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Banking News 02.02.2017

Dearness Allowance now reduced by 0.90%

(Decrease of 9 slabs) from February 2017


Revised DA rate is @ 46.90%, from Feb-17 to April-17

The DA for November 2016 to January 2017 was 47.80%


Dearness Allowance for pensioners from

February-2017 to July-2017 is increased



From E-Group, Banking-News



Budget 2017:

Income tax rate cuts; Individuals earning

Rs 3 lakh annually to pay zero rate of tax


Sumit Jha

The Financial Express

Published on February 2, 2017



New Delhi, February 1: In a bid to improve tax compliance and reward salaried taxpayers in the aftermath of demonetisation, finance minister Arun Jaitley on Wednesday announced halving of the income tax rate to 5%, levied on incomes between Rs 2.5 lakh and Rs 5 lakh. However, this benefit would come with a greater cost for individuals with annual salaries of Rs 50 lakh and above as they will have to cough up a 10% surcharge on income up to Rs 1 crore.


The changes in the personal income tax would result in a net revenue loss of Rs 12,800 crore to the government. While the lowering of tax would mean a revenue loss of Rs 15,500 crore, the surcharge would mitigate the loss by Rs 2,700 crore, Jaitley said in his Budget speech.


The individuals with Rs 3-lakh annual income will in effect pay a zero rate of tax, given the availability of Rs 2,500 as a rebate. Moreover, if the limit of Rs 1.5 lakh under Section 80C for investment is used fully, the tax would be zero for people with income of Rs 4.5 lakh. “Post-demonetisation, there is a legitimate expectation of this class of people to reduce their burden of taxation. Also, an argument is made that if a nominal rate of taxation is kept for lower slab, many more people will prefer to come within the tax net,” Jaitley said.


The finance minister added that taxpayers with income up to Rs 5 lakh other than business income will require to fill a simple one-page form for filing income tax return. Further, the Budget announced reduction in holding period of immovable properties for computation of long-term capital gains to two years from three years earlier.


Additionally, it was also announced that the base year for counting the cost of property would now be from April 2001 compared to 1981 earlier. Both the measures are expected to bring down tax liability for those holding immovable assets.


“The FM recognised the contribution of the salaried class to the tax revenues yet did not meet the expectation of standard deduction of this class. However, a tax saving for all is proposed by reducing the rate of tax from 10% to 5% for the income slab of Rs 2,50,000 to Rs 5,00,000,” Sonu Iyer, tax partner and people advisory services leader, EY India, said.



From E-Group, Banking-News



Budget 2017:

Minor tax relief for banks on bad debt provisioning


K R Srivats

The Business Line

Published on February 2, 2017



New Delhi, February 1: Finance Minister Arun Jaitley sought to soothe public sector banks facing NPA (non-performing assets) pain by handing out tax relief, albeit much lower than their demand. The Budget provides that banks will be allowed tax deduction for NPA provisioning up to a limit of 8.5 per cent of their total income, against the current limit of 7.5 per cent of total income.


“This will reduce the tax liability of banks,” Jaitley said in his Budget speech.  In the run-up to the Budget, the Reserve Bank of India had, in the wake of demonetisation, urged Jaitley to allow banks to avail of full tax deduction on the provisions made toward bad debts. Any such facility of full tax deduction is expected to come handy for banks, which are faced with challenges of demonetisation and sluggish loan recoveries in the third quarter (October-December), the RBI said.


However, the Budget has only partially delivered on this front.


Meanwhile, Jaitley also said that he proposes to tax interest receivable on actual-receipt basis instead of accrual basis in respect of NPA accounts of all non-scheduled cooperative banks and bring them at par with scheduled banks. “This will remove the hardship of having to pay tax even when interest income is not realised,” he added.


As far as the capital requirements of public sector banks go, the Budget has provided ₹10,000 crore for the same. Most non-banking finance companies (NBFCs) were disappointed that the Budget did not enhance the tax deduction for the sector on the NPA provisioning front.


“While the RBI is bringing convergence in regulation for NBFCs with banks, it is imprudent that on the tax front we see divergence,” Raman Aggarwal, Chairman, Finance Industry Development Council, a representative body for asset-financing NBFCs, told BusinessLine. This Budget has extended the provision of Section 43D of the Income Tax Act (taxing interest on receipt basis) to co-operative banks also (already available to scheduled commercial banks), but NBFCs have been kept out, he rued.


“To deny NBFCs coverage under Section 43D is disappointing. Moreover, there has been no increase for NBFCs for bad debt provisioning (it is currently 5 per cent).  Why should NBFCs be subject to such discrimination and negative bias when we talk of regulatory convergence of all financial entities?” asked Aggarwal. He said the RBI’s objective to bring activity-based regulation and not entity-based regulation has to be matched with a similar approach in matters relating to taxation.


In the run-up to the Budget, FIDC had suggested that eligibility norms for NBFCs to avail refinance from MUDRA should be made favourable. This would enable small and medium-sized NBFCs to shift from acceptance of public deposits to refinance from MUDRA, it had said. A case for removal of the minimum loan ticket size of ₹1 crore for NBFCs to use the Sarfaesi law for recovery of dues was also made. That has also not been accepted by the government. The Centre had on August 6 last year notified a 2015-16 Budget provision allowing NBFCs to avail of the Sarfaesi law for recovery of dues. However, it had been stipulated that the law would be available only in cases where the minimum lending ticket size is ₹1 crore. This had come as a surprise to the NBFC sector.



From E-Group, Banking-News



Budget 2017:

Tax rate for MSMEs could

have been reduced further


Arundhati Bhattacharya

The Business Line

Published on February 2, 2017



Mumbai, February 1:  Last year’s Budget focussed on agriculture and rural development. The Budget this year also began with the agriculture theme. However, the focus is on efficient implementation of existing schemes by increasing the allocation.


The total allocation for the rural, agriculture and allied sectors in 2017-18 is Rs 1,87,223 crore, which is 24 per cent higher than in the previous year.


In the Budget, the government has announced several measures that will directly or indirectly benefit micro, small and medium enterprises (MSMEs). The proposal to reduce the tax rate to 25 per cent for MSMEs with turnover up to Rs 50 crore would benefit 6.67 lakh MSME units.


It is estimated that there would be Rs 7,200-crore benefit to MSMEs. However, the tax rate should be reduced further, as MSMEs provide inputs for a number of industries.


In a move aimed at promoting transparency and accountability in political funding, the government has taken various steps. Introduction of electoral bonds is a novel idea and probably the first of its kind in the world. Donors can purchase bonds only through cheques or digital mode which helps track the source of the purchase.


Along with the expectations of the common man, the government has reduced the personal income tax rate for the entry level tax slab (Rs 2.5 lakh to Rs 5 lakh) to 5 per cent, from the present 10 per cent.


The primary motive is to include more number of people in the tax net, so that the tax burden can be shared between the salaried and non-salaried.


The author is Chairman of SBI


From E-Group, Banking-News



Budget 2017:

Recapitalisation of banks will

 boost their lending capacity


Arundhati Bhattacharya

The Economic Times

Published on February 2, 2017



Mumbai, February 1:  This year’s Budget has maintained a logical continuity from the previous year’s and also with ongoing announcements. Hence, the focus on agriculture has continued with emphasis on agri-lending, agriculture insurance and implementation of core banking solutions in Primary Agriculture Credit Societies (PACS) with an aim to double the farm income. Most of the announcements were unanticipated.


The measure to tackle black money — such as capping the cash transition limit to Rs 3 lakh — and reforms in political funding — such as reduction in minimum cash donation to political parties to Rs 2,000 and novel ideas like electoral bonds — were in the surprise list. These measures are nonetheless a continuation of demonetisation.


The capping of cash transactions will help the banks reduce cash intensity. This, in turn, will help in freeing up manpower at branches for undertaking more value-added services.


For the banking sector, the thrust to digital economy will help banks expand their digital footprint as well as to meet the additional 10 lakh new point-of-sale terminals target by March 2017. The agriculture lending target has been substantially revised to Rs 10 lakh crore supported by further provisions for agriculture insurance.


It is important to create credit absorption capacity rather than to just enhance lending targets. This can done by supporting infrastructure creation in rural areas, which the Budget aims at doing.


The draft Bill to curtail the menace of illicit deposit schemes is also a welcome move after the success of the Jan Dhan Yojana. Affordable housing will be classified as infrastructure, which is expected to give this sector a boost.


The Budget has proposed to create a Payments Regulatory Board in the Reserve Bank of India by replacing the existing Board for Regulation and Supervision of Payment and Settlement Systems. This is welcome, given that payments function and banking function in new digital environment have been completely unbundled.


The Budget has provided Rs 10,000 crore for recapitalisation of banks in 2017-18. But what is reassuring is the FM’s statement that more will be given if required. The abolishing of the Foreign Investment Promotion Board is a welcome move as it removes another hurdle in movement of inward FDI. This will boost the foreign investors’ confidence to invest in India.


The Budget has chalked a clear fiscal path for the years ahead and with the proposed changes in personal income tax at the lowest slab, the target of 3.2% of the GDP may be achieved if new reforms like GST kick in within the stipulated date.


There has been a thrust on quality of expenditure as is evident from geo-tagging of MGNREGA assets and using space technology to plan its works, in line with GoI’s emphasis of extracting maximum value from government expenditure. With the merger of the railway budget with the Union Budget, the Indian Railways has become central to the government’s policy on infrastructure investment, kicking off an investment cycle and generating second-order employment.


This viability of the Railways has been kept in mind as it has been stated that fares will be determined on the service provided as well as the cost of competing modes of transport. Accordingly, rural road, air connectivity to Tier-2 towns and shipping have also been touched on in this Budget. We hope that high-speed broadband connectivity on optical fibre will be available in more than 1,50,000 gram panchayats by 2018. Without this, the digital economy won’t flourish. Overall, the Budget has not changed the goalpost set in the previous one. It has added new targets.


But on careful examination, they all appear to be prudent and reasonable. Given the macroeconomic environment, at home and abroad, the Budget has achieved a delicate balancing act.


The author is Chairman of SBI



From E-Group, Banking-News



Budget 2017:

Govt pushes for digital economy

but no substantial tax breaks


Suchetana Ray and Sunny Sen

The Hindustan Times

Published on February 2, 2017



Mumbai, February 1:  The government announced a wide-arching plan on Wednesday to bolster cashless transactions and digital literacy among the rural and poor with a slew of measures but many were disappointed with no substantial tax breaks. Finance minister Arun Jaitley’s budget speech made repeated references to the importance of a digital economy for “speed, accountability and transparency”.


“A shift to digital payments has huge benefits for the common man… it has a transformative impact in terms of greater formalisation of the economy and mainstreaming of financial savings into the banking system,” Jaitley told Parliament. “India is now on the cusp of a massive digital revolution,” he added – this was one of the 27 times he mentioned the word “digital”.


The government has repeatedly pushed for digital transactions– especially after the junking of Rs 1000 and Rs 500 notes last November – and increase in digital literacy in far-flung areas. Keeping in line with the move, the finance minister stepped up the allocation of the BharatNet Project by Rs 10,000 crore in 2017-18, which will connect 150,000 gram panchayats with high-speed broadband.


The other thrust area of the budget was BHIM, the Aadhaar-based mobile wallet with 12.5 million downloads that Jaitley hopes would play a critical role in making India cashless. The finance minister announced two new schemes to promote BHIM – a referral bonus scheme for individuals and a cash-back scheme for merchants. He also proposed Aadhaar Pay, a payment system for merchants, especially for those who do not have debit cards, mobile wallets and mobile phones. He added that a mission would be set up with a target of 2,500 crore digital transactions for 2017-18.


Banks, too, will focus on expanding the cashless economy by adding one million new point-of-sale terminals by March 2017, and two million Aadhaar-based PoS by September 2017. These digital transaction machines also got an adequate tax boost from Jaitley.


To complete the digital cycle, Jaitley wanted to facilitate loan disbursement based on digital transaction history, and this is where the Small Industries Development Bank of India (SIDBI) would play an important role. “Government will encourage SIDBI to refinance credit institutions which provide unsecured loans at reasonable interest rates to borrowers based on their transaction history,” he said.


The government will review the Payments and Settlement Act and make amendments to institute a Payments Regulatory Board under The Reserve Bank of India, he said. The amendments are proposed in the Finance Bill 2017. Mobile wallet entrepreneurs say the move would go a long way in promoting the ambitions of non-banking payment firms, as the board is likely to have equal representation from banks and mobile-wallet companies.


A digital economy has been the stated ambition of the Modi-government, and expectations were running high in the digital ecosystem of tax sops for the digital ecosystem. But Jaitley left this sector wanting with little announcement of any relief. While small merchants expected tax breaks for adopting digital transactions, wallet companies sought government support at a time many of them are reeling under heavy losses.



From E-Group, Banking-News



Budget 2017:

FIPB to be abolished; further

easing in FDI policy planned


Amiti Sen

The Business Line

Published on February 2, 2017



New Delhi, February 1: The Foreign Investment Promotion Board (FIPB), which vets and approves foreign direct investment (FDI) proposals not cleared through the automatic route, will be abolished in 2017-18, Finance Minister Arun Jaitley has announced.


“A roadmap for the same (abolition of FIPB) will be announced in the next few months. In the meantime, further liberalisation of the FDI policy is under consideration and necessary announcements will be made in due course,” Jaitley said.


Ministries may step in


The Finance Minister, however, did not clarify the alternative mechanism for routing FDI proposals in case they did not qualify for automatic clearance. One option, he said, could be the designated Ministries and Departments handling the proposals.


“The concerned ministry dealing with it is one alternative,” Jaitley said. The government would carry out the proposal in the course of the year and all options would be looked at, he said.


There will also be further liberalisation of the FDI policy and necessary announcements will be made in due course, the Finance Minister said in his Budget speech.


“It will be interesting to see the approval mechanism the government will put in place for sectors/areas that currently continue to be under the approval route, such as retail trade, defence and in-kind (non-cash) FDI investments,” said Radhika Jain, Director, Grant Thornton Advisory Private Ltd.


Through two previous tranches of FDI liberalisation, the BJP-led government has already ensured that more than 90 per cent of total FDI inflows are now through the automatic route. The FIPB has also put in place e-filing and online processing of FDI applications. “We have now reached a stage where FIPB can be phased out,” said Jaitley. Finance Ministry officials clarified that existing FDI procedures for defence and sectors that entail national security will be subject to controls.


“The proposal to abolish FIPB is a bold move, expected to reduce M&A (mergers & acquisition) timelines, and create new investment opportunities for foreign investors,” said Mukesh Butani, Managing Partner, BMR Legal.


FDI increased from ₹1,07,000 crore in the first half of last year to ₹1,45,000 crore in the first half of 2016-17. This marks an increase of 36 per cent, despite a 5 per cent reduction in global FDI inflows, the FM said.


Some restrictions


The government allows 100 per cent FDI in most sectors. While FDI up to a certain limit, say 51 per cent or 74 per cent, is permitted through the automatic route in many sectors, for higher FDI it has to be routed through the FIPB. While India has liberalised FDI rules in most sectors, there are some where restrictions remain.


In the defence sector, while the government allows 100 per cent FDI, it is subject to conditions, such as the foreign investor providing access to modern technology.


The single-brand retail sector continues to be weighed down by the condition of compulsory domestic sourcing of 30 per cent of inputs, which could be relaxed for a few years if the investor qualifies as one manufacturing items with cutting-edge technology.


In multi-brand retail, while the policy allows 51 per cent FDI, the government has so far opposed entertaining any new application in the area. FDI is prohibited in lottery, gambling, atomic energy, and railway operations.



From E-Group, Banking-News



SBI Q3 results on Feb 10, 2017


The Business Line

Published on February 2, 2017



Mumbai, February 1:  State Bank of India has informed BSE that a meeting of the Central Board of the Bank will be held on February 10, 2017 to discuss and approve the working financial results of the Bank for the Quarter/Nine months ended December 31, 2016 (Q3).


Further, the Company advise, in terms of Regulation 30(6) read with item No. 15 of Part A of Schedule III of the Listing Regulations, an audio conference call by the Top Management of the Bank with Analysts/Investors across the globe is scheduled to be held from 7.00 pm to 8.30 pm on February 10, 2017.


In accordance with SEBI (Prohibition of Insider Trading) Regulations, 2015, and in terms of Bank’s Code of Conduct to regulate, monitor and report trading in the securities of the State Bank of India for prohibition of insider trading, the trading window for dealing in SBI’s Shares will be closed for designated persons from February 01, 2017 and will end 48 hours after the results are made public.



From E-Group, Banking-News



SBT posts Rs 68-crore loss in

 Q3 on mounting bad loans


The Press Trust of India

Published on February 1, 2017



Mumbai, February 1: SBI associate State Bank of Travancore (SBT) today reported a net loss of Rs 67.76 crore for third quarter ended December due to four-fold jump in bad loans. The bank had registered a net profit of Rs 91.47 crore in the year-ago period, it said in a BSE filing.


However, the third quarter figures show that bank's net loss narrowed as compared to net loss of Rs 587.69 crore in the second quarter ended September 2016.


As asset quality of the public sector bank slipped further during the quarter, the gross non-performing assets (NPAs) rose to 12.22 per cent in December quarter up from 3.87 per cent a year ago. Net NPA stood at 8.03 per cent against 2.46 per cent a year earlier.


In absolute value, gross NPAs were Rs 8,169.97 crore, against Rs 2,603.88 crore. Net NPAs rose to Rs 5,121.89 crore from Rs 1,628.07 crore a year earlier.


Thus, to cover bad loans, bank had to make provisions including contingencies of Rs 441.61 crore in the December quarter as compared to Rs 318.65 crore a year ago.


SBT said it has changed its policy of Income Recognition and Asset Classification (IRAC) in respect of certain common loans and advances within the SBI Group, that resulted in higher provisions for bad assets.


As per the policy, the bank had adopted the lowest IRAC status withing the group and made provisions accordingly. And the change is being made in view of the inherent weakness in these loans.


"This has resulted in classification of standard advances amounting to Rs 578.30 crore as NPA, additional provision on NPAs by Rs 889.92 crore, reduction in interest income by Rs 4.08 crore, classification of standard investment amounting to Rs 2.46 crore as NPA and thereby increase in provision for depreciation on investment by Rs 2.46 crore," it said.


On the merger of the bank with parent SBI, it said the respective boards of SBT and SBI passed resolution in May 2016 to enter into negotiations for acquiring business including assets and liabilities of SBT under Section 35 (1) of SBI Act, 1955.


"The scheme of acquisition of SBT by SBI has been approved by the Board of Directors on September 26, 2016," State Bank of Travancore said. State Bank of Travancore stock closed 3.96 per cent higher at Rs 561.85 apiece on BSE.


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