the board of any PSB. Candidates for
post of board member in PSBs should not be a board member of any other bank or financial
institution/insurance company. No person can be elected or re-elected on the board of any PSB if he
or she has served as a director in the past on the board of any bank, financial institution or insurance
company for six years whether continuously or intermittently.
2. RBI ALLOWS BANK OF CHINA TO OFFER BANKING SERVICES IN INDFIA: The Reserve Bank of India has allowed Bank of China to offer regular banking services in India. The Bank of China Ltd has been added in the Second Schedule of the Reserve Bank of India Act, 1934. All commercial banks are in second schedule. Latest addition to Second schedule is Jana Small Finance Bank Ltd. Banks falling under second schedule have to adhere to the norms set by Reserve Bank of India.
3. RBI BANS NBFCs FROM CHARGING LOAN FORECLOSURE PENALTIES: The Reserve Bank of India has now barred Non-Banking Finance Companies (NBFCs) from charging pre-payment penalties (foreclosure charges) from individual borrowers. As per the latest notification from RBI, NBFCs shall not charge pre-payment charges from individuals on any floating rate term loans sanctioned for purposes other than business. Foreclosure charges are part of the fee-based income for any lender which adds to its bottomline. The direction includes both deposit-taking and non-deposit-taking NBFCs. The notification comes at a time when NBFCs are struggling with host of serious issues.
4. LIQUIDATION PROCESS NOW TO BE COMPLETED WITHIN AN YEAR: The liquidation process of any Corporate Debtor under Insolvency & Bankruptcy will have to be completed within one year of its commencement. This is in accordance with the amendment to the Insolvency & Bankruptcy Board of India (IBBI) Regulations. It provides for a model timeline for each task in the liquidation process.
5. SBI ROLLS OUT POLICY ON WILFUL DEFAULTERS: State Bank of India (SBI) has put in place a comprehensive policy on willful defaulters. It envisages setting up of three willful default identification committees (WDICs). Each of these committees will be headed by a Deputy Managing Director (DMD). There will be quarterly reviews by branches for identification, declaration of willful defaulters and taking action against them. The proposals for classification of borrowers as willful defaulters have to be placed before any of the three WIDCs based on the area of operation.
6. NBFC TOP EXECUTIVES MOVE OUT TO JOIN BANKS/FINTECH: Many of the Non-Banking Finance Companies (NBFCs) are struggling with multiple problems including liquidity crisis. Now many of the top executives and senior professionals of these NBFCs are quitting and are looking out for openings elsewhere. A few years back theses executives had moved out of banking and insurance sector to join these NBFCs. But now the trend seems to have reversed.
7. BANKS PLAN FOR UNIFORM LENDING POLICY IN JEWELLERY SECTOR: Banks led by State Bank of India are working on a common policy framework for lending to the gems and Jewellery sector. The uniform policy will define terms of entry, such as credit rating, the systems exposure to the borrower, in terms of collaterals and experience of the borrowe. These will enable a uniform approach in proposals to this sector.
8. RBI TO TABLE REPORT ON DEVELOPMENT OF SECONDARY MARKET SOON: Next Month Reserve Bank of India is expected to come out with a report on facilitating development of secondary market for corporate lending. RBI had set up a task force to suggest policy and regulatory interventions required for development of secondary market in corporate loans, including loan transaction platform for stressed loans.
1. NBFCs MAY FACE BANK-LIKE RESTRICTIONS: After forcing banks to recognize stressed loans and Non-Performing Assets (NPAs) last year, RBI is talking tough to large Non-Banking Finance Companies (NBFCs) on asset quality. RBI may place lending restrictions on some big Finance Companies under Prompt Corrective Action (PCA). This is similar to the PCA framework laid down on banks, where they are not allowed to increase their large risk exposure unless they improve financial ratios in respect of capital adequacy and NPAs. RBI has asked Large NBFCs to make provisions for loans acquired by them from other small lenders and on such portion of loans where there is a moratorium period on repayment. RBI’s supervision department is already looking at the top 50 NBFCs.
2. IBBI TIGHTENS NORMS FOR INSOLVENCY RESOLUTION PROFESSIONALS:The Insolvency & Bankruptcy Board of India (IBBI) has tightened norms governing Resolution Professionals. Insolvency Resolution Professionals would be barred from having employment when they are in possession of authorization to take up work under the insolvency law. Besides this, an insolvency Professional and his/her relative cannot accept any employment from successful resolution applicant concerned for one year.
3. CONSOLIDATION OF REGIONAL RURAL BANKS ON GOVERNMENT AGENDA:The government is eyeing a mega revamp of its Regional Rural Banks (RRBs). The plan includes consolidation of these RRBs for better operational efficiencies in line with the government’s focus on rural improvements. The plan also includes adoption of differentiated banking strategies such as targeting specific sector for a strong regional connect. Some RRBs will be merged with their sponsoring banks. There are 56 operational RRBs and the aim is to bring them down to less than 38. At present Central government holds 50% stake in RRBs. Sponsor banks own 35% and the rest 15% is by respective state governments.
4. BANKS TAKE GOVERNMENT TO COURT OVER Rs 18,000 GST CHARGE: Last year the government had levied Rs. 18,000 crores as service tax and GST on banks on services offered by these banks to customers who maintain large balances and deposits for getting free facilities such as wealth management or locker facility. The government has accused banks of bypassing the taxation process and avoiding service tax GST. (To sight an example, the instance of a locker, where instead of an annual rent of say about Rs 3,600/-, the locker is offered free of cost for a huge deposit. The rent would have fetched a GST of Rs. 648/- to the government but a deposit will not earn any GST). In the same way many a serviceis offered free of cost for which the government is demanding service tax/GST. After refusing to respond to the tax notice for over a year, banks have now dragged the government to court.
5. GOVERNMENT TIGHTENS ANTI-MONEY LAUNDERING LAWS: The government has tightened the Anti-Money Laundering laws by expanding the ambit of the “Proceeds of Crime” which now includes properties and assets created through any criminal activity even if it is not under the Prevention of Money Laundering Act (PMLA). These crimes will now be considered as “relatable Offence”. The new amendment has been brought in with the Finance Bill passed in Lok Sabha recently.
6. RBI BLAMES BANKS ON MUDRA LOAN DEFAULTS: The Reserve Bank of India has held banks poor credit appraisal responsible for their high bad loans arising out of Mudra (Micro Units Development & Refinance Agency) Loans. Non-Performing assets (NPAs) in Mudra loans have spiked and as at the end of FY 2018-19 it is at 9.3% of Mudra advances. Loans under Mudra were Rs 3.22 trillion as at FY 2018-19. RBI Governor Mr. Shaktikanta Das spoke at length with all banks chiefs on this issue and addressed his concerns.
7. SBI HIRES 83 OVERSIGHT AGENCIES TO MONITER END USE OF FUNDS: State Bank of India Chairman Mr. Rajnish Kumar has stressed that diversion of funds is a big concern for banks and is the route cause for the loans going bad. The bank now has empaneled 83 oversight agencies to constantly monitor the end use of bank loans. He also said that the methods of lending will also have to undergo change. The consortium discipline or the multiple banking discipline has to be improved and here the regulator (RBI) also has to play a major role.
8. RBI GOVERNOR ASKS BANKS TO DIGITALLY ENABLE ONE DISTRICT EACH: RBI Governor has asked all banks to setup enabling infrastructure for digital payments in one district per state over the next one year. The banks have agreed to identify one district in each state to make it 100% digitally enabled within a time frame of one year in close coordination with all the stakeholders. Such districts may be covered with the “Transformation of Aspirational Districts” programme of the Government.
1. STANDARD CHARTERED BANK IS THE FIRST FOREIGN BANK TO START OPERATIONS IN “GIFT CITY”: Gujarat International Finance Tech-City (GIFT City) is a business district promoted by Gujarat Government through a joint venture company. GIFT City is India’s first operational smart city with International Financial Service Centre (IFSC) in Ahmedabad. Government has envisaged GIFT IFSC as a hub to bring Offshore financial transactions. And Standard Chartered Bank Ltd is the first foreign bank to start its operations in GIFT City. The banking business at GIFT IFSC has seen a 167% jump in just two years with the cumulative banking transactions touching $ 22 billion this year as compared to $ 6 billion in 2016.
2. RBI WANTS AUDIT FIRM PARTNERS UNDER LENSE TO STAY AWAY FROM BANKS: Reserve Bank of India over the last two years has placed significant responsibility on statutory auditors of commercial banks. It has directed Audit firm partners who are in the midst of any disciplinary proceedings not to sign balance sheet of any bank or even engage in the audit process. Amid the ongoing poor quality of asset in the banks resulting in high provisioning, the RBI has put in place a system to exchange notes with auditors every quarter where in observations on provisioning and other issues are shared and if any changes are necessary, the same can be incorporated by the auditor in the next quarter.
3. DIGITAL PAYMENT COMPANIES SEEK COMPENSATION FROM THE GOVERNEMENT: The government has mandated the digital payment companies to waive the Merchant Discount Rate (MDR), a charge borne by merchants on digital payments. Now the Payment Council of India, an industry body representing Non-Banking Payments Service Providers, is seeking compensation from the government for losses incurred while processing online payments due to the “zero” MDR charges. At “zero” MDR these digital payments companies will find it very difficult to survive, hence they have sought at least a minimum charge to maintain business viability.
4. SEBI PROVIDES NEW FORMAT FOR COMPLIANCE REPORT ON CORPORATE GOVERNANCE, SBI DIFFERS ON THE SAME: Securities Exchange Board of India (SEBI) has come out with a new format for compliance report on corporate governance to be submitted by listed companies to stock exchanges. As per the new format these companies have to make disclosures on quarterly basis, annual basis and within six months from end of financial year along with second quarterly report. This will come in to effect from 30thSeptember 2019. But State Bank of India is differing on the new corporate governance rules set by SEBI. While SEBI says since SBI is a listed entity, it has to comply with new corporate governance rules but SBI says its governance structures are derived from the SBI Act, 1955 which supersedes SEBI rules.
5. REAL ESTATE DEVELOPERS FACE THE HEAT AS CREDIT MARKET DRIES UP NEW FUNDING: Real Estate Developers are facing lot of stress as the credit market dries up fresh funding for their projects and getting credit has become a herculean task for these builders. With the worsening crisis of Non-Banking Financial Companies, the funding for new projects has nearly dried up. Borrowing rates for most developers have surged to the highest. But even at this high cost capital availability is limited as most of the banks have literally stopped project funding.
6. NEED DATA SHARING TO CURB CONSUMER BANKING FRAUDS: Experts from banking and payments industry want a common registry to tackle the menace of consumer banking frauds. Transparency in reporting the Turn-Around Time (TAT) of the resolution of debit card and OTP related frauds can go a long way in increasing the use of digital payments platform. There are broadly 2 types of debit card related frauds, one is related to cloning of cards and the other is related to OTP frauds. In both the cases the money is transferred immediately to a bank account which is linked to KYC. A common registry can help blacklist these accounts and track the perpetrators of these frauds. The National Payments Corporation of India (NPCI), a body responsible for governance of payments system, is considering such a common registry but the key challenge lies in the regulatory whip and cooperation from all stakeholders to share fraud information that is deemed sensitive by banks.
7. NPA CRISIS—LOAN WRITE-OFFS BY BANKS CROSS Rs.2 LAKH CRORE MARK: Write-Offs made by 27 banks in FY 2019 crossed the Rs.2 lakh crore mark, with 16 public sector banks alone accounting for Rs.1.77 lakh crore worth write-off loans. In FY 2018, banks had written off Rs.1.28 lakh crore bad loans. The amount of Written-off amount for FY 2019 could be even more as the numbers for Dena Bank and Vijaya Bank, which are now merged with Bank of Baroda are not available. This as per the data compiled by Financial Express.
1. NCLAT ASKS IL&FS, GOVERNMENT ABOUT STEPS TAKEN FOR 55 LOSS MAKING FIRMS: The National Company Law Appellate Tribunal (NCLAT) has sought information from the government and IL&FS about the steps being initiated and taken for the 55-loss making red entities of the debt-ridden group. The two member NCLAT bench has asked IL&FS and Ministry of Corporate Affairs to file an affidavit within two weeks stating the time it would take to decide on the action. Besides this the appellate tribunal has also asked about the steps taken for releasing the funds from pension and provident fund accounts in the loss-making companies.
2. POST MERGER BANK OF BARODA TO FOCUS ON TECH INTEGRATION: After the merger of Bank of Baroda with Vijaya Bank and Dena Bank, Bank of Baroda is focusing on integrating the technology systems of all the three banks for providing a smooth customer experience. The merged entity now has more than 9,500 branches and the IT heads of all the three banks have begun chalking out an integration strategy. This integration is necessary so as to allow a customer of any three banks to go to any branch and request basic banking services.
3. NON-BANK FINANCE COMPANIES FREEZE HIRING: Non-Banking Financial Companies (NBFCs) which act as country’s shadow banking sector have been reeling under a lot of stress and liquidity crunch. Due to this, these NBFCs have put brakes on hiring or we can say that the hiring of new staff has come to a complete standstill. And despite government giving some lifeline to NBFC sector in the recent budget, it is unlikely that the position of these NBFCs is going to improve soon.
4. DEPOSITS IN JAN-DHAN ACCOUNTS CROSS Rs.1 LAKH CRORE: Deposits in bank accounts opened under Jan Dhan scheme, launched five years ago by the Modi government have crossed the Rs 1 lakh crore mark. At present there are around 36.06 crore Jan-Dhan savings accounts and as per the latest data by the Finance Ministry these accounts hold a balance of Rs 1,00,495 crore as on July 3, 2019. And as per the latest data available, out of these 36.06 crore bank accounts, about 5.07 crore (about 14.37%) are zero balance accounts.
5. GOVERNMENT TO TAX BUYBACKS BY LISTED COMPANIES: The Central Government has decided to introduce a 20% tax on buybacks by listed companies. Until now only the unlisted companies were taxed for the buybacks. The measure has been introduced by the government to curb the misuse of the buyback route by listed companies to avoid taxes. Until now listed companies have been using buyback to return money to shareholders instead of dividends since dividends attract distribution tax. With introduction of tax on buyback this trend will end, but markets are reacting negatively on this.
6. NOW RBI TO TAKE CONTROL OF HOUSING FINANCE COMPANIES: All these years National Housing Bank (NHB) was controlling the supervisory and regulatory powers of all Housing Finance Companies. National Housing Bank was also acting as a lender and was refinancing these Housing Finance Companies. From now onwards all the powers to supervise and regulate these Housing finance Companies will be with the Reserve Bank of India. This move will make implementation of regulations simpler and easier.
7. INCOME TAX DEPARTMENT EYES NRIS’ RESIDENTIAL STATUS: A resident Indian can attain NRI (Non-Resident Indian) status by staying away from India for 182 days in a calendar year. And when you are an NRI,tax rules are different from an Indian Resident. The NRI income tax will depend on his/her residential status. If you are an NRI you don’t have to pay tax on global income earned but if you are a resident, tax must be paid on global income also. Hence many Indians carefully divide their time between India and abroad. Income Tax department is scrutinizing the residential status of Non-Resident Indians and are sending notices to several of them to reopen tax assessments of the last 5 years. They have also been told to share photocopies of their passports.
1. GOVERNMENT TO PROVIDE CREDIT GUARANTEE TO PSBs TO BUY NBFC ASSETS: Non-Banking Finance Companies (NBFCs) play an important role in sustaining consumption demand and capital formation there-by inducing economic growth. Off late the NBFC sector is undergoing a liquidity hurdle with a spate of defaults by companies such as IL&FS and DHFL since September 2018. Even as NBFCs are governed by RBI, it has limited control and authority over the sector and therefore appropriate proposals are mooted out by the Finance Ministry to address the issues faced by these NBFCs. As a first step towards these measures, the government will provide one time six months’ partial credit guarantee to public sector banks on purchase of high-rated pooled assets of Rs 1 lakh crore or more from financially sound NBFCs during the current financial year.
2. Paytm TRANSACTIONS WILL BE COSTLIER IN FUTURE: From 6th July 2019 onwards Paytm transactions will get a little costlier. It will start passing on the Merchant Discount Rate (MDR) that banks and card companies charge for digital transactions to consumers. The charge amounts to 1% on payments through credit cards, 0.9% for debit cards and up to Rs 12-15 for transactions on net banking and UPI payments. All these days Paytm was absorbing these charges and was not charging anything extra to its customers. But henceforth these charges will be passed on to the customers by Paytm.
3. BANKS STARE AT SLIPPAGES OF Rs 15,000 CRORE OF MSME LOANS: A big chunk up to Rs 15,000 crore loans given to Micro, Small & Medium Enterprises (MSMEs) could slip over to NPA category over the next 10 months. In fact these loans could have been slipped to NPA category long time back if RBI had not given banks a breather. On June 6, 2018 a RBI notification had allowed banks and NBFCs to temporarily classify their exposure to all MSME loans up to Rs 25 crore as standard asset if they were standard assets as on 31/08/2017. Now most of these loans may go bad.
4. VERY SOON TAX DEPARTMENT WILL START “FACELESS TAX ASSESSMENT”: Finance Ministry has proposed to introduce “Faceless Assessment”. This means that there will be no human intervention while scrutinizing the tax return. The main aim is to cut down the interaction between tax payer and income tax officer. Faceless Assessment means the assessing officer will not know the identity of the tax payer and would use technology to scrutinise details of the tax payer.
5. BANKS AND INSURANCE COMPANIES HOLD OVER Rs 32,000 CRORE AS UNCLAIMED DEPOSITS: Indian Banks and Insurance companies hold a huge sum of Rs 32,000 crore as unclaimed deposits with them. Any account which is not operated for 10 years or more is termed as unclaimed account and the amount deposited in such accounts is termed as unclaimed deposit. The amount of unclaimed deposit with all banks put together as on March 2018 was Rs 14.58 crore, the unclaimed deposit with life insurance companies was Rs.8,928 crore and Rs 989.62 crore with non-life insurance companies.
6. DEBT MUTUAL FUNDS REDUCE THEIR EXPOSURE IN NBFC SECTOR: Debt Mutual Funds exposure to Non-Banking Financial Companies ( NBFCs) has come down by Rs 58,000 crore since liquidity crunch of NBFCs started in July last year.A report by CARE Ratings on mutual funds reports that the percentage share of funds deployed by mutual funds in NBFCs has dropped from 19.04% in July 2018 to 14.81% in April this year. Since July 2018 Mutual Funds have withdrawn almost 36%of their investments from CPs of NBFCs.
7. NBFC CRISIS MAY HAMPER ECONOMIC GROWTH: The Economic Survey for 2018—19 has highlighted the contagion risks posed by stress in Non-Banking Financial Companies (NBFCs) as it has hurt the consumption growth in the automobile sector which in turn has affected manufacturing sector as well. The survey has warned that if the stress is spilled over this year then it will badly hamper economic growth due to lower credit off take by NBFCs.
1. NBFC CREDIT DISBURSALS FALL BY 31%: Non-Banking Finance Companies (NBFCs) credit disbursals
dropped by 31% to 1.96 lakh crore as on March 31, 2019 from 2.83 lakh crore at the end of March
2018. According to a data compiled by credit bureau body CRIF and Industry body Finance Industry
Development Council (FIDC), NBFCs contribute almost 20% of the total credit in India and due to this
slump in NBFC credit flow almost all sectors—Automobiles, MSME, agriculture and real estate have
been badly affected. This is also one of the main reasons for the collapse in automobile sales.
According to a CEO of a troubled NBFC, the government and the regulators have to take note of it and
act fast, otherwise there will be an eventual economic recession.
2. GOVERNMENT PAYS BACK SOME IL&FS LENDERS: The government has paid up Rs 25 crore to Asian Development Bank and German Development Bank on sovereign government guarantees issued on behalf of the distressed Infrastructure Leasing & Financial Services (IL&FS) after IL&FS defaulted on loan repayments. Considering the default status of IL&FS, the government had no other option but to pay from its contingency fund to avoid a default on a loan guaranteed by it. The government is further staring at another Rs 250 crore payments towards guaranteed IL&FS loans in near future.
3. MICRO ATMs A BIG HIT IN RURAL INDIA: The Aadhaar-Enabled Payments System (AEPS) which is a biometric-abled payment channel which falls under the broader category of Micro-ATMs, has emerged as one of the fastest growing payment systems in rural India next to Unified payment Interface (UPI) in terms of annual volume growth. While UPI addresses just top 80 million customers, AEPS caters to 800 million customers who are neglected by banks. AEPS developed by NPCI in 2015 works as cash points for rural bank customers where they can withdraw cash from their Aadhaar linked bank accounts simply by scanning their fingerprints at biometric compatible Point of Sale (PoS) devices which are located in most of the local kirana stores in rural India.
4. INCOME TAX DEPARTMENT TO SHARE DATA ON DEFAULTERS’ ASSETS WITH PSU BANKS: The Central Board of Direct Taxes (CBDT) has directed zonal heads of the income tax department to share information related to assets and liabilities of defaulters with banks on the request of respective banks. This will go a long way in boosting loan recovery efforts of Public Sector Banks. An official of the commissioner rank and above can share this information with the applicant bank if he is satisfied that it is in the public interest.
5. GOVERNMENT ASKS BANKS TO APPOINT GM-LEVEL OFFICIAL TO ADDRESS MSME SECTOR WOES: The Micro Small & Medium Enterprises (MSMEs) has been the focus of the present government as it plays a critical role in promoting economic growth. Taking forward the agenda of the government, Finance Minister Ms Nirmala Sitaraman has asked to focus on inclusive growth of MSMEs with an objective of achieving the growth target of $5 trillion economy by 2024. In view of this, the government has asked banks to appoint a General Manager–level official to resolve the problems being faced by MSME sector, particularly with regard to availability of credit.
6. RBI LAUNCHES “CMS” FOR FILING ONLINE COMPLAINTS AGAINST BANKS, NBFCs: The Reserve Bank of India has launched an application on its website for lodging complaints against banks and NBFCs with a view to improve customer experience in timely redressal of grievances. The Complaint Management System (CMS) is a software application installed by RBI in its website to facilitate RBI’s grievance redressal process. Customers can lodge complaints against any regulated entity such as banks and NBFCs and the complaint would be directed to the appropriate office of the Ombudsman/Regional Office of RBI.
7. RBI CONCERNED OVER HIGH LEVEL OF PROMOTER PLEDGING: The practice of pledging of shares by promoters suggests that they are unable to access other funding means and increasing frequency of share pledging is a reflection of poor financial health of the company. RBI in its Financial Stability Report (FSR) has said that high level of share pledging by promoters is seen as a warning signal which indicates poor financial health of the company and also a probable situation where the company is unable to raise funds from other means and this activity is risky for any company as debt repayment will be a difficult task.
1. INDIABULLS FINANCE & LAKSHMI VILAS BANK MERGER GETS CCI APPROVAL: In April 2019 Lakshmi Vilas Bank Ltd had announced its merger with Indiabulls Housing Finance in a share-swap up deal. The Competition Commission of India (CCI) has considered the proposed merger and has approved the same. The combined entity, with employee strength of 14,302 will have a loan book of Rs 1.23 lakh crore. The merged entity will now have a larger capital base and wider geographical reach. However, the said merger is yet to get the approval from Reserve Bank of India.
2. TAX ASSESSMENT CASES OLDER THAN 4 YEARS WILL NOT BE RE-OPENED: The government is contemplating to create such a rule under which income tax officials will not be able to re-open the tax assessment case older than four years of any tax payer. At present the officials can examine the records of tax payers for up to 6 years. After the introduction of new rule, the tax payers will get a lot of relief as well as reduce the work burden of the tax department. However, for those who commit tax frauds the time limits remains as 6 years only.
3. FINANCE MINISTRY ASKS PUBLIC SECTOR BANKS TO PROVIDE DETAILS OF EXPECTED RECOVERIES AND PROVISIONS IN STRESSED ACCOUNTS: The Finance Ministry has sought detailed information from Public Sector Banks (PSBs) on their expectation of recoveries and provisions held in respect of stressed accounts admitted in National Company Law Tribunals (NCLTs). This is being sought as the Ministry is expected to take a call on setting aside funds for recapitalisation of PSBs for FY 2020 based on the information provided by these banks. The information could also help to gauge the functioning of NCLTs and a further possibility of setting up of a dedicated tribunal to fast-track the hearings in corporate insolvency resolution cases.
4. MORE INDEPENDENT DIRECTORS TAKE EXIT ROUTE FEARING LEGAL SCRUTINY: Former executives, ex-bureaucrats and others who are working as Independent Directors on several company boards are taking the exit routes sighting personal problems as independent directors are increasingly being held accountable for the actions of promoters and management. This shows a growing trust deficit in corporate world. In FY 2019, Nifty 500 companies saw 316 exits by independent directors which is 31.7% more than last year.
5. HARD TIMES AHEAD FOR NBFCs AS RECORD DEBT REPAYMENT BECOMES DUE IN NEAR FUTURE: The Non-Banking Finance Companies (NBFCs) which are already in great stress due to liquidity crunch are likely to face more heat and increased strain as they have a record 1.1 trillion (approximately Rs. 1.11 lakh crore) of local currency bonds due next quarter, according to data compiled by Bloomberg. With re-financing these NBFCs is becoming a bigger risk, the only options for these NBFCs is selling of loan portfolios and securitization as there is zero-to-no growth in new loan disbursements in many of the NBFCs. This financing crunch of NBFC’s may hurt India’s economic growth in a big way.
6. GOVERNMENT MAY SELL STAKE IN SOME WEAK PSU BANKS: A proposal is being considered by the government to sell a majority stake in some weak Public Sector Banks (PSBs). The government wants to use these proceeds to fund the rural housing program. The proposal is in the early stages and the details are still being worked out and if approved, it could be included in the budget to be unveiled on July 5TH. If the plan is finalised, the government will need to amend a law to enable it to sell majority stake in state-run banks.
7. SEBI TIGHTENS RULES FOR USAGE OF CLIENT FUNDS BY BROKERAGES: Securities & Exchange Board of India (SEBI) has tightened the rules for usage of client funds by brokerages. As per the new rule brokers have been asked to transfer the securities to their client accounts within one day of receiving payment. In case the client defaults on the payments, brokers have been instructed to hold on the securities up to 5 days after which they can liquidate the securities in the market and recover the dues.
1. RBI ASKS BANKS TO GROUT ATMs TO WALL, PILLER OR FLOOR TO ENHANCE SECURITY: The Reserve Bank of India has instructed all banks to ensure their ATMs are grouted to a wall, pillar or floor by September 2019 to enhance security of cash vending machines. This rule excludes those ATMs that are installed in high security areas such as airports. In 2016 RBI had set up a Committee on Currency Movement (CCM) to review the entire gamut of security of cash in transit and the ATMs and based on the recommendations of the said committee these instructions have been given.
2. BANKS ASKED TO ISSUE KCC TO ELEIGIBLE FARMERS WITHIN 2 WEEKS OF SUBMITTING APPLICATIONS: The Reserve Bank of India has directed all the concerned banks to issue Kisan Credit Cards (KCC) to eligible farmers within two weeks after they submit the application for the same.Presently there are 6.95 crore active KCCs under which crop loans are given to farmers at a subsidized interest rate. Now KCC has also been extended to farmers involved in animal husbandry and fisheries activities. Despite these measures there are still many farmers who are still out of the ambit of institutional credit.
3. PNB ADMITS STAGGERING LOAN DEFAULTS OF Rs 25,000 CRORE: Punjab National Bank has admitted to 1,142 big and small defaulters all over the country who have defaulted a stupendous amount of Rs 25,090 crore. Out of 1,142 cases PNB has so far initiated recovery proceedings by filling suits against 1,108 defaulters covering an amount of Rs 23,869 crore. No suits have been filed in remaining cases who owe the bank Rs 1,210 crore. Mysteriously some of the defaulting companies are shown as registered abroad while some companies registered in India have taken loan from PNB’s overseas branches.
4. BANK OF BARODA EXPERIMENTS WITH VERTICAL STRUCTURE FOR OPERATIONAL SYNERGIES: In a sudden move towards organizational restructuring, Bank of Baroda has closed all its regional offices under its Mumbai zone and created vertical structures to achieve operational synergies. The bank after its mega merger has decided to have exclusive teams for business generation and outbound sales while another set of teams will look after administration, service and support function. This vertical is only tried now in Mumbai zone for time being.
5. RESERVE BANK RELAXES NORMS FOR NO-FRILLS ACCOUNTS: Reserve Bank of India has now relaxed norms for No-frill accounts. Banks now will provide cheque books and other facilities as is available for other normal bank accounts. However, the bank can ask the account holders to maintain minimum balance in lieu of such facilities being extended to them.
6. MORE ITEMS LIKELY TO GO OFF THE HIGHEST GST SLAB: The GST structure will be pruned further as several items in highest slab of 28% is being pruned down. The GST council may meet on June 20thahead of budget to discuss certain issues. The Finance Ministry has also unveiled a road map for implementation of the new GST return mechanism. It has also put in place a transition mechanism.
7. RBI GOVERNOR CALLS FOR SYSTEM TO EVALUATE PERFORMANCE OF BANK CHIEFS: RBI Governor Mr.Shaktikanta Das has said that the performance of bank chiefs of public and private sector banks should be closely monitored by the Board of Directors either through a sub-committee or an external peer group review. An effective evaluation system should also be put in place for banks to improve their financial and operating parameters.
1. FITCH DOWNGRADES CREDIT RATINGS OF ICICI BANK & AXIS BANK: At a time when the Indian banking industry is struggling with poor asset quality and bad loans scenario, the rating agency Fitch has downgraded the credit ratings of two private sector banks—ICICI Bank and AxisBank to Junk. Fitch has downgraded the long-term Issuer Default Rating (IDR) to BB+ from BBB- for both the banks. The rating agency expects the performance of India’s banking sector to be below average over the next one or two years. Fitch in its report has said that banks in India can take advantage of faster growth and improved business prospects only if their damaged balance sheets recover substantially with infusion of fresh equity that will help them to support credit growth.
2. NBFC LIQUIDITY PROBLEM TURNING IN TO SOLVENCY ISSUE: It is 9 months since IL&FS crisis started and since then the NBFC sector is facing liquidity problems due to which many NBFCs have sold their loan portfolios to many banks to raise money. The latest crisis of NBFC is the default by DHFL. The NBFC problem is something that may have started as liquidity but it is quickly morphing into a solvency issue for some NBFCs. The government needs to address this issue and resolve it sooner rather than waiting for the worse to happen.
3. RBI ISSUES REVISED CIRCULAR FOR RESOLUTION OF STRESSED ASSET: The Reserve Bank of India has issued a revised circular for resolution of stressed assets which replaces its earlier circular dated 12Th February 2018which the Supreme Court had declared as ultra vires. The new norms replace all the earlier resolution plans. Now the lenders can start resolution process for a stressed asset within 30 days of default. During the review period of 30 days, lenders may decide on the resolution strategy, including the nature of resolution plan and the approach for implementation of the resolution plan. The RBI circular also mentions that in case the defaulted loan amount is more than 2,000 crore the resolution plan should be implemented within 180 days from the end of review period.
4. “ON TAP” LICENSING FOR SMALL FINANCE BANKS UNDER STUDY: The Reserve Bank of India has said that it is considering “On-Tap” licensing facility for small finance banks. The draft guidelines for the same will be issued by August 2019. “On-Tap” facility allows the RBI to accept applications and grant license for banks throughout the year subject to fulfilment of set conditions. So far RBI has issued licenses to 10 small finance banks. Of this, 8 have been included in the second schedule of the RBI Act, 1934 and are now scheduled banks.
5. MICROFINANCE INDUSTRY POSTS 38% GROWTH IN 2018-19: The microfinance industry’s Gross Loan Portfolio (GLP) stood at 1,87,386 crore as on 31.03.2019, up by 38% as compared to last year’s figures. The total number of microfinance accounts was 9.33 crore as on 31.03.2019 showing a growth of 21.9%. These figures are as per the report of Microfinance Institutions Network (MFIN).
6. 6,800 CASES OF BANK FRAUDS REPORTED IN 2018-19: Over 6,800 cases of bank fraud involving an unprecedented amount of Rs 71,500 crore have been reported in the financial year 2018-19. The previous year showed a figure of 5916 cases involving Rs 41,167 crore which shows a clear increase of over 73% in fraud amount. This was as per a RBI reply to RTI query.
7. PUBLIC SECTOR BANKS ASKED TO PREPARE PLAN FOR THIRD ROUND OF CONSOLIDATION: Chiefs of all Public Sector Banks have been asked to be ready with their consolidation plan so that it could be placed before Alternative Mechanism (AM) of the new government. Third round of bank consolidation is planned for October-December quarter of this fiscal year. The AM is a group of ministers under Finance Ministerwhich was created in 2017 to fast track consolidation and help create strong and competitive banks with improved risk profile.
8. NPA CRISIS-- PSU BANKS STARING AT YET ANOTHER SPIKE IN BAD LOANS: With operating losses of over Rs 50,000 crore in March’19 quarter and the likelihood of a few more large corporate accounts going bad in near future, the woes of Public Sector Banks (PSBs) as far as bad loans are concerned are not yet over. There are concerns that credit exposures could turn toxic in sectors like agriculture, real estate and NBFCs, which could badly affect the balance sheets of PSBs.
1. RUPEE CO-OP BANK GETS EXTENSION FOR ITS BANKING LICENCE TILL 31st AUGUST: Rupee Co-op Bank Ltd which is on the brink of closure since last three years has already applied for its merger with Maharashtra State Co-op Bank Ltd and the said proposal is under consideration and the Board of Administration (BoA) of Rupee Co-op bank Ltd is hopeful for a positive reply from Maharashtra State Co-op Bank. Meanwhile the financial condition of Rupee Co-op Bank has improved and the statutory audit of the bank for FY 2018-19 is completed without any adverse remarks. Hence the BoA has requested RBI to carry out Annual inspection of the Bank. The Bank has paid Rs 332 crore to 83,777 needy depositors under hardship scheme of RBI. Considering all these factors, RBI has granted extension of its banking license till August 31st, 2019.
2. BANK CAN USE AADHAAR FOR KYC WITH CUSTOMER’S CONSENT: Reserve Bank of India specifies Know Your Customer (KYC) norms to be followed by banks and other entities regulated by it for various customer services. Accordingly now banks have been allowed to carry out Aadhaar authentication/off-line verification of an individual who voluntarily uses his Aadhaar number for identification purpose with customer’s consent.
3. RBI FORMS TWO PANELS TO STRENGTHEN SALE OF STRESSED CORPORATE ASSETS AND HOUSING LOAN PORTFOLIOS: Reserve bank of India has appointed two separate panels to create a more vibrant and transparent framework for the sale of bad corporate assets and securitisation of housing loans in abid to make these processes more open and structural. These panels have been asked to review the existing market conditions and come out with recommendations in line with global best practices. The current market lacks any formalised mechanism and is largely restricted to sale of bad debts by banks to Asset Restructuring Companies (RACs). There is a need for creating a more vibrant secondary market for debt which will go a long way in increasing the efficiency of the debt market.
4. RBI EXTENDS LAST CUT-OFF TIMING FOR RTGS TRANSACTIONS FROM 4.30 PM TO 6 PM:Reserve Bank of India has extended the last cut-off time for customer transactions through Real Time GrossSettlement Systems (RTGS) from 4.30 pm to 6 pm from June 1ST 2019. Effectively the transactions will now take place under three windows: 8 am to 11 am, 11 am to 1 pm and 1 pm to 6 pm.
5. NPA CYCLE APPEARS RELENTLESS: A couple of years ago the bad loan scenario was mainly confined to the corporate sector. But off late the Non-Performing Assets (NPAs) menace is spreading to Micro Small & Medium Enterprises (MSMEs) and retail segments as well. Earlier only banks were affected by these NPAs but now even the Non-bank segments– NBFCs are badly affected by this bad loan scenario. A pattern in March quarter results of FY 2019 indicates fresh slippages in new segments. 22 out of 33 banks declaring results show a substantial increase in NPAs, with 58% increase in overall provisioning in one quarter. This includes some large borrowers being added to the existing list and also potential slippages from stressed NBFCs that are apprehended. In our opinion a fresh cycle of toxic bad loans could further affect the financial sector badly in coming financial year.
6. RBI SEEKS TO TIGHTEN ALM NORMS FOR NBFCs: Amid persisting liquidity crunch faced by NBFCs, the Reserve Bank of India has put a draft circular tightening the norms for their Asset Liability management (ALM). It proposes to introduce Liquidity Coverage Ratio (LCR) for all deposit seeking NBFCs and also non-deposit seeking NBFCs with an asset value of 5,000 crore and above.LCR refers to the ratio of proportion of highly liquid assets to be held by financial institutions to ensure their on-going ability to meet short-term obligations.
7. GOVERNMENT MAY TAX CASH TRANSACTIONS AT BANKS: The new government is planning to put in place further measures by re-introducing Banking Cash Transaction Tax (BCTT) to discourage cash transactions and curb black money. The tax authorities are also considering levying estate tax on inherited property in line with global practices. All this is being examined to see the feasibility and effectiveness of the tax before implementing the same.
1. BANK OF BARODA LOOKS TO RATIONALISE 800-900 BRANCHES: Following its merger with Vijaya Bank and Dena Bank, Bank of Baroda is considering the option of rationalising 800 to 900 branches across the country to improve its operational efficiency. There are cases where branches of all the three banks are at one location, on the same road or in the same building making it non-viable. After comprehensive study and review, Bank of Baroda has identified around 800 to 900 of such branches which need to be rationalised as the lender could opt for re-location or closure of these branches. Besides this there is also the need to close Regional and Zonal offices of merged entities. After the merger, Bank of Baroda has become the second largest Public Sector Bank with over 9,500 branches, 13,400 ATMs and 85,000 employees with 12 crore customer base.
2. COMPREHENSIVE PUBLIC SECTOR BANK REFORMS ON THE CARDS: A host of measures are on the cards for transformation of Public Sector Banks (PSBs). Consolidation of these PSBs is the top most agenda. A list of directions is being separately worked out for these PSBs to focus on risk management, enhanced early warning signals in cases of stressed assets and bringing in new Fintech players. Basically these measures will be rolled out for prudential and clean lending.
3. SOME BANKS MAKE RECORD PROVISIONS AGAINST BAD LOANS: Since the past one year most of the banks are looking to clean their books and strengthen balance sheets by improving their Provision Coverage Ratio (PCR). PCR is the ratio of provisioning to gross Non-Performing Assets and indicates the extent of funds a bank has kept aside to cover loan losses. PCR is at a record level in some banks, which is a positive factor as it makes bank figures more reliable. SBI’s PCR increased to 78.73% in March 2019 from 74.63% in March 2018 and ICICI Bank’s PCR for March’19 was 80.60% as compared to 60.40% in March 2018.
4. RBI NOT IN FAVOUR OF SPECIAL CREDIT WINDOW FOR NBFCs:Government and NITI Aayog think that a special credit window for Non-Banking Financial Companies (NBFCs) is required to be made available as they are facing liquidity crunch. However, Reserve Bank of India is not in favour of providing special credit window to NBFC sector to tide over the liquidity crunch as it feels that the liquidity crunch scenario is not sector-specific, but limited to a few large NBFCs which have over-leveraged due to aggressive lending.
5. UPI SEES EIGHT-FOLD GROWTH: Unified Payments Interface (UPI) transactions has seen an eight-fold jump in financial year 2018-19 to 8.76 lakh crore from 1.09 lakh crore in financial year 2017-18. But it has a long way to go before it overtakes the number of card transactions (both debit and credit card) which is 3.2 times that of UPI transactions on an average.
6. PRIVATE BANKS’ PROVISIONS RISE IN FY’19: The provision for bad loans made by private banks in anticipation of larger slippages has increased substantially by nearly 13% during the financial year 2018-19. The value of provisions made by 16 private sector banks that have so far reported their March’19 quarter results stood at Rs. 54,447 crore, up from Rs. 48,298 crore for Financial Year 2018. But the value of gross Non-Performing Assets (NPAs) has remained nearly flat at the end of March 2019.
7. MINISTRY PLANS TO TIGHTEN AUDIT REPORTING STATNDARDS: The Ministry of Corporate Affairs plans to propose changes to Companies (Auditor’s Report) Order (CARO). CARO applies to most large companies in India other than financial and charitable institutions. The move comes at a time when questions have been raised on the role of auditors in several of the recent financial scams, particularly the loan repayment defaults of IL&FS which is being investigated by Serious Fraud Investigation Office of the Ministry of Corporate Affairs. The Ministry plans to review the auditing standards to tighten the rules for auditors.The Ministry is also looking to operationalize the recently formed National Financial Reporting Authority (NFRA).
1. OPTIONS AVAILABLE FOR FILING DELAYED INCOME TAX RETURNS: The deadline for filing Income Tax Returns is July 31ST for every assessment year. If you miss the deadline, you can file the delayed returns by up to 31ST March of the following year. If one has missed the deadline for filing returns for the year 2016-17 and 2017-18, he/she cannot file delayed returns now. They can file a delayed return only on the direction of income tax officer, that is if they get notice for not filing the return. In the same manner one can file a condonation of the delay to the Assessing Officer and if he is satisfied with the reason for the delay, he can allow to file the delayed returns.
2. HOME BUYERS CANNOT CHOOSE BETWEEN OLD AND NEW GST RATES: The GST council has allowed the real estate developers to shift to 5% GST rates for residential units and 1% for affordable housing without the benefit of input tax credit(ITC) from April 1ST 2019. For the on-going projects, the builders have been given the option to either continue in the 12% GST with ITC or opt for the new rate without ITC. But homebuyers will not have the option of choosing between old and new rates. It also says that the project started before April 1ST but had not received any bookings would be classified as New Project and will be subjected to revised GST rates.
3. RBI ALLOWS BANKS TO TREAT IL&FS EXPOSURE AS NPA: The Reserve Bank of India (RBI) has allowed banks to treat exposure of IL&FS and its group companies as Non-Performing Assets (NPAs) following the National Company Law Appellate Tribunal’s (NCLAT) order. Earlier RBI had asked banks not to treattheir exposure as NPAs without the prior permission of Appellate Tribunal. But an order by NCALT on May 2nd has allowed the banks to declare the accounts of IL&FS and its group companies as NPAs.
4. RBI PLANS INCENTIVES FOR BANKS TO MOVE IBC: RBI is understood to be planning “Incentive” to those banks which take the errant borrowers to bankruptcy court. RBI is considering a proposal to assign a “lower risk weight” on such loans to companies against which action has been initiated under the Insolvency & Bankruptcy Code (IBC) of 2016. A lower risk weight would act as an incentive to banks as it would help them in conserving capital. Lower risk weights on loans would make it easier for banks to achieve and maintain Capital Adequacy Ratio.
5. IBA SEEKS APPLICATIONS TO MAKE FORENSIC AUDITORS’ LIST: The Indian Banks’ Association (IBA) has invited applications for the empanelment of firms to conduct forensic audit of frauds in the banking industry. IBA plans to rope in firms for two separate categories of frauds—up to Rs 50 crore and above Rs 50 crore. At present there are 72 firms on IBA’s panel and their term is ending in August 2019. These firms will have to re-apply to be empaneled again. As on March 2018, the number of frauds in banks involving amounts of Rs 1 lakh and above stood at 5,917 which is 17% up from March 2017 figures.
6. SBI TO SEEK CONSULTATNT’S HELP TO DRAW UP LONG TERM GROWTH PLAN: State Bank of India (SBI) is seeking to engage the services of a consultant to suggest strategies to improve its Return on Assets (RoA) and Pre-Provisions Operating Profit (PPOP) by increasing income from different sources, reducing cost and optimising the balance sheet. The consultant is expected to draw a road map by planning portfolio strategy and long term growth opportunities. He will strategize for current account acquisition and increasing its balances and optimising Asset Liability Management (ALM).
7. RBI MAY OFFER MORE TIME FOR BANK-LED RESOLUTION OF NPAs:RBI is planning a liberal approach towards resolution of stressed assets when it issues a revised circular, replacing its controversial February 12 circular. As per the new circular the banks will be given 30 days from the first default to identify and qualify the account as a bad debt (Special Mention account-SMA) and initiate resolution action. The RBI as per the suggestion given by IBA, may allow individual banks to grant additional 60 days’ time for approval and implementation for a resolution plan. So, instead of having 180 days’ time (as earlier) for a bank-led resolution, now the banks could get up to 270 days to resolve an asset without taking it to NCLT.
1. RBI OUTLINES ITS VISION DOCUMENT ON PAYMENTS & SETTLEMENT SYSTEMS FOR 2019-21: The Reserve bank of Indiahas outlined a three year vision for payments & settlements system which will offer huge business opportunities for technology-enabled Fintech players. It will enable merchant acquisitions of non-banks, participation of private entities in retail payments which will open fresh business avenues. This vision document is a pursuit towards less cash society accompanied by a less-card India.The endeavour is to serve segments of society which is untouched by the payments system as RBI is trying to smoothen the digital payments in rural areas by pushing its feature - phone-based digital payments where the transaction can take place without internet connection. It is also a customer-centric approach to ensure prevention of frauds through digital channels.
2. INSOLVENCY PROFESSIONAL MAY REQUIRE A CERTIFICATE OF PRACTICE TO BE ABLE TO WORK: Insolvency Professionals (IPs) may soon require to obtain a Certificate of practice (CoP) to be able to work as resolution professionals or liquidators. Insolvency regulator IBBI proposes to amend the existing IP regulations so as to introduce the concept of CoP for Insolvency Professionals. This CoP needs to be renewed every year for the IPs to remain in practice.
3. BANKS SET ASIDE Rs. 50,000 CRORE PROVISIONS DUE TO JET AIRWAYS AND IL&FS COLLAPSE: Stung by the collapse of Jet airways and IL&FS as many as 13 banks have made a provision of Rs 50,000 crore in the fourth quarter of FY 2019. How much of this would be written off and how much would be recovered is very difficult to predict for the banks. Loan loss provisions across 13 Public Sector Banks stood at Rs 52,739 crore for the fourth quarter of FY 2019 which is sharply higher that the figure (29,626 crore) in the corresponding period of previous year. Most of the banks have reported huge losses for March’19 quarter.
4. NBFCs TIEUP WITH BANKS UNDER RBI’S LOAN CO-ORIGINATION SCHEME: An increasing number of Non-Banking Finance Companies (NBFCs) are partnering with banks under the RBI’s loan co-origination scheme. Due to liquidity crunch prevailing in the market, the NBFCs are forced to look for cheaper routes to raise funds. It is envisaged that loans worth between Rs. 5,000 to Rs. 10,000 crore may have been sanctioned under the scheme since its inception in August last year.
5. RBI TELLS BIGGER NBFCs TO APPOINT CHIEF RISK OFFICER:The Reserve Bank of India has instructed Non-Banking Finance Companies (NBFCs) with an asset size of over Rs. 5,000 crore to appoint a Chief Risk Officer to improve standards of their risk management. RBI said that with increasing role of NBFCs in credit intermediation, there is a need for these NBFCs to augment risk management practices. RBI directive comes ata time when most of these NBFCs are facing liquidity crisis as some of the firms are burdened with over-leveraging and mismatch between assets and liabilities. And if theNBFC is listed then it has to report the appointment and incumbency of any Credit Risk Officer to the stock exchanges.
6. ICICI BANK MOVES TO ROLE-BASED DESIGNATIONS OF ITS TOP EXECUTIVES: In a major HR shift, ICICI Bank has shocked its top management by getting rid of all grades of Deputy General Manager(DGM) and above. These top management executives will be now known by their role and there will be no grade-based benefits. The bank has also got rid of hierarchy as no longer can anyone guess an executive’s seniority based on the size of his car or access to executive dining room. So much so that earlier even the internet bandwidth was depending on the seniority. This move will affect 400 executives. ICICI Bank has moved from grade-based designations to role-based designations.
7. PUNJAB NATIONAL BANK TERMINATES AGREEMENT TO SELL ITS STAKE IN HOUSING FINANCE ARM: Punjab National Bank has terminated the agreement to sell its stake in PNB Housing Finance with General Atlantic Group and Varde Partners. The bank said it strongly believes in the growth story of housing finance and hence it will continue to support the housing finance arm in its growth plans.
1. LENDERS TAKE 57% HAIRCUT IN 94 CASES WORTH Rs 1.75 LAKH CRORE: Banks have taken a huge 57% haircut in 94 large accounts worth Rs 1.5 lakh crore which were resolved in Financial Year 2019, recovering just Rs 75,000 crore, which amounts to 43% of total value of the admitted claims, as per a report. The average resolution time for these 94 cases resolved was 324 days as against the stipulated timeline of 270 days. As of March 2019 there were 1,143 cases pending at various bankruptcy tribunals, and 32% of them are pending beyond 270 days. The report further says that had these 94 cases were liquidated, the recovery would have been just 22%.
2. ROUND 2 OF PSB MERGERS, BIG BANKS MAY GET A CALL: The government is soon likely to invite select big banks for discussion on a second round of merger in Public Sector Banks, according to a Finance Ministry Official. The lenders to be called for discussion may include Punjab National Bank and Union Bank of India. The merger activity may start anytime during the second or third quarter of the current fiscal year. But in our opinion the time is not ripe for further mergers as most of the banks are in a recovery mode and first they need to strengthen and consolidate their balance sheets. Moreover the government should see how the earlier merger of Dena Bank and Vijaya Bank with Bank of Baroda shapes up.
3. RBI MOVES TO TIGHTEN CURRENT ACCOUNT OPERTAING NORMS TO CHECKFUND DIVERSION:In a move to tackle fund diversion, Reserve bank of India has proposed sterner rules on opening and running of current accounts of corporate borrowers. As per the proposed rule, current accounts can only be opened with the lead bank in a lending consortium while other banks having collection accounts will have to transfer funds at the end of the day to the current account with the consortium leader. RBI has said the rule would apply to corporate accounts which have borrowed and availed a credit limit of Rs 50 crore or more from the banking system.
4. LENDERS TO ANIL AMBANI’S RCom FACE STEEP HAIRCUT: Lenders to Anil Ambani’s Reliance Communication (RCom), Reliance Telecom and Reliance Infratel are finalising plans to recover their loans of Rs 45,000 crore. Banks have decided to shortlist a Resolution Professional from a field of 15 players. But the bankers feel it will be a tough task given that the value has been significantly eroded with the impaired assets, leaving little on the table for the potential buyer. So even if the lenders find a buyer, they will have to take huge haircut.
5. NBFCs AIM TO TAP OVERSEAS LOAN MARKET TO RAISE FUNDS: Non-Banking Finance Companies which includes some prominent players like Piramal Capital Housing, Bajaj Finance, Hero Fincorp, L&T Finance, Tata Financial Services are now going beyond bonds to seek loans from overseas banks in the form of External Commercial Borrowing (ECB). While they are willing to be exposed to currency risks, they want to diversify their funding pattern. Each company aims to raise about $ 200-400 million in the next few weeks. Maturities of such loans are likely to be in the range of 3 to 5 years.
6. RBI GETS SUPREME COURT ULTIMATUM ON RTI ACT DISCLOSURES: The Supreme Court has ordered the Reserve Bank of India to disclose its annual inspection reports of banks along with the list of defaulters and information related to them under the Right to Information Act. The Supreme Court further said that the RBI is duty bound under the law to disclose information sought under RTI Act.
7. CBDT AND GSTN SIGN A PACT TO NAB TAX EVADERS TO REDUCE BLACK MONEY GENERATION: The Central Board of Direct Taxes (CBDT) and Goods & Services Tax Network (GSTN) have signed an agreement to facilitate exchange of data between the two. The I-T Department will share key financial information including the status of I-T Return filings, turnover of business, gross total income and turnover ratio with GSTN. This is done to nab the evaders and thus reduce generation of black money.
1. DEUTSCHE BANK LOOKS TO GROW ITS RETAIL BUSINESS IN INDIA: Deutche Bank is looking to grow
its retail business in India. It is planning to roll out a new digital platform for processing loans. The first
part of the digital platform will be completed in June this year while the process will be completed by
the end of this year.
2. DEPOSITS IN JAN-DHAN ACCOUNTS INCHING TOWARDS Rs 1 LAKH CRORE MARK: As on March 2019, the number of accounts in Jan-Dhan Yojana crossed 35.39 crore. The Jan-Dhan accounts scheme which was launched five years ago is set to cross Rs 1 lakh crore mark soon. The total deposit in the said accounts touched to Rs 96,107 crore as on March 2019. As per the latest data available, the figure has touched an all-time high of Rs 97,665 crore as on April 3 rd 2019.
3. IRREGULARITEIS OF MORE THAN Rs 1 LAKH CRORE FOUND IN COMPANIES UNDER INSOLVENCY & BANKRUPTCY CODE: Forensic audit of over 200 companies facing corporate insolvency resolution action under the Insolvency & Bankruptcy Code (IBC) has revealed irregularities of more than Rs 1 lakh crore. This also includes diversion of funds. The Ministry of Corporate Affairs, which is responsible for implementation of IBC is expected to initiate action against promoters, directors and even the auditors involved in such cases.
4. BANKS IN SEARCH OF INFORMATION TECHNOLOGY TALENT: All banks are going more and more digital nowadays and due to this lenders (Private Banks, NBFCs and Fintech Companies) are trying to attract best of the Information Technology (IT) talent with fat pay packets with ESOPs (Employee Stock Options). A top class techie with a flair for analytics is in lot of demand. Many smaller Fintech companies are offering a partnership in the business with an equity stake if the candidate is top class.
5. 28 to 30% CONSUMER COMPLAINTS TO RBI ARE ABOUT DIGITAL OR CARD PAYMENTS: About 28% to 30% of the complaints filed by consumers with RBI are in the space of digital transactions and card payments. As per the annual report by RBI on Banking Ombudsman Scheme 2017-18, 22% of the complaints pertained to banks not adhering to the “Fair Practice Code”, while ATM and debit card related issues made up the second largest category of complaints with more than 15%. Together with the credit-card related complaints and online banking issues, the total share of complaints on digital channels almost touched 30%.
6. STATE BANK OF INDIA APPOINTS 8 NEW DEPUTY MANAGING DIRECTORS: The country’s largest bank, SBI with more than 25% share of country’s loan market, has elevated eight of its executives to the post of Deputy Managing Directors (DMD) in one of the biggest HR revamps. SBI is also in the process of identifying about 15 executives who would fill the positions as Chief General Managers.
7. MICROFINANCE SECTOR TO GROW AT 22% IN FINANCIAL YEAR 2020: As per a report by rating agency Icra, the Microfinance industry is likely to grow at 20-22% in the current fiscal. The industry will require external capital of almost Rs 3,500 to 4,700 crore over the next 3 years to sustain the growth potential. There is a need for the Microfinance Industry to do a more thorough credit analysis/assessment of actual debt repayment capacity of the borrower.
1. BANKS BOARD BUREAU IDENTIFIES 75 SENIOR OFFICERS FOR LEADERSHIP ROLES IN PSBs: The Banks
Board Bureau (BBB), the apex body for selection of whole-time Directors of Public Sector banks has
identified 75 senior officers from the Senior Management Level to take over leadership role in the
future. The current list of 75 officers have been selected from a pool of 450 such eligible officers to
take on the current and emerging challenges as well as help create a leadership pipeline. Shortly a
globally ranked Indian Institution will be identified where every year the identified personnel would
undergo intensive leadership development training.
2. ICICI BANK LAUCNHES INSTANT LOAN SCHEME: ICICI bank has launched an Instant Loan for its salaried customers wanting to buy cars and two wheelers. Pre-approved ICICI Bank customers can get a sanction letter for a car or two wheeler loan instantly which can be used to get a vehicle loan for the full on road price within 15 days. ICICI Bank is already offering instant personal loans, home loans and credit cards and now it has added vehicle loans in this list.
3. IDBI BANK BRINGS PAPERLESS ACCOUNT FACILITY FOR NRIs: IDBI Bank has launched “NRI-Insta- Online” account opening for Non Resident Indians (NRIs). This online account opening process is available to NRIs residing in Financial Action Task Force (FATF) member countries. Hence NRIs living in nearly 40 countries will now be able to open account in IDBI Bank without submitting paper documents as they will not be required to furnish any physical documents such as KYC proofs. This user friendly initiative will help NRIs to open the account without any need to visit the branch or submit any physical documents and they can choose the branch in which the account needs to be opened.
4. EASIER FINANCING FOR LOW-COST HOMES LIKELY: The government is planning to ease funding and construction norms for its “Housing for All” programme to speed up construction of affordable house. Some of the changes under consideration are allowing greater access to institutional finance to the poor, relaxation in eligibility criteria for bank loans and switching to a life cycle cost approach to construction of such houses to bring down costs and ensure quality of construction. Besides this, fiscal support is being considered for companies that use recycled products made from waste.
5. CHANGES IN INCOME TAX RETURN FORM FOR AY-19-20: The Central Board of Direct Taxes (CBDT) has introduced new Income Tax Return (ITR) forms for the assessment year 2019-20. The new ITR form comes with a set of changes. The tax payer will be required to feed more detailed disclosure. The idea is to check evasion and eliminate many loopholes. With the last date for filing the returns being 31 ST July, the tax payer needs to start the process in advance to fill in the required details.
6. CBDT AMENDS FORM-16 AND FORM-24Q FOR DETAILED REPORTING ON TDS: The Central Board for Direct Taxes (CBDT) has affected amendments in Form-16 (Certificate for Tax Deducted at Source- TDS) and Form-24Q, a quarterly TDS statement for salaries. As per the new form it is required to provide more details related to bifurcation of exemptions under Section 10 of the Income Tax Act, disclosure of standard deduction amount and other income.
7. BRITAIN ORDERS FOR SEPERATION OF AUDIT AND CONSULTANCY BUSINESS FOR THE “BIG FOUR” AUDIT FIRMS: Britain’s “Big-Four” accounting firms have to now separate their consultancy business and audit business as per the country’s competition watchdog. This means the auditors should focus exclusively on producing the most challenging and objective audits rather than being influenced by their much larger consultancy businesses.
8. BUILDERS FACING TOUGH CHOICE IN GST RATES FOR ONGOING PROJECTS: Builders and home buyers are finding it difficult to understand the best deal for them under the new GST rates for on- going projects. Real Estate Developers have time till May 10 th to decide on whether to stick to the old rate with input tax credit or to opt for new GST rate (5%) with no input tax credit.
1. SBI CARD PLANNING FOR A CARD-LESS BUSINESS MODULE : SBI Card, the credit card arm of State Bank of India (SBI), is changing its business model. It is planning and is preparing for a card-less world. In the last 18 months it has set up its own infrastructure and brought back its core platform to India without losing sight of growth. Now they are using Chatbot, Artificial Intelligence and robots to do their respective jobs. The card company is backed by private equity fund Carlyle and is also diversifying its funding from banks beyond SBI to tap local bond market as it seeks diversification after the exit of GE Capital a year ago.
2. BANKS CLOSE THE FY19 WITH ROBUST CREDIT GROWTH: According to RBI data released this week, bank credit rose by 13.24% while deposit grew by 10.03% in Financial Year 2018-19. This is the second consecutive double-digits credit growth after the same had declined to 4.5% in Financial Year 2016-17. On a Year-on-Year basis, non-food credit increased by 13.2%, Loans to Services sector by 23.7%, Credit to Industry by 5.6%, credit to Personal loan segment by 16.7% and advances to Agriculture & Allied Activities increased by 7.5%.
3. BANK BOARD BUREAU TALKS OF AUTONOMY TO PSU BANKS TO DECIDE ORGANISATIONAL STRUCTURE : The Banks Board Bureau (BBB), the apex body for selection of whole-time Directors of State-owned Banks, has made a case for giving a complete autonomy to banks to decide organisational structure for better efficiency. The board has suggested revamping credit governance architecture in these banks to reinforce efforts to minimise credit costs and enhance efficiency of credit allocation. It has also recommended incentivisation scheme linked to performance.
4. I-T DEPARTMENT TO GO AFTER 65,000 NON-FILERS FOR 2016-17 : The Income Tax Department will initiate recovery of tax along with penalty from approximately 65,000 assessees who had deposited Rs 10 lakh and more in their bank account during demonetisation period but did not file returns for the assessment year 2017-18.
5. RESERVE BANK OF INDIA ISSUES NEW NORMS FOR BANKS TO SET UP CURRENCY CHESTS: The Reserve Bank of India (RBI) has come out with new set of guidelines for setting up of new Currency Chests by banks. As per the new guideline the strong room/vault size must be of minimum 1,500 sq ft. For those situated in hilly area the area should be 600 sq ft. Besides this, the new currency chests should have the capacity to process 6.6 lakh pieces of bank notes per day.
6. LIC GETS 12 YEARS TO CUT ITS STAKE IN IDBI BANK: The Reserve Bank of India has given Life Insurance Corporation of India (LIC) 12 years to reduce its stake by 10% in IDBI Bank. Presently LIC has 51% controlling stake in IDBI bank making it the bank’s majority shareholder. This has to be brought down to 40% in the next 12 years.
7. CERTAIN NBFCs TO GET LICENCE FOR FOREX DEALERSHIP: Reserve Bank of India has announced that certain Non-Banking Financial Companies (NBFCs) will be able to get licence as authorised foreign exchange dealer. This move will make it easy to purchase foreign exchange for overseas travel. Accordingly Non-deposit taking systematically important NBFCs (NBFCs-NDSI) will be made eligible to apply for grant of Authorised Dealer Category-II licence.
8. BANK OF INDIA TO SELL 25.05% STAKE OF ITS INSURANCE JV : Bank of India has announced that it will sell 25.05% stake in its insurance Joint Venture (JV) Star-Union Dai-ichi Life Insurance Co. The proposed sale of over 6.48 crore equity shares will fetch the bank at least Rs 1,106 crore. The floor price for the stake sale has been fixed at Rs 170.50 per share.
1. RBI TO ISSUE NEW DIRECTIVE AFTER SC VERDICT ON FEBRUARY 2018 CIRCULAR: In February 2018
RBI had issued a circular which had stipulated that banks had 180 days to arrive at debt resolution
plan for loan accounts above 2,000 crore and more, failing which the company would have to be sent
to bankruptcy Court under Insolvency & Bankruptcy Code (IBC). Now the Supreme Court has quashed
this circular. RBI will soon issue a revised directive on stressed asset resolution that will comply with
Supreme Court order. RBI Governor Mr. Shaktikanta Das said RBI stands committed to maintain and
enhance the momentum of resolution of stressed assets and adherence to credit discipline.
2. NEW CUSTOMER-PROTECTION MEASURES ON CARDS FOR ELECTRONIC PEYMENTS: The Reserve Bank of India would soon come up with new set of customer-protection measures aimed at improving user confidence in electronic payment channels. The main objective is to reduce the use of cash in business transactions. The proposed regulations will include a common timeframe for all authorised electronic payment systems to respond to customer complaints and setting up a compensation framework for failed transactions.
3. AXIS BANK ASKS MORE THAN 50 OF ITS MID-LEVEL MANAGERS TO LEAVE: Axis Bank, headed by its new CEO has reviewed the business and has decided to terminate more than 50 mid-level Managers in view of restructuring its business and cut costs. These affected officials held important posts and had led various supervisory functions in corporate and retail banking. This decision has rattled many old timers in the bank. The bank said that changes are afoot at the bank to raise productivity and efficiency.
4. BANKS AND OTHER OPERATIONAL CREDITORS SET TO LOSE OVER Rs 90,000 CRORE AS VIDEOCON GROUP SINKS: The two main Videocon group companies, Videocon Industries Ltd (VIL) and Videocon Telecommunication Ltd (VTL) owe Rs 59,451 crore and Rs 26,673 crore respectively to Indian Banks, led by Consortium leader SBI. Besides this, 731 other Operational Creditors have made separate claims. The total amounting to over Rs 90,000 crore makes it the biggest corporate bankruptcy case in Indian banking industry. Interestingly the group promoters-Venugopal Dhoot, Pradipkumar Dhoot and Rajkumar Dhoot have also claimed Rs 57,823 crore on the basis of personal guarantees provided by them for various facilities availed by the VIL.
5. NEARLY ALL ASSETS OWNED BY IL&FS LENDING ARM HAVE TURNED BAD: According to the government appointed board of the lender, 90% of the Rs 18,800 crore assets of I-Fin, the firm’s lending arm, have turned bad. The situation is so bad that it was impossible for the board to give a timeline to the creditors of the group firms on when they could expect a court-imposed moratorium to be lifted.
6. GST REVENUE COLLECTION TOUCHES NEW HIGH: The GST collections touched a record high of Rs 1.06 trillion in March 2019, up from Rs 97,247 crore in February 2019. This is the result of improved compliance and increased number of returns filed. The collection in March 2019 has been highest since introduction of GST and also reflects a 15.6% growth over March 2018.
7. RBI NORMS ON BANK EXPOSURE COME INTO EFFECT FROM APRIL 1 st : New guidelines on bank exposure on large borrowers take effect from April 1 ST. The new guidelines cap a bank’s exposure to a group of companies at 25% of its core capital and to an individual company at 15%. It is three years since RBI came out with these guidelines but many banks are still struggling to comply with this because of capital constraints. These banks may look at cancelling the existing sanctioned limit of borrowers to meet the cut-off date.
8. MUMBAI TOPS IN TAX COLLECTION FOR FINANCIAL YEAR 2019: Mumbai has emerged as top contributor to the exchequer and accounted for 32% of overall tax collection in financial year ending March 2019.
1. GOOGLE TO ISSUE CREDIT CARDS : Google is about to start issuing credit cards to its select users of its
own AdWords advertising program. This card will help small and medium sized businesses that are
cash-strapped as this card will give them ample credit on affordable terms. The Google card is actually
a store card which can be used for payment at specific merchant establishments. The card comes with
no annual fee and a very low 8.99% annual percentage rate.
2. SBI PLANS TO BRING MORE HIGH NET WORTH CUSTOMERS INTO ITS FOLD: State Bank of India is opening 55 Wealth Management Centres across the country by 2020 to attract High Networth Customers. So far SBI has opened 44 such centres with a network of 121 wealth hubs which has about 52,000 customers and is managing their assets worth 30,000 crore. SBI is offering wealth management service to existing customers with minimum of Rs 30 lakh manageable assets. For new customers the entry threshold is Rs 10 lakh.
3. FIVE PSU BANKS GET CAPITAL INFUSION OF Rs. 21,428 CRORE FROM GOVERNMENT: Five state owned banks, including Punjab National Bank, Bank of Baroda and Union Bank received capital infusion to the tune of Rs. 21,438 crore from the government. The capital infusion is for the current fiscal ending March 31, 2019. The capital infusion will be by way of preferential allotment of equity shares of the bank during 2018-19 as government’s investment.
4. BANKS’ CONSUMER DURABLE LOAN BUSINESS SHRINKS BY 75%: The volume of banking sector’s consumer durable loan share has shrunk by 75% year-on-year. According to RBI data, banks outstanding consumer durable loans stood at Rs. 4,600 crore at the end of January 2019, as against Rs. 19,700 crore a year back. This is in spite of HDFC bank’s recent thrust in this segment. Zero-cost Financing schemes and cash-backs offered by many NBFCs has taken away this business from the banks.
5. SBI MAY ASK SENIOR RETIRED BANKER TO HEAD JET AIRWAYS: As lenders moved in to take charge of the cash-strapped Jet Airways, State bank of India, the lead banker may ask one of its senior retired bankers to head the airline and guide it out of the present financial mess. As per the plan, approved by the government, the lenders are set to take over the airline and run it for a few months before selling it.
6. BANKS MAY INCREASE DEPOIST RATES: With credit growth outstripping the deposit growth so far in the present financial year, banks may be forced to increase their deposit rates to attract more deposits. In the present financial year banks have so far witnessed credit growth of 14.33% while the deposit growth has seen only 9.97 % increase.
7. CHARTERED ACCOUNTANTS COMPLAIN AGAINST INCOME TAX OFFICERS TO THE GOVERNMENT: Various Chartered Accountant bodies across the country have written to the Finance Ministry asking them to hold back tax officials instructed to take all possible measures to recover tax. The instructions given by the Central Board of Direct Taxes (CBDT) to all principal Chief Income Tax Commissioners to take all possible measures to achieve the shortfall of 14.9% in the targeted tax collection has created fear in the minds of the tax payers. The complaint also mentions that the government must follow the process of law if at all the recovery measures are to be adopted.
8. GOVERNMENT TO PUSH PSBs TO TAP MARKET FOR FRESH CAPITAL IN NEXT FISCAL: The government will push large Public Sector Banks (PSBs) to tap the market for fresh capital in the next fiscal year as it is not inclined to give them more capital infusion as it has already infused sufficient funds in this fiscal. It is also seeking details from these banks on action taken in cases of bad loans above Rs 50 crore. The government also expects the remaining 5 banks to come out of PCA by the end of next year.
1. SBI UNLIKELY TO MEET FULL YEAR TARGET OF NBFC LOAN PURCHASE: State Bank of India is unlikely
to meet its full year target of NBFC loan purchase as it is selectively buying portfolios in the Housing,
Agriculture and MSME categories. It feels there are not many good and quality assets worth buying.
This fiscal, SBI has so far bought loans worth only Rs.17,000 crore from Non-Banking Finance
Companies as against the set target of Rs. 45,000 crore.
2. INDIA’S BAD LOANS RATIO IS THE WORST IN THE WORLD: India holds the dubious distinction of having the worst Non-Performing (Bad loans) loan ratio among the world’s major economies. Reserve Bank of India in its latest report states that the bad loans ratio of banks fell for the first time since the year 2015. It has surpassed Italy’s bad loan ratio. Italy has successfully mana ged to reduce its bad loan ratio.
3. REALTY COMPANIES CAN OPT FOR OLD OR NEW RATES OF GST FOR THEIR ONGOING RESIDENTIAL PROJECTS: Real Estate Firms will have the option of adopting a lower rate of Goods & Services Tax (GST) without Input Tax Credit (ITC) or go for the existing rate with ITC. This applies only to the on-going projects where the construction and actual bookings have started before 1 ST April 2019 but are yet to be completed. Projects beginning on or after 1ST April 2019 will invariably fall into lower GST rate regime. In our opinion if the developer opts for GST with ITC benefit then he has to offer the flats at higher GST rates and customers may not be willing to purchase at higher GST rate.
4. RBI SAYS NO TO IDBI BANK NAME CHANGE PROPOSAL: The Reserve Bank of India has turned down IDBI Bank’s proposal to change its name from IDBI Bank to LIC IDBI Bank or LIC Bank following acquisition of its major stake by LIC. Earlier this month, RBI changed the categorisation of IDBI Bank to a private Sector lender.
5. SBI CUSTOMERS CAN NOW WITHDRAW CASH FROM ATM WITHOUT THE USE OF DEBIT CARD: Customers of State Bank of India will no longer require debit cards to withdraw money from ATM. State Bank of India has announced that the customer can generate a One-Time-Pin (OTP) through their mobile application and use the PIN to draw money from the ATM. The service is currently made available at 16,500 ATMs. And very soon it will be available in more than 60,000 ATMs across the country.
6. BANK OF BARODA LAUNCHES CRECHE/DAYCARE FACILTY FOR CHILDREN OF EMPLOYEES: Bank of Baroda has become one of the first Public Sector Banks to launch a crèche/child day care facility for children of its employees. It has launched the facility at its Mumbai Corporate Office which houses more than 1,500 employees. The bank intends to launch more of such day care centres in the near future. This initiative is designed to help its employees to save time and reduce stress of finding right day care centres for their children. The bank will bear 60% of the cost with the 40% to be borne by the respective employee.
7. DEUTSCHE BANK IS PLANNING TO SET UP A BAD LOAN BUYING UNIT IN INDIA: Deutsche Bank is planning to set up a unit in India to buy and reorganise bad loans in India. It seeks to make profit from an unprecedented bad-loan clean-up in India with one of the worst Non-Performing loan ratios. The Bank felt the need to have its own Asset Reconstruction Company (ARC) to buy and r eorganise Non- Performing Loans as current Indian rules restrict overseas investorsfrom buying soured loans directly from investors in India.
8. PRIVATE BANKS MAINTAIN CREDIT GROWTH OF 20%: The credit growth of private banks in the third quarter of the present financial year touched 22% year-on year. This is for the fifth consecutive quarter that the private banks have maintained the growth rate at 20% or more. On the other hand the growth rate of Public sector banks remained subdued at 8.4%.
1. RBI CATEGORISES IDBI BANK AS PRIVATE SECTOR LENDER: Subsequent to the of the majority stake in IDBI Bank by LIC
of India, Reserve Bank of India has categorised IDBI Bank as a private sector lender. LIC of India completed the process
of picking up a controlling 51% stake in IDBI Bank. IDBI Bank has been categorised as Private Sector bank for regulatory
purposes with effect from 1 ST February 2019. For December 2018 quarter IDBI Bank reported a loss of Rs. 4,185.48. The
Bank’s Non-Performing Assets (NPAs) as on December 2018 were 29.67% of the gross advances.
2. GOVERNMENT’S “MUDRA YOJANA” SPELLS TROUBLE FOR BANKS: Government’s small loans scheme- Micro Units Development & Refinance Agency (MUDRA) has seen bad loans soaring in its entire three segments—Shishu, Kishore & Tarun. NPAs under MUDRA scheme in the first nine months of the current fiscal have increased by 53% to Rs. 14,930 crore from Rs. 9,769 crore last year. The total disbursement this year from April to February is Rs. 2.12 lakh crore as compared to Rs. 2.46 Lakh crore for the full fiscal year 2017-18. This is according to the data received by Indian Express through RTI (Right To Information).
3. SBI LINKS INTEREST RATE ON MOST SAVINGS ACCOUNT DEPOSITS TO REPO RATE: State Bank of India became the first domestic bank to link the interest rate it offers on savings account to the Reserve Bank of India’s Repo rate. Savings accounts with deposits above 1 lakh would be now priced at 2.75% below the Repo rate of 6.25%, which at present works out to be 3.25%. Accordingly all Cash Credit and Overdraft facilities over Rs 1 lakh would be priced at 2.25% over the Repo rate, this would mean at the present Repo rate of 6.25% the floor price would be 8.5%. The bank would be charging “risk premium” over the floor rate, depending on the credit rating of the respective borrower. This method of linking interest rate to Repo rate is an attempt to speed up the transmission of any changes in the benchmark monetary policy rate to depositors and borrowers.
4. NOW YOU CAN DEPOSIT CASH, PAY UTILITY BILLS THROUGH NON BRANDED WHITE LABEL ATMs: White label ATMs (WLAs) are those ATMs which are owned and operated by Non-Bank entities. A customer from any bank will be able to withdraw money from these WLAs but needs to pay a fee for the services. After review of the existing norms for these WLAs, RBI has decided to allow them to offer services like cash deposit and payment of utility bills. These WLAs can now buy wholesale cash above Rs 1 lakh directly from RBI, currency chests and from any scheduled bank including Regional Rural Banks.
5. TIGHTER HOUSING FINANCE NORMS ON THE CARDS: National Housing Bank (NHB) is considering tightening the Asset- Liability Management (ALM) norms for Housing Finance Companies (HFCs) to help detect their solvency concerns early. This will be the latest in a series of steps, including tougher capital and borrowing norms. These tough steps are being taken by NHB after defaults by IL & FS entities and concerns about DHFL’s repayment ability.
6. MANAPPURAM FINANCE KICK-STARTS ITS DOORSTEP GOLD LOAN DELIVERY IN DELHI, MUMBAI: Manappuram Finance has decided to offer doorstep delivery of gold loan to customers in Delhi and Mumbai. The Company will initially offer doorstep gold loan facility across 50 branches each in Delhi and Mumbai. It has successfully launched this facility in Chennai and Bangaluru. With this launch the company intends to address the convenience and security factors in one go as the customers don’t have to commute with gold or cash as the money would get transferred directly to their accounts.
7. BANKS COMING OUT OF PCA FRAMEWORK MAY NOT SEE SUDDEN GROWTH IN CREDIT: Recently 6 banks are out of Prompt Corrective action (PCA) framework of RBI. But these banks may not be able to show a robust growth in their credit portfolio immediately. If these banks become very much aggressive in loan disbursements which are still not strong enough, may exert pressure on asset quality, thereby raising a risk of slipping back in to PCA.
8. SMALL FINANCE BANKS NEED ADDITIONAL CAPITAL TO GROW: Small Finance Banks (SFBs) are likely to grow at 25- 30% on yearly basis if they can arrange additional capital of Rs 4,000 to 6,000 crore till financial year 2023. In the nine months in the present fiscal these banks have reported an annualised growth of 33%. These banks have witnessed growth under asset, deposit and better return on their equities.
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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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 2019. 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.
7. 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.
8. 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.
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 February. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
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.
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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
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.
2. 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).
3. 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.
4. 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/-
5. 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.
6. 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.
7. 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.
8. 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.
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