State Bank slashes minimum balance to Rs. 3,000, spares minors, pensioners (BL, BS, FE, ET 26.09.17)
State Bank of India has exempted basic savings bank deposit accounts, small accounts, accounts held by minors and pensioners, and those held by recipients of social welfare benefits, among others, from maintaining a Monthly Average Balance. The Monthly Average Balance requirement (MAB) in metro centres has been reduced to Rs. 3,000 from Rs. 5,000 with effect from October 1. “For non-maintenance of MAB, the charges have also been revised downwards, ranging from 20-50% across all population groups and categories,” the bank said in a statement. Currently, the charges at semi-urban and rural centres range from Rs. 20 to Rs. 40 and at urban and metro centres from Rs. 30 to Rs. 50. After amalgamation with its five associate banks and Bharatiya Mahila Bank, SBI had revised the charges on account holders’ minimum balance (non-maintenance), ATM use and cash-handling, among others, with effect from April 1. This did not go down well with customers. In its statement, SBI underscored that financial inclusion accounts, including Jan Dhan Accounts, have never been subject to any charges. The bank said it has 42 Cr savings bank accounts, out of which 13 Cr accounts under the Pradhan Mantri Jan Dhan Yojana / Basic Savings Bank Deposit were already exempted. The revision in MAB is likely to benefit another 5 Cr account holders.
SBI opens new branch in Singapore (BL 26.09.17)
SBI opened its sixth branch in Singapore, extending its services in the country’s heartland. The new branch has come up in Ang Mo Kio area, which is popular for its housing estates. SBI already operates branches in housing estates Marine Parade and the industrial estate of Jurong. It has two branches in Little India precinct as well as one in the central business district. “About 80% of our customers are Chinese and the rest are high networth Indians,” said SBI country-head Soma Sankara Prasad after opening the Ang Mo Kio branch to a roaring lion dance, a Chinese tradition. SBI offers the highest interest rates on deposits among other banks here, handles wealth management, insurance and rupee remittances among a wide range of services, he said. The new branch underlines SBI’s growing banking business in Singapore, he said.
YES Bank set to achieve low-cost deposit target of 40% this fiscal (BL 26.09.17)
Encouraged by healthy growth in deposits and advances in the retail segment, YES Bank has brought forward the target for achieving increase in the proportion of this segment in its overall business. As against the earlier target of achieving 40% CASA (current account, savings account) deposit in overall deposits by 2020, the private sector bank now expects to achieve the same within this financial year. As at June-end 2017, CASA stood at 36.8%. The bank also expects the proportion of CASA plus retail fixed deposits in total deposits to increase to about 75% from the current 62% well before the 2020 target, said Pralay Mondal, Senior Group President, after launching the bank’s private credit card for ultrahigh networth individuals (UHNIs). On the advances front, the bank intends increasing the proportion of retail advances in overall advances to 40% from 32% now. Mondal said the bank is witnessing good traction in retail loans. YES Bank’s ‘by invitation’ credit card for UHNIs has been launched on the MasterCard World Elite platform. This card, which has a membership fee of ₹50,000 and a renewal fee of ₹10,000, will be issued to a select 2,500 customers.
Karnataka Bank to hire consultant for transformation initiative (BL 26.09.17)
The board of Karnataka Bank has accorded in-principle approval for implementing transformation initiatives by engaging a consultant. The bank informed this to the stock exchanges after its board meeting on September 24. In a separate filing to the stock exchanges on September 20, the bank had stated: “As we step into the 94th year and also as the centenary year (2024) is fast approaching, the bank continues to explore transformation possibilities in all spheres of banking having regard to the changing landscape of the banking sector in the country.” With a view to explore various transformation opportunities, including engaging consultants/advisors, the bank had convened a meeting of the board of directors on September 24. Mahabaleshwara MS, MD and CEO of the bank said that the bank has identified a number of intervention areas for transformation. These include in the areas of growth strategies, HR and digitisation.
KVGB to have Aadhaar-enrolment centres in 10% of branches by Oct 10 (BL 26.09.17)
Karnataka Vikas Grameena Bank (KVGB), which has jurisdiction over nine districts in Karnataka, is targeting to open Aadhaar-enrolment centres in at least 10% of its branches by October 10. Inaugurating the first such centre at its branch in Dharwad on Saturday, S Ravindran, Chairman, KVGB, said it is the first bank to provide this service in northern Karnataka and the first regional rural bank to provide this service in the State. The bank has plans to open such centres in 62 more branches across its service areas by October 10. The bank has 622 branches in Dharwad, Gadag, Haveri, Bagalkot, Vijayapura, Belagavi, Uttara Kannada, Udupi and Dakshina Kannada districts of Karnataka. Customers will have to bring any of the documents approved by the Unique Identification Authority of India (UIDAI) as proof of their residence and identity. “The enrolment process can be completed in about 10-15 minutes,” he said. The Centre has made Aadhaar mandatory for opening new accounts. Existing accounts should be linked to Aadhaar by December 31, he added.
Suryoday Small Finance Bank begins to pare FD rates (BL 26.09.17)
After keeping fixed deposit interest rates relatively high since commencing its operations in January 2017, Suryoday Small Finance Bank has embarked on a path to gradually align them with the rates being offered by mainline banks. Suryoday SFB has cut interest rates on fixed deposits (FDs) in select maturity buckets by 25-75 basis points (bps) with effect from September 21. One basis point equals one-hundredth of a percentage point. The bank has pared the FD rate in its ‘sweet spot’ tenure of one to two years by 50 basis points to 8.50% from 9%, said MD and CEO R Baskar Babu. “We will cut it (interest rate) again after a month by 25 bps. We are getting enough deposits. People are coming and asking why are you paying so much (9% interest rate) when other banks are cutting their FD rates. This is creating discomfort. “So, we are saying, okay if you (customer) are comfortable, we will keep trimming the interest rate by 25 basis points, bring it down probably to 8% and stay there,” explained Babu. Among all the maturity buckets, the bank is paying the highest interest rate of 8.75% in the over two years to three years maturity bucket. It has left the interest rate in this maturity bucket unchanged to attract relatively longer term liabilities. The small finance bank, which is headquartered in Navi Mumbai (the twin city of Mumbai), has kept its savings bank (SB) deposit rate unchanged. The SB rates are 6.25% on deposits up to and including Rs. 1 lakh; 7.25% for above Rs. 1 lakh and including Rs. 10 lakh; and 7% for above Rs. 10 lakh. Suryoday SFB has pegged its SB and FD (in the above one-year maturity bucket) rates higher to attract retail deposits after it got converted from a microfinance institution (MFI) into a bank. Even after the rate cut, the bank is paying about 100-250 bps more on FDs of above one-year tenure compared with what mainline banks are paying. Since March-end 2017, Suryoday SFB has grown its deposits 10-fold to about Rs. 250 Cr as on date. The bank currently has 16 branches.
SBI launches chatbot to help customers in banking activities (BS, FE 26.09.17)
Artificial intelligence banking platform Payjo said it has launched an AI-powered chat assistant for State Bank of India to addresses customer enquiries. The chat assistant, known as SBI Intelligent Assistant, or SIA, will help customers with everyday banking tasks just like a bank representative, the company said in a statement. "SIA is a revolution in the banking industry. It is set to disrupt the way banks and customers interact," Payjo founder and CEO Srinivas Njay said. SIA has been set up to handle nearly 10,000 enquiries per second, or 864 million in a day, which is nearly 25% of the queries processed by Google every day. "SIA will enhance customer service several notches above. Payjo's expertise in the conversational banking domain helped us build SIA as a superior chatbot in the global banking space. "We look forward to taking SIA and simplifying the customer's lives on multiple customer interaction platforms in partnership with Payjo," SBI chief technology officer Shiv Kumar Bhasin said. With SIA, the bank will reduce significant operational expenditure over time. Currently, SIA can address enquiries on banking products and services. It is trained with a large set of knowledge and is adept at answering frequently asked questions as well.
1,000 bank branches open Aadhaar updation centres as Sept 30 deadline nears (BS 26.09.17)
The UIDAI has said over 1,000 bank branches of 42 private and public sector banks have opened Aadhaar enrolment and updation centres within their premises. The Aadhaar issuing body further said it has received commitments for opening of such centres in 15,000 bank branches "at the earliest". "Bank Aadhaar Kendras are being established with a view to make the Aadhaar verification process of bank accounts convenient for the people as it has become mandatory under amended Prevention of Money Laundering Rules to verify bank accounts with Aadhaar by December 31, 2017," Ajay Bhushan Pandey, CEO of UIDAI said in a statement. In July, the Unique Identification Authority of India (UIDAI) had asked private as well as public banks to open Aadhaar enrolment and updation facilities in one out of 10 branches, and the initial deadline for doing so was August- end. Earlier this month, the UIDAI gave banks one more month to open Aadhaar enrolment centres in a stipulated 10% of branches, but said it will impose Rs 20,000 as fine per uncovered branch after September 30. The reprieve was granted as many banks had sought additional time from UIDAI for setting up such facility on their premises. "The enrolment and updation facilities are now being made available within the premises of branches of all scheduled and commercial Banks as...UIDAI has directed them to open these Bank Aadhaar Kendras by September 30, 2017 for the convenience of the people," said the UIDAI statement.
Post-demonetisation digital payments up, debit card use declines: Report (BS 26.09.17)
Investment banking firm Jefferies said there is growth in digital payment mode by bank customers post-demonetisation whereas there has been a decline in usage of debit cards. In a report, Jefferies also said the RuPay adoption for e-commerce has increased while the growth of credit cards has been secular. The National Electronic Funds Transfer (NEFT) volumes have grown upwards of 30% with a further around 10% improvement in per-transaction size, resulting in around 40% growth by value, it said. Similarly, the Immediate Payment Service (IMPS) is showing stellar growth on a smaller base. "While growth has come off the low base, it still continues to grow at 100% plus. Instant payment, with ease of choosing the receiver and its 24x7 availability, makes it a very useful and attractive payment system," Jefferies said. According to the report, the usage of debit card has been weak and the total debit card transactions have seen a modest decline -- both in terms of value and volume. "Card swipes are growing at sub-10% with no change in ticket size resulting in sub-10% growth in transaction value after a sudden spike during demonetisation." "It would, therefore, seem logical that a remonetised banking system has started seeing more cash-based transactions and the debit card is losing out," Jefferies said. On the other hand, the Unified Payment Interface (UPI) has seen a reasonable pick up with the government promoter BHIM mobile app (payment app) continuing to show a healthy growth in volumes. RuPay adoption for e-commerce is fairly encouraging, according to Jefferies. "Total monthly spends have nearly tripled since demonetisation for transactions over POS (point of sale) while e-commerce spends have more than doubled. Considering RuPay cards were mostly provided during the financial inclusion drive, such trends are very encouraging."
Collection efficiency in MFIs, SFBs rises to 93%: Icra (FE 26.09.17)
The collection efficiency in the microfinance sector, which includes microfinance institutions and small finance banks (SFBs), has increased to 93% in July 2017 from a low of 87% in December 2016, credit ratings agency Icra said. The improvement has been seen across the affected districts except the Vidarbha region of Maharashtra, and fresh slippage of loans into delinquency has been arrested, Icra said. Entities with concentrated operations in certain districts of western Uttar Pradesh, parts of Madhya Pradesh, the Vidarbha region of Maharashtra and North Karnataka faced a sharper dip in asset quality following demonetisation, it said. Based on the recovery trends, it is expected that 70-75% of the portfolio delinquent for more than 90 days will be written off. The credit costs for the industry is likely to be in the range of 5.5-8% for FY18, Icra said. The extent of impact will differ among MFIs on the basis of share of their portfolio in impacted geographies, their client engagement, field discipline, collection frequency, IT systems and appraisal mechanisms, and pro-activeness in curtailing operations in overheated areas.
NIBM to train bankers to deal with NPAs, prompt corrective action (FE 26.09.17)
The National Institute of Bank Management plans to conduct workshops on the new ecosystem created by the government for resolving ballooning NPAs. NIBM is also going to conduct programmes to help banks under the prompt corrective action (PCA) of the RBI to come out of the PCA and improve their financials, KL Dhingra, director, NIBM, said. “RBI has put six public sector banks under Prompt Correction Action, which indicates that these banks need to focus on their financials and asset quality. This also puts certain restrictions on these banks. NIBM proposes to conduct specialised courses for the officers of these banks for enabling them to steer their banks out of the PCA, as early as possible,” Dhingra said. The increasing level of NPAs in the banking sector, more particularly of the public sector banks, is a cause of concern for the Centre and it has come up with the Insolvency and Bankruptcy Code 2016 and created the new “ecosystem for resolving the issue of ballooning NPAs”, he said. The ecosystem comprises the Insolvency and Bankruptcy Board of India, National Company Law Tribunal and the National Company Law Appellate Tribunal, and bankers need to be trained to work in the new systems. According to Dhingra, the total number of participants attending NIBM training programmes had gone up by 93% during the last three years.
BBB Gets Ready to Groom Execs for Top Deck (ET 26.09.17)
The Banks Board Bureau (BBB), headed by former Comptroller & Auditor General Vinod Rai, has asked all state-run banks to identify senior-level bank executives, who can be groomed across functions to prepare a pipeline of leaders to take over as managing directors and chief executives in future. The move is a part of the government's efforts to overhaul human resource practices in public sector banks. “We have been asked to identify officers at deputy general manager level, who will be mentored by the BBB. Such identified officers will move across all verticals such as IT, HR and operations within the bank for a period of one year,“ said a government official aware of the developments. A senior bank executive, who is privy to this information, said the BBB was not satisfied with the current level of expertise among the top executives in PSBs. “The shortlisted candidates for the top post or at executive director level did not have enough experience across all verticals. It was felt that banks themselves should identify performing candidates and accordingly they will be mentored by the BBB,“ this official added. Earlier this year, the government shifted Usha Ananthasubramanian, then the MD of Punjab National Bank, to the smaller Kolkata-based Allahabad Bank. Similarly, Melwyn Rego, then the MD of Bank of India, was transferred to Syndicate Bank. A halt on the selection of chiefs for state-run banks is also likely.
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Govt’s 1st estimate sees kharif food output dropping 2.8% to 134.67 mt (BL 26.09.17)
Floods and erratic rainfall in different parts of the country may bring down the 2017 kharif foodgrain output to 134.67 million tonnes (mt) from a record harvest of 138.52 mt during the previous kharif season. Rice output was estimated to fall to 94.48 mt, down 1.9 mt from 96.39 mt in the last kharif season, according to the first advance estimates for the year released by the Agriculture Ministry. The drop in output was seen across all major rain-fed crops barring sugarcane, which registered a nearly 10% increase in cropping area and a corresponding increase in output: 337.7 mt against 306.72 mt in kharif 2016. Experts believe that the first estimates are a poor indicator of the eventual outcome. Abhijit Sen, agricultural economist and former chairman of the Commission for Agricultural Costs and Prices, however, said: “But if it holds, it may have an impact on farm incomes, which will be lower because of lower output. This would mean that the demand for other goods in rural areas will not recover the way the government was hoping it would. In other words, despite having two good monsoon in a row, private consumption expenditure will not go up and thus may have an impact on the overall economy.” However, Agriculture Ministry officials remain hopeful. “The numbers are robust. We are on track. Early estimates are always on the lower side. But considering that there was 5% less rains than the long-period average this time, the overall situation is good,” said a senior official.
Pressure mounts on the rupee (BL 26.09.17)
The rupee, which was stuck in a narrow range between 63.85 and 64.33 over the last several weeks, fell sharply and broke below 64.33 against the dollar last week. The currency fell to 65.16, its lowest since April. Though it managed to claw back from this low to a high of 64.73, the rupee lost momentum again and reversed lower to close at 65.12 on Monday, down 1.5% for the week. A combination of both global and domestic factors triggered this sharp fall in the rupee last week. The outcome of the US Federal Reserve meet on Wednesday was the first trigger that impacted the rupee. The Fed, in the meeting, confirmed its intent to begin its balance sheet normalisation in October. It also raised the growth forecast for this year to 2.4% from 2.2% projected earlier. The dollar index surged as a result of this projection from around 91.5 to 92.7. Though it has come off from this high, it is managing to sustain above 94. Key resistance is at 92.80. A strong break above it can take the index higher to 93.35 initially. Further break above 93.35 will see the rally extending to 94.20. But inability to break above 92.80 can drag the index lower and keep it range-bound between 91 and 92.80. The dollar index will come under renewed pressure if it declines below 91. In such a scenario, it can fall to 90.3. The news that the Centre is planning a stimulus package piled further pressure on the rupee. The fiscal deficit can widen on the back of the stimulus, thereby, weighing on the currency.
Govt. may turn down FRBM panel's proposal on fiscal council (BS 26.09.17)
The government is likely to dump a proposal for setting up a fiscal council, which is aimed at monitoring the government’s fiscal announcements for any given year and providing its forecasts and analysis for the same. Additionally, any new Bill to institutionalise a future fiscal road map, or an amendment to the existing Fiscal Responsibility and Budget Management (FRBM) Bill, may happen in the next Budget session of Parliament, Business Standard has learnt. The fiscal council was suggested by the FRBM panel as part of its recommendations for a medium-term fiscal road map till FY23. The panel was headed by former Member of Parliament and revenue and expenditure secretary N K Singh, and included former finance secretary Sumit Bose, RBI Governor Urjit Patel, Chief Economic Advisor Arvind Subramanian, and Rathin Roy, director of the National Institute of Public Finance and Policy, as members. It has recommended a fiscal deficit target of 2.5% of gross domestic product (GDP), revenue deficit of 0.8% and a combined Centre-state debt ceiling of 60% for 2022-23 — the end point of its six-year medium-term fiscal road map. These recommendations are part of the draft Debt Management and Fiscal Responsibility Bill. The government is examining these recommendations.
3,000 State schemes to be brought under DBT ambit (BL 26.09.17)
In a significant expansion of the direct benefit transfer scheme, the Centre is working to expand it to include all State government schemes as well. “All States are on board and working with us. State government schemes should come within the ambit of DBT over the next few months,” said a senior official. An estimated 3,000 schemes of State governments will then come under DBT, covering 40,000 beneficiaries and Rs. 3-lakh Cr of funds. Payments for all government benefits, whether at the State, Central or even local level, would then be done by cash transfers directly deposited into the beneficiaries’ bank accounts. In fact, government officials say that with the inclusion of State schemes, an estimated Rs. 6-lakh Cr of government benefits would be paid through DBT. At present, over 370 schemes of 55 Central ministries are part of the DBT platform, with over 76.38 Cr beneficiaries. Payments of over Rs. 39,623 Cr for Central and Centrally-Sponsored Schemes have been done through cash transfers in the current fiscal, while a cumulative Rs. 2.22-lakh Cr have been transferred through DBT. States have already been working with the Centre to set up DBT cells in their own regions. “With most Central and CSS schemes already on DBT, on-boarding State schemes is the next logical step,” said the official.
RBI caps banks exposure to Reits, InvIts at 10% of unit capital (BS, FE 26.09.17)
The Reserve Bank amended the statutes making it possible for lenders to invest in Reits and InvIts capping such exposures to 10% of the unit capital of such instruments, and also to regulate their commodity derivatives play. In amendments to the Master Direction- Reserve Bank of India (Financial Services provided by banks) Directions, 2016, the central bank said banks should not invest more than 10% of the unit capital of a real estate investment trust (Reit) or an infrastructure investment trust (InvIt) subject to overall ceiling of 20% of its net worth. The master directions first issued in May last year did not provide for investments in the Reits and InvIts, both newly introduced instruments. The RBI also prohibited banks from becoming a professional clearing member of commodity derivatives segment of Sebi-recognised exchanges unless it satisfies certain prudential criteria. These include bank satisfying membership criteria of the exchanges and complying with the regulatory norms laid down by Sebi and the respective stock exchanges and putting in place board-approved risk control measures, among others.
Modi promises to light up all homes by December 2018 with Rs 16000-cr scheme (BS 26.09.17)
Setting the bar for higher government spending in the infrastructure sector, Prime Minister Narendra Modi unveiled a flagship programme called “Saubhagya — Pradhan Mantri Sahaj Bijli Har Ghar Yojana” to provide power to all households in the country by December 2018. The Rs 16,320-Cr scheme aims at providing “last-mile electricity connectivity to all rural and urban households”. The announcement, made at the headquarters of Oil and Natural Gas Corporation, would reinforce the ruling party’s electricity-for-all target, recently advanced from 2019 to 2018. “Of the 250 million houses that India has, more than 40 million of the houses are electrified. Through Saubhagya, without taking money from the poor, electricity will be provided to these (remaining) families. For this, we expect an expenditure of more than Rs 16,000 Cr,” Modi said. The Union government will provide 60% of the funds, amounting to Rs 12,320 Cr. For special category states, the Centre’s contribution will be 85%. State governments and their utilities will provide 10% funds (in the case of special category states, the share will be 5%). Loans will account for the remaining component.
Modi revives Economic Advisory Council with Bibek Debroy as chief (BL, BS 26.09.17)
NITI Aayog member Bibek Debroy will be to Prime Minister Narendra Modi what C Rangarajan was to former prime minister Manmohan Singh. While the country waited for steps to boost economic growth, the government on Monday announced setting up an Economic Advisory Council to the Prime Minister (EAC-PM), headed by Debroy. Also, even as the BJP’s national executive meeting was silent on any stimulus package, the PM announced a Rs 16,320-Cr electrification plan for all households by end-2018 at another event. The EAC to the PM is making a comeback after over three years, though with a tweak in the name. In its earlier avatar, it was known as the PM’s Economic Advisory Council, or PMEAC. The Modi government decided to set up the panel to propel the economy, as various parameters are showing signs of weakness amid a resource crunch. The council will analyse any issue, economic or otherwise, referred to it by the PM, according to its terms of reference. The body, which is an independent council, can also take up the issues suo motu. It will also address issues of macro-economic importance and present its views to the PM.
Centre’s spending slows down after brisk start even as it talks of stimulus (FE 26.09.17)
Even as the Centre is looking for options to prop up demand in the economy, partly by stepping up productive spending, its capital expenditure has slowed down in the April-August period, compared to the scorching pace in the first quarter. Budgetary capex stood at 1.13 lakh Cr or 36.56% of the full-year target of Rs 3.09 lakh Cr in the first five months of 2017-18; in the corresponding period last year, it stood at 36.97% of that year’s target. With early passage of the Budget and front-loading of spending, capex in April-June this year was 22.1% of the Budget target while it was 19.9% of the corresponding target in the year-ago period. Since then, spending has inevitably slowed, given the budgeted fiscal deficit target of 3.2% of the gross domestic product (GDP) for 2017-18. In April-August this year, the fiscal deficit stood at Rs 5.24 lakh Cr, or 95.97% of the full-year target; in the year-ago period, the deficit had barely touched 74% of the annual target. India’s economic growth plunged to a 13-quarter low of 5.7% in April-June as the demonetisation-hit manufacturing sector received another blow from pre-goods and services tax (GST) de-stocking by jittery businesses. The scope for a fiscal stimulus by the Centre is limited. Non-tax revenues not keeping pace with budgetary expectations with shortfalls likely in spectrum proceeds and the Rs 27,000-Cr reduction in the Reserve Bank of India’s (RBI) dividend. Though farm loan waivers could potentially boost rural consumption, these will have an immediate negative impact on states’ capex, as many of their fiscal position is constrained. A stimulus will, thus, have to come by reallocating resources — a shift from revenue to capital spending — as well as PSU capex, which did well last year too.
Commercial risk policy set to become simpler, more transparent (BL 26.09.17)
Commercial risk cover will be more broad-based and simpler soon, thanks to the proposed changes in the policy wordings. The General Insurance Council, a representative body of general insurers, health insurers and re-insurers in the country, has recommended changes in the standard fire and special perils insurance policy for commercial risks. The Insurance Development and Regulatory Authority of India (IRDAI) had in February 2016 asked the council to develop industry standard product wordings to be adopted by the insurers for commercial risks. On the basis of a series of discussions held with its member insurers, the council has now come up with recommendations. “Keeping protection of policyholders’ interests in focus, the expert group has recommended certain modifications/ amendments to the extant policy wordings to bring in more clarity in wordings and for removal of ambiguities and to reduce litigation,” R Chandrasekaran, Secretary General, General Insurance Council, said in a communication to stakeholders. For example, it had recommended the complete list of perils covered in standard fire and special perils (material damage) policy. The 12 perils, including fire, lightning, explosion/implosion, aircraft damage, riot, strike, and malicious damage, missile testing operations and bush fire, with their definition and exclusion have been mentioned. The objective is “to bring clarity with respect to the list of named perils covered in the policy,” the council mentioned in the synopsis of the proposed changes.
Chit funds choked by GST levy (BL 26.09.17)
Goods and Services Tax (GST) on chit funds has crushed this traditional financial instrument, its defenders say. The levy of GST has rendered the chit model cost inefficient and neither the subscribers nor the chit promoters can afford the tax burden, said TS Sivaramakrishnan, General Secretary, All India Association of Chit Funds (AIACF). By bringing chit funds under the ambit of GST, it depicts the step-motherly treatment meted out to the industry that has been singled out for taxing while other NBFCs enjoys 90-100% abatement, he said. Sivaramakrishnan further said: “The chit industry has been pleading to increase the abatement from 30% to 90 or 100%, to make it at par with other NBFCs. The implementation of GST has further dented our prospects as we now end up paying more than the service tax levy. “To explain, we were being charged at an effective rate of 10.5% (15% less abatement of 30%) in the service tax regime but in the GST it has been increased to 12%,” he added. The recent trends in the industry have led to concerns about limiting the reach of chit funds to poorer households. According to Sivaramakrishnan, “Chit fund regulations have significantly increased the transaction costs for chits, and since most of the costs have to be incurred for each additional member, the regulations could push funds away from serving the poor. “As funds can only justify the transaction costs per capita if the individual ticket size is relatively large, this possibility cannot be ruled out.” The functionality of the chit funds is akin to that of banks and NBFCs, which mobilise savings from account-holders and lend them to borrowers.
Vikram Akula back into microfinance biz through Vaya Finserv (BS 26.09.17)
Hyderabad-based Vaya Finserv is set to launch microfinance operations, also marking the comeback of Vikram Akula into the sector he’d substantially influenced not long before. Debuting as a banking correspondent (BC) in 2015, Vaya is opening its first set of 15 microfinance branches this week in Bihar, a state where it sees a big need for such loans. Akula is co-founder and chairman of Vaya. The entity currently operates 50 BC branches in five states and managed Rs 436 Cr of a combined micro loan portfolio for YES Bank, RBL Bank and Reliance Capital. It recently got a non-bank finance corporation microfinance licence from the RBI. In 2012, Akula quit as chairman of Bharat Financial Inclusion (formerly SKS Microfinance), which he’d founded and led to a successful initial public offering (IPO) of equity in 2010. It was a result of differences triggered by the Andhra Pradesh microfinance crisis.
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Markets fall 2.4% in five sessions (BS 26.09.17)
Concerns of economic slowdown continued to weigh on Indian equities, as the benchmark indices closed in losses for a fifth session in a row on Monday. While the benchmark Sensex lost 295 points or 0.93% to close at 31,626, the National Stock Exchange’s Nifty closed at 9,872, 92 points or 0.92% lower. This takes the total fall in the past five sessions to 2.4%. The current phase of market correction has been triggered by weak cues both on the domestic and global fronts. The Street fears that a possible stimulus plan by the government could disturb the fiscal situation. Further, it could also lead to a significant divergence from the fiscal deficit target for the financial year. In the current scenario, a full-fledged stimulus might not be feasible for the government and, hence, it could lead to increased spending in select pockets. Market experts expect the volatility in the markets to continue for the near to medium term. Numerous analysts have been predicting a timely correction in the markets since August, as the gush of liquidity has led to a sharp rise in valuations. This happened even as corporate earnings remained largely stagnant. The fall was sharper in the broader markets with the BSE SmallCap index losing more than two% during the session, and the BSE MidCap fell 1.14%. The overall breadth of the market also remained negative with shares of 2,020 BSE-listed companies posting declines against 541 posting advances. According to G Chokkalingam, founder and MD, Equinomics Research and Advisory, valuations look expensive in several pockets of the market, especially in the mid- and small-cap stocks. “Industrial growth has stagnated over the years and so have corporate earnings. However, mid and small-cap stocks have rallied even in such a backdrop. Hence, a correction in these segments looks imminent,” he added.
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