Financial Awareness-January(21-31) 2017

  1. Restructured education loans not to be treated as NPAs: RBI (Source: MINT)
  • In order to encourage banks to provide education loans, the Reserve Bank of India (RBI) has said rescheduling of payment period of such loans due to unemployment of borrower will not be treated as restructured accounts for computing NPAs.
  • Banks may allow up to three spells of moratorium (not exceeding 6 months each) during life cycle of education loan, taking into account spells of unemployment/underemployment, “without treating the exercise as restructuring”, RBI said.
  • However, banks would be required to maintain a higher provisioning of 5% during the additional moratorium period and one year thereafter.

2. Centre pushes for fingerprint money transactions through Aadhaar Pay (Source: BL)

  • Keen to push digital payments among the poor and illiterate in rural areas of the country, the government is pushing to popularise Aadhaar Pay which ensures financial transactions by just using fingerprint.
  • Aadhaar Pay, which is merchant version of the already in use Aadhaar-enabled payment system (AEPS), will become an alternative for all online and card transactions which require password and PIN.
  • The app facilitates merchants to take cashless payments from a customer who is only required to give his Aadhaar number, name of the bank (from where the money is to be deducted) and finger print for authentication.
  • At present five banks — Andhra Bank, IDFC Bank, IndusInd Bank, State Bank of India and Syndicate Bank — have gone live over Aadhaar Pay and several banks are in the process of launching pilots on the app.

3. PNB launches Contactless Credit Card (Source: BL)

  • In another digitalisation initiative, Punjab National Bank (PNB) has launched a Contactless Credit Card.
  • This new credit card, which has been named PNB Wave N Pay –Contactless Card, could be used by just waving it across the terminal and the transaction will be through. There is no need to enter any PIN for transactions up to Rs. 2,000.
  • This contactless credit card has been launched on Visa Platinum platform.

4. A double whammy for FPIs from April (Source: BL)

The government has finally brought in changes to ensure that foreign investors using double tax avoidance agreements (DTAAs) with Mauritius and Singapore do not get away without paying capital gains tax on their investments. There is, however, a 50 per cent concession on the tax rate from April 1, 2017 to March 31, 2019, if the investors are able to show that they have a substantial presence in these countries. Else, the full rate will apply. From 2019-20, these investors will be taxed at the full domestic capital gains tax rate. The second impact is through the General Anti Avoidance Rules (GAAR) that will be applicable on income earned in 2017-18, relating to tax assessment year 2018-19. While investments prior to March 31, 2017, are protected from GAAR, any tax benefit that arises from this April due to innovative tax arrangements can be scrutinised and questioned by the taxman.

5. Demonetisation has negative impact on jobs, SMEs, says Assocham survey (Source: MINT)

  • Demonetisation has negatively impacted job creation by hurting small and medium enterprises (SMEs) in the immediate run, an Assocham survey said.
  • However, the large and well-organised sectors of the Corporate India stand to benefit in the long run, Assocham’s Bizcon Survey said.
  • With regard to the sectoral impact of demonetisation, it said a majority of industry feels that agriculture, cement, fertiliser, automobile, textiles and retail will have “negative impact”. However, power, oil and gas, pharmaceuticals, IT and electronics and infrastructure will have a positive impact, they survey added.

6. Govt considering regulator for electronic payments (Source: BL)

  • With digital transactions gaining traction, the Government is mulling setting up of a separate regulator for enabling electronic payment system in the country as well as regulate transaction charges.
  • Ratan Watal committee on digital payments suggested that the Government makes regulation of payments independent from the function of central banking.
  • The Reserve Bank, in its representation before the Watal Committee, has stated that regulation of payments should be with the central bank because regulating money supply is an integral function of a central bank and includes maintaining the confidence in money as a means of exchange.
  • Explaining the need for a separate regulator, official sources said that electronic payment does not entail exchange of physical cash and it does not involve deposit taking or credit offtake or servicing of loans/deposits.

7. RBI to set up corporation for insolvency resolution in the financial sector (Source: MINT)

  • The central bank is working on setting up a financial sector resolution corporation, said N.S. Vishwanathan, deputy governor, Reserve Bank of India (RBI).
  • The deputy governor said that while non-financial sector companies had the Insolvency and Bankruptcy Code (IBC) to deal with resolution, the proposed corporation is likely to help protect financial sector companies.
  • In September 2016, a panel set up by the government had released a draft law on financial sector resolution. This draft had suggested setting up a corporation to manage resolution. And it had also said that once the Financial Resolution and Deposit Insurance Bill, 2016 was enacted, the Deposit Insurance and Credit Guarantee Corporation (DICGC) could be dissolved and all its functions passed on to the new corporation.

8. India Post gets payments bank licence to start services (Source: BL)

  • India Post Payments Bank, the Payments Bank floated by the postal department, has received the RBI’s final nod to commence commercial operations.
  • As a differentiated bank, it will confine its activities to acceptance of demand deposits, remittance services and other specified services. A payments bank can accept deposits up to Rs. 1 lakh per account from individuals.
  • The Centre has also appointed A.P.Singh, who was earlier Joint Secretary in the Department of Investment and Public Asset Management, as the interim managing director and CEO of IPPB.

9. Digital push: Insurance soon for your money in mobile wallets (Source: Bl)

  • The government is exploring options to insure money in mobile wallets similar to how banks offer insurance on savings accounts.
  • According to sources, the government is talking with the stakeholders, wallet players and insurance companies, to work on the rules.

10. RBI extends tenure of 4 types of bonds (Source: BS)

  • The Reserve Bank of India (RBI) has converted four types of securities totalling Rs 37,078 crore and maturing in 2017-18, to longer-tenure ones maturing in 2024-25 and 2029-30.
  • This takes off redemption pressure. About Rs 2.30 lakh crore of bonds are scheduled to mature in 2017-18 and the market was expecting the government to do some aggressive ‘switching’ of these bonds to longer-tenure debt paper.
  • The consensus estimate of the market is the government would redeem about Rs 1.75 lakh crore of bonds in the next financial year so that the gross borrowing programme can be kept in check.

11. HDFC Bank to deploy around 20 humanoids in 2 years (Source: BS)

  • HDFC Bank is planning to install up to 20 humanoids (Ira) at its branches in the two years to assist customers. Ira helps the welcome desk by giving directions to customers.
  • The bank is working on artificial intelligence and voice recognition technologies which, when coupled with connectivity with its core banking software, will open up new possibilities.

12. India Post kicks off payment bank with pilots in Ranchi, Raipur (Source: BL)

  • India Post Payments Bank (IPPB) on January 30th kicked off its operations by rolling out pilot services in Raipur and Ranchi.
  • It will offer an interest rate of 4.5 per cent on deposits up to Rs. 25,000; 5 per cent on deposits of Rs. 25,000-50,000 and 5.5 per cent on Rs. 50,000-1 lakh.

13. For UCO Bank, post-demonetisation cash inflows help offset drop in Iran oil payments (Source: BL)

  • The effect of demonetisation has been mixed and the jury is still out on whether there will be any short-term benefits. But one bank has certainly seen a windfall of sorts — demonetisation seems to have helped UCO Bank put the crisis, caused by the stoppage of oil payments for imports from Iran, behind it.
  • UCO Bank was the designated bank to route payments to Iran for imports by Indian oil companies at a time when there were global sanctions against that country. This facility provided the bank with a considerable float and enabled it to earn a good sum as interest.
  • At one time, the outstanding payment to be made was about Rs. 25,000 crore but this started drying up when sanctions were lifted and Iran was allowed to export oil through other countries and take payments from other banks. The drop in all oil payments for imports from Iran by India has affected Bank’s cost of funds. This has been partly offset by the cash inflow post demonetisation. However, funds under the Rupee Payment Mechanism are getting depleted and the entire amount will be liquidated by March 31.


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