People will shift from bank deposits to other instruments: FM Arun Jaitley

Finance Minister Arun Jaitley on Friday said the convention that banks deposits were safe investment avenues would be a thing of past and people would shift to alternative instruments which have the potential to provide better returns.

"It (bank deposit) is certainly safe, but then the whole concept of economic system that banking system pay high rate of interest for those deposits were no longer relevant. And world over people have successfully experimented it.

"The conventional deposit rate, the lending rate are very low but you have very powerful alternative instruments in which if you invest you will earn a lot higher. That is how the pension funds and sovereign funds are surviving and doing extremely well," he said while launching the State Bank of India 's wealth management initiative SBI Exclusif.

The Bank, he said, can play a role in helping large section of retired persons who were trying to live a respectable life on the strength of their savings.

"In India now as that opportunity expands, as a number of people with additional resources increases, you need a set of competent managers to manage the resources," Jaitley said.

SBI Exclusif is targeted at the fast-growing affluent segment in the country for wealth management which will come initially free of cost.

Under the scheme, SBI Exclusif customers will have access to a dedicated Relationship Manager supported by a team of investment experts to take care of all their banking and investment needs.

The bank had launched the offering in Bengaluru on a pilot basis on January and it rolled out this service in Delhi today for customers who earn a monthly income of Rs 2 lakh per month or fixed deposits of Rs 30 lakh or Rs one crore housing loan.

Very Alerming ICICI Banks net profit fell to Rs 2,232 crore in June Quarter

ICICI Banks net profit fell to Rs 2,232 crore in June Quarter.

ICICI Bank Ltd, India's top private sector lender by assets, said quarterly profit fell 25 per cent as its bad loans ticked up, although the decline was smaller than expected.

Net profit fell to Rs 2,232 crore ($333.26 million) for its fiscal first quarter to June 30, from Rs 2,976 crore a year earlier, the Mumbai-based bank said in a statement on today.

Analysts on average had expected the lender, which is also listed in New York, to report a net profit of Rs 2,199 crore, according to data compiled by Thomson Reuters.

Gross bad loans as a percentage of total loans were 5.87 per cent in the June quarter, compared with 5.82 per cent in the previous three months.

PSB capital injection is akin to throwing money down the drain must read

Our country as a whole does not have capital. If a government has fiscal deficit, this means it doesn't have money. You are actually borrowing to put money in risk capital (equity of banks)."

 

This is how a former Reserve Bank of India (RBI) deputy governor responded to the recent government decision to inject Rs 22,915 crore into public sector banks or PSBs. This is nothing new. The government has been funding PSBs year after year (see The Annual Event). It has, over the past six years, given these banks close to Rs 90,000 crore, equal to the entire allocation for the rural sector in Union Budget 2016/17. "It's the worst type of funding," he says.

What he did not say is that given the poor performance of PSBs over the years - reasons include rising non-performing assets, or NPAs, because of high exposure to troubled sectors such as steel, power and infrastructure, besides sluggish credit demand - the capital allocated is grossly insufficient. It is, for instance, nowhere close to the Rs 1,42,730 crore gross NPAs that PSBs had to write off between 2011 and 2015. Also, future growth needs when the economy picks up and Basel-III norms mandating higher capital mean that PSBs require many times more than what the government is willing to pump in (Rs 70,000 crore by March 2019).

What is worse is that such capital injection is akin to throwing money down the drain as PSBs, which account for two-third of India's banking system, have been performing poorly for years. "No amount of capital will be sufficient if PSBs don't show tangible improvement in operational performance," says the former deputy governor.

Reasons For Recap

PSBs are under so much stress that they have reduced lending to prevent further capital erosion. This is keeping cost of funds high for companies and hitting the recovery in corporate earnings in spite of the RBI reducing benchmark rates several times in the past couple of years. The outgoing RBI Governor, Raghuram Rajan, hit the nail on the head when he recently said the slowdown in credit growth was largely due to stress in PSB balance sheets and not high interest rates. Banking sector credit growth has fallen from 20 per cent-plus to less than 10 per cent over the past few years.

So, why give PSBs capital when credit growth is sluggish? There are several reasons for this. One, they need money to clean up their balance sheets, necessary for pick-up in credit growth that is a must if India's economy is to pick up. Over the past four-five years, their capital adequacy ratio, or CAR, has fallen from 13.1 per cent to 11.6 per cent (the minimum level is 9 per cent). The reasons are rise in provisioning for NPAs, poor internal capital generation due to lower profitability, and low stock market valuations. State Bank of India (SBI) Chairperson Arundhati Bhattacharya has admitted that a part of the new capital - it has got Rs 7,575 crore, the highest among PSBs - will go into cleaning up the balance sheet.

Another reason is the RBI's asset quality review, or AQR, three months ago, in which a large chunk of restructured loans was re-classified as NPA. The AQR pushed up bank NPAs from 5.1 per cent of gross advances in September last year to 7.6 per cent in March this year. Higher NPAs mean higher provisioning (setting aside of funds) from profits which, along with low credit offtake, is pulling down profits of banks. This has dried up internal capital generation through profits. After the AQR phase, for which the deadline is March next year, PSB balance sheets will be much more cleaner, giving them space to start lending afresh. They could also get extra capital if restructured assets classified as NPAs and written off turn around and start repaying. This, of course, is a big if.

Kalpesh Mehta, Partner, Financial Services, Deloitte, says there could be some relief as banks are also converting loans into equity under the special debt restructuring scheme and the newly-introduced facility for converting unsustainable debt into equity or preference shares.

"The provisioning requirement is expected to come down gradually after March next year. Hopefully, PSBs will generate more cash accruals. This will also help (in higher valuation) as the market will take this into account while pricing the stock," says P.K. Gupta, Managing Director, SBI.

Future Growth

Given the level of stress in PSB balance sheets, low profits and near absence of options to raise money from the market, the amount the government has given is not sufficient for future growth. "The prospects of higher credit growth after the AQR and Basel-III norms (for minimum capital) mean these banks will require more capital," says Mehta of Deloitte. Already, retail loans, especially mortgages and unsecured loans, are showing good growth. Credit demand from SMEs is not bad either. The corporate sector, after some de-leveraging, is also coming to banks for working capital and other requirements. Exports, too, have stabilised after shrinking for nearly two years. The need for capital in such an environment cannot be overstated.

P. K. Gupta, Managing Director, State Bank of India

"The provisioning requirement is expected to come down gradually after March next year. Hopefully, PSBs will generate more cash"

ICRA has estimated that PSBs will require Rs 40,000-50,000 crore Tier-I capital this year. The Rs 23,900 crore, though provided at the beginning of the year, plus the Rs 1,100 crore that will come later, will not be sufficient. The NDA government has promised to provide Rs 70,000 crore by March 2019. The remaining money will come in 2017/18 and 2018/19. According to estimates, PSBs will need Rs 4,40,120 by March 2019 - Rs 2,39,720 crore Tier-1 capital, Rs 1,55,900 crore additional Tier-1 capital and Rs 64,500 crore Tier-II capital. The government, being their majority owner, will have to invest a big chunk of Tier-1 capital. For others, the banks can tap retail and institutional investors.

Kalpesh Mehta, Partner, Financial Services, Deloitte

"While nobody is talking of complete privatisation, there are options such as dilution of government stake and consolidation"

But what if banks fail to raise money from the market? In such a case, LIC can be a standby option. Banks are already finding ways to raise capital by selling non-core assets. The RBI has also allowed banks to revalue their real estate, a lot of which is at prime locations, to boost capital.

The government has mooted the idea of the RBI capitalising PSBs out of surplus funds. Rajan is not in favour of such a step. ?This seems a non-transparent way of proceeding, getting the bank regulator once again into the business of owning banks, with attendant conflict of interest," he said recently. Adds Mehta of Deloitte: "While nobody is talking of complete privatisation, there are options such as dilution of government stake and consolidation."

Experts say in a country whose economy depends on bank funds due to absence of an active corporate bond market, the government has no option but to support the banking sector. However, like the former deputy governor said, a capital-starved country with both current account and fiscal deficits cannot afford to put taxpayer money down the drain either. Ultimately, banks will have to use capital efficiently. This can happen only if they follow a professional approach. The Banks Board Bureau under Vinod Rai is already on the job to put the right people at the helm to improve governance. "It's high time PSBs become self-sustained and return capital to the government, which needs it the most for kick-starting the economy," says a consultant. And, if nothing works, privatisation is the best way to get rid of inefficiencies. 

Central Govt. employees to get D.A. @2% with effect from 1st July 2016

Central Govt. employees to get D.A. @2% with effect from 1st July 2016 on revised basic pay as per 7th CPC.

Central employees to get enhanced pay and arrears together with August salary : Order issued

Central employees will celebrate August 2016 salary as the revised pay with arrears from January to July 2016 will reach their hand very soon. Fin-min issued Office Memorandum in this effect. 

Though they have to wait for the increased allowances as of now, still the payment of arrears will definitely dilute the disappointment a bit.
"The arrears as accruing on account of revised pay consequent upon fixation of pay under CCS(RP) Rules 2016 with effect from 01.01.2016 shall be paid in cash in one installment along with the payment of salary for the month of August 2016, after making adjustment on account of GPF and NPS, as applicable."

for details click on link

http://finmin.nic.in/7cpc/7thCPC_Implementation_payfixation_Arrears29072016.pdf

Bank Strike Could Impact Transactions Worth Rs 15,000 Crore: 10 Developments

Banking operations across the country were hit today, with 8 to 10 lakh employees of 40 private and state-run banks striking work. Lenders, including State Bank of India, informed customers that banking services would be hit because of the strike today. However, private sector banks like ICICI Bank were working as usual.

Here are 10 developments about the bank strike

1. 1>Services like cheque clearances, cash deposit and withdrawal at branches and other facilities were hit because of the one-day bank strike. According to industry body ASSOCHAM, Friday's strike will impact customer transactions worth about Rs 12,000 crore to Rs 15,000 crore.
2. 2>No disruptions are likely at the nearly 2 lakh automatic teller machines or ATMs across the country, according to striking employees. The vital treasury operations including a Rs 15,000 crore government bond auction are unlikely to be affected, traders said.
3. 3>The one-day strike has been called by the United Forum of Banks Unions (UFBU), an umbrella organisation of nine bank employees and officers' unions representing 8 lakh staffers.
4. 4>"The strike is on," said CH Venkatachalam, general secretary of the All India Bank Employees Association. "The strike will involve employees and officers of public sector banks, old generation private banks and foreign banks with a total of more than 80,000 branches," he added.
5. 5>Employee unions are opposed to the government's decision to privatise IDBI Bank. They are also unhappy with the decision to merge the five associate banks of the State Bank of India (SBI) with SBI.
6. 6>The decision to merge State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad with SBI was taken by the government in June. The proposed merger could transform SBI into a global behemoth.
7. 7>Bank unions say that the government is consolidating (merger) public sector banks and at the same time giving licences to corporate houses to start banks.
8. 8>Bank unions say the inadequate infusion of capital in public sector banks will result in reduction of government's equity capital and create compulsion for higher extent of private capital leading to privatisation of banks.
9. 9>Bank unions have also accused the government and the Reserve Bank of India of not taking tough measures to recover bad loans. They want the names of defaulters to be published. Bank unions are also demanding that "willful and deliberate defaulters" should be declared as criminal offenders and punished.
10. 10>According to bank unions, the total bank loans willfully defaulted by borrowers stand at Rs 58,792 crore, while the total quantum of bad loans of the government owned banks stood at Rs 539,995 crore as on March 31, 2016.
11. source profit ndtv

Da from august 2016 for banker is 35 slab

Aug 2016  DA increased 35 slab (3.50%) ie 455 @ 45.50% For Pensioners increase 29 slab.     Swapan Bhattacharya obc mosat

As per my projection da increase in dot

please visit more and more this blog

Da from august 2016 for banker is 35 slab

Aug 2016  DA increased 35 slab (3.50%) ie 455 @ 45.50% For Pensioners increase 29 slab.     Swapan Bhattacharya obc mosat

As per my projection da increase in dot

please visit more and more this blog

Da from august 2016 for banker is 35 slab

Aug 2016  DA increased 35 slab (3.50%) ie 455 @ 45.50% For Pensioners increase 29 slab.     Swapan Bhattacharya obc mosat

As per my projection da increase in dot

please visit more and more this blog

Seventh Pay Commission Hike Notified: 10 Things To Know

The Finance Ministry has notified the salary hike based on Seventh Pay Commission recommendations. This means that lakhs of government employees will receive higher salaries likely from next month. The notification is dated July 25, 2016.  About 1 crore employees and pensioners will benefit from the pay hike, effective from January 1, 2016. 
 
Here are the key highlights of the notification: 
 
1) According to the pay new structure, the existing basic pay as on December 31, 2015, shall be multiplied by a factor of 2.57.
 
2) The arrears shall be paid during the financial year 2016-2017.  
 
3) Entry-level pay will be raised to Rs 18,000 a month from the current Rs 7,000. The maximum pay has been fixed at Rs 2.5 lakh. 
 
4) The  Seventh Pay Commission's recommendations  on  allowances  (except  dearness  allowance) has been referred  to  a committee, which will submit  its  report  within  four  months. All allowances will continue to be paid at existing rates in existing pay structure. 

5) There shall be two dates for grant of increment January 1 and July 1 of every year, instead of existing date of July 1.
 
6) The  recommendations  of  the  Commission  for  increase  in  rates  of  monthly  contribution towards Central Government Employees Group Insurance Scheme (CGEGIS) for various categories of employees  has  not  been  accepted.  The existing rates of monthly contribution shall continue.
 
7) The Finance Ministry will work out a customised group insurance scheme for central government employees.
 
8) The  recommendations  of  the  seventh pay commission  relating  to  interest  bearing  advances  as  well  as interest free advances have been accepted with some exceptions. 
 
9) Committees  will  be  set  up  by  Department  of  Personnel   to  examine individual,   post-specific and cadre-specific anomalies  arising   out   of   implementation   of   the recommendations of the Commission.

10) Non-performing central government employees will not get annual increment if their performance is not up to the mark.

UIDAI wants to make mobile phones Aadhaar-enabled, holds discussion with smartphone makers

Your smartphone may become a gamechanger for India's public policy, becoming a one-stop instrument for instant identity authentication that will allow you to receive all government services that work on the Aadhaar platform. 

A meeting on Wednesday between Ajay Bhushan Pandey, chief executive officer of the Unique Identification Authority of India (UIDAI), which administers Aadhaar, and senior executives of smartphone-makers Apple, Samsung, Google, Microsoft and Micromax, and product software think tank iSPIRT, discussed ways to make mobile phone handsets Aadhaar-enabled. 

Pandey told ET the initial response of smartphone company executives was "positive" and they said they will have to consult their headquarters before taking the idea further. 

Here's UIDAI's idea: chips of Aadhaar-enabled smartphones will be encrypted with a UIDAI key and the phones will be connected to the Aadhaar server. The key is a security feature to prevent information leakage. The server connection will allow instant fingerprint and iris authentication. Some high-end smartphones already have fingerprint and iris recognition technology embedded in their operating system. The technology bar for putting these features in smartphones is not high — most smartphones can be equipped similarly. 

"This can be a game-changing feature in phones to become the identity of a person and let him do more transactions on the phone in a secure manner. This is perhap  the first time something like this will be attempted in the world," the UIDAI CEO told ET. 

Microsoft and Micromax declined to comment. Apple and Google didn't respond to ET's questions. A Samsung India spokesperson said the company is the only phone-maker to have already embedded Aadhaar-friendly technology in one of its handsets. .. 

Pandey explained the rationale behind the idea in detail: "Nearly 104 crore Indians have Aadhaar and almost 40 crore have smartphones. Every agency requires authentication via Aadhaar. If people don't need to go to any office to authenticate their identity and get government services, and if they are able to do so through their mobile phones, this can be the big gamechanger," he said. 

Pandey also said smartphone-makers should see Aadhaar-friendly instruments as a business opportunity, just as GPS-enabled phones were. As Aadhaar takes deeper hold as the interface between Indians and their governments, at the Centre and in states, and as smartphone sales go up, handsets that offer this facility will be an attractive consumer proposition, the UIDAI CEO said. 

Samsung India told ET: "Galaxy Tab Iris will support government benefit programmes and enable banks and financial institutions to streamline the process of an individual's authentication, regardless of language and literacy barriers." 

There are, however, a few issues to be sorted out before Aadhaar-enabled phones become a viable proposition for manufacturers. A smartphone industry executive, who did not wish to be identified, said companies running operating systems such as iOS (Apple) and Android (Google) may have worries over sending fingerprint and iris data over "unsecure" networks, raising privacy issues. Apple is known to be extremely reluctant about opening up its operating system to any external system. 

The UIDAI CEO told ET the solution is a "registered device". 

He said the biometric information can get encrypted by a UIDAI key at the chip level in phones, making it impossible for anyone but the Aadhaar server to see the information. Such encryption will ensure the information can't be decrypted and reused. "We have explained this to phone manufacturers," Pandey said. 

He also said UIDAI can address other concerns about privacy since the authority has ensured full privacy and security of personal biometric information of 104 crore citizens. He said laptops used for capturing biometric information have an Aadhaar key that encrypts the information, and there has been no leakage of information. 
 

Syndicate Bank has posted a net profit of Rs 79.13 crore fall in to 75%from previous year

Syndicate Bank has posted a net profit of Rs 79.13 crore for the fiscal first quarter that ended on June 30, 2016.

The state-owned bank had registered a net profit of Rs 301.98 crore for the corresponding period of the previous fiscal year.

The results are not comparable on account of an exceptional write-off.

"Previous quarter results are not comparable with the current quarter since there was an exceptional item of write off on account of fraud at three branches of Jaipur region," it said in a regulatory filing.

Transactions of these three branches are under investigation, pending which no additional provision is considered necessary during the quarter, it added.

Total income of the bank stood at Rs 6,419.12 crore in the reported quarter. It was at Rs 6,323.42 crore in the year-ago period, it said in the filing.

Gross NPAs were 7.53 per cent of gross advances in the June quarter of the current fiscal year. In the year-ago period,

it was 3.72 per cent. Net NPAs stood at 5.04 per cent in the quarter under review as against 2.36 per cent in the corresponding quarter of 2015-16.

Syndicate Bank said it has upgraded NPAs of Rs 220.42 crore and also made recoveries of Rs 444.70 crore.

"Out of the total cash recover, the cash recovery in domestic NPAs amounted to Rs 444.70 crore which includes cash recovery in prudentially written off accounts amounting to Rs 82.35 crore," it said.

"To accelerate recovery performance under NPA, during the current financial year, one Bruhat Synd Adalat was conducted. Bank has mobilised 16,648 proposals involving one time settlement amount of Rs 84.69 crore," the bank added.

Among other key metrics, Syndicate Bank's interest income stood at Rs 1,479 crore during April-June of 2016-17. It was Rs 1,412 crore a year earlier.

However, the bank registered fall in global business at Rs 4.68 lakh crore from Rs 4.72 lakh crore a year ago. Hence, global deposits also fell to Rs 2.63 lakh crore from Rs 2.69 lakh crore.

Punjab National Bank Q1 profit 57% fall in to Rs 306 cr

State-owned Punjab National Bank (PNB) on Thursday reported a 57.49 per cent fall in net profit to Rs 306.36 crore during April-June quarter, due to sharp rise in bad loans.

The bank had posted a net profit of Rs 720.71 crore during the corresponding period of the previous fiscal.

The total income stood at Rs 13,930 crore during the quarter, up 3.70 per cent, as against Rs 13,432.05 crore in the same quarter a year ago.

Interest earned decreased by 3.8 per cent to Rs 11,574.94 crore as against Rs 12,034.69 crore in the first quarter of the previous fiscal.

Gross non-performing assets (NPAs) as a proportion of advances rose significantly to 13.75 per cent compared with 6.47 per cent at the end of June last year. Net NPAs also rose to 9.16 per cent from 4.05 per cent.

During the quarter under review, provision for bad loans jumped 51.17 per cent to Rs 2,738.38 crore compared with Rs 1,811.39 crore a year ago.

Bank Of Baroda.PNB,UCO,Canara,SBBJ and other 8 Bank Fined 27 Crores For Violating Forex Laws

 In a major crackdown for violations and lapses related to foreign exchange laws and KYC (know your customer) norms, the Reserve Bank of India has imposed a Rs 27 crore penalty on 13 public- and private-sector banks, while asking eight others including State Bank of India (SBI) and ICICI Bank to ensure strict compliance with guidelines.

On the basis of inputs received from a public sector bank, the RBI had undertaken a scrutiny on advance import remittances in 21 banks in October and November 2015.

In a statement issued on Wednesday, the RBI said it imposed a monetary penalty on 13 banks for "violation of regulatory directions/instructions/guidelines, among other things, on KYC norms".

These banks are: Bank of Baroda (Rs 5 crore), Punjab National Bank (Rs 3 crore), Syndicate Bank (Rs 3 crore), UCO Bank (Rs 2 crore), HDFC Bank (Rs 2 crore), Allahabad Bank (Rs 2 crore), Canara Bank (Rs 2 crore), IndusInd Bank (Rs 2crore), SBBJ (Rs 2 crore), Bank of India (Rs 1 crore), Corporation Bank (Rs 1 crore), RBL Bank (Rs 1 crore) and SBM (Rs 1 crore).

The RBI further said that eight other banks - Axis Bank, Federal Bank, ICICI Bank, Kotak Mahindra Bank, OBC, Standard Chartered Bank, SBI and Union Bank of India - have been "advised to put in place appropriate measures and review them from time to time to ensure strict compliance with KYC requirements and FEMA (Foreign Exchange Management Act) provisions on an ongoing basis".

"In respect of eight other banks...based on written and oral submissions, it was decided to advise them to put in place appropriate measures and review the same from time to time to ensure strict adherence to KYC/AML requirements as well as FEMA provisions on an ongoing basis," the RBI said.

It, however, added that "this action" is based on deficiencies in regulatory compliance and "is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank and its customers".

The scrutiny in the 21 banks examined the alleged irregularities in opening and monitoring of accounts including violations under FEMA provisions.

Gazette Notification of 7th CPC

Gazette Notification of 7th CPC

Govt. has notified 7th CPC vide gazette notification dated 25.07.2016. Ministry of Finance likely to issue Office Memorandum today.
 
 Salient features are :

With regard to fixation of pay of the employee in the new Pay Matrix as on 1st day of January, 2016, the existing pay (Pay in Pay Band plus Grade Pay) in the pre-revised structure as on 31st day of December, 2015 shall be multiplied by a factor of 2.57. The figure so arrived at is to be located in the Level corresponding to employee’s Pay Band and Grade Pay or Pay Scale in the new Pay Matrix. If a Cell identical with the figure so arrived at is available in the appropriate Level, that Cell shall be the revised pay; otherwise the next higher cell in that Level shall be the revised pay of the employee.

After fixation of pay in the appropriate Level as specified in sub-paragraph (2) above, the subsequent increments in the Level shall be at the immediate next Cell in the Level.  

There shall be two dates for grant of increment namely, 1st January and 1st July of every year, instead of existing date of 1st July; provided that an employee shall be entitled to only one annual increment on either one of these two dates depending on the date of appointment, promotion or grant of financial up-gradation.

The recommendations on Allowances (except Dearness Allowance) will be referred to a Committee comprising Finance Secretary and Secretary (Expenditure) as Chairman and Secretaries of Home Affairs, Defence, Health and Family Welfare, Personnel and Training, Posts and Chairman, Railway Board as Members. The Committee will submit its report within a period of four months. Till a final decision on Allowances is taken based on the recommendations of this Committee, all Allowances will continue to be paid at existing rates in  existing pay structure, as if the pay had not been revised with effect from 1st day of January, 2016. 

The recommendations of the Commission relating to interest bearing Advances as well as interest free Advances have been accepted with the exception that interest free Advances for Medical Treatment, Travelling Allowance for family of deceased, Travelling Allowance on tour or transfer and Leave Travel Concession shall be retained.

The recommendations of the Commission for increase in rates of monthly contribution towards Central Government Employees Group Insurance Scheme (CGEGIS) for various categories of employees has not been accepted. The existing rates of monthly contribution shall continue. Department of Expenditure and Department of Financial Services will work out a customised group insurance scheme for Central Government employees.

RBI imposes Rs 5-crore penalty on Bank of Baroda and Rs 2-crore on HDFC Bank

Reserve Bank has imposed a penalty of Rs 2 crore on HDFC Bank for lapses in adhering to Know Your Customer (KYC) and anti-money laundering (AML) norms.

The RBI has also slapped a fine of Rs 5 crore on Bank of Baroda (BoB) over Rs 6,100-crore scandal exposed last year.

Further to the media reports in October 2015 about irregularities in advance import remittances in various banks, the RBI had conducted a scrutiny of the transactions carried out by HDFC bank, the country's second largest private sector lender said in a regulatory filing today.

The RBI issued a show-cause notice to which the Bank submitted its detailed response.

"After considering the bank's submissions, the RBI has imposed a penalty of Rs 20 million on the bank on account of pendency in receipt of bills of entry relating to advance import remittances made and lapses in adhering to KYC/AML guidelines in this respect," it said.

HDFC Bank further said it has implemented a "comprehensive corrective action plan" to strengthen its internal control mechanisms "so as to ensure that such incidents do not recur".

The RBI has imposed a penalty of Rs 5 crore on Bank of Baroda after it found irregularities in the Rs 6,100-crore scam that was unearthed last year.

"The Reserve Bank of India has imposed a penalty of INR 50 million on Bank of Baroda...Pursuant to the internal audit of the Bank of Baroda, the Reserve Bank of India and investigative agencies in October 2015 were advised by the bank of certain irregularities observed," Bank of Baroda said in a BSE filing.

The RBI, BoB said, carried out the investigation and noted the deficiencies which were reflective of weaknesses and failures in internal control mechanisms in respect of certain AML provisions.

The public sector bank further said it has implemented a comprehensive corrective action plan, to strengthen internal controls and to ensure that such incidents do not recur.

 

Various irregularities by bank such as non-submission and inordinate delays in filing of Suspicious Transaction Reports (STRs),besides opening of accounts by several entities without fulfilling KYC norms, were noticed by the RBI.

Shares of HDFC Bank closed at Rs 1,246.55 apiece on BSE, up 1.23 per cent. Bank of Baroda shares closed 3.21 per cent up at Rs 155.75 apiece.

Don’t merge loss-making banks, privatise them

In pursuing the objective of consolidating banks, the government has announced that State Bank of India (SBI) and its associates would be merged. Earlier, in 2009, the Rakesh Mohan-led Committee on Financial Sector Assessment had proposed that the RBI should create a conducive environment for mergers and amalgamations. The merger of PSBs had been recommended even earlier in 1998 by the M. Narasimham-led Committee on Banking Sector Reforms. Still earlier, restructuring of Indian banks through merger and acquisitions had also been recommended by other committees since 1972. Thus, issues related to consolidating the Indian banking sector have been debated and discussed for many years and merger has been a preferred recommendation consistently.

Globally, the Southeast Asian crisis of 1997 had encouraged consolidation and restructuring of banks in many Asian countries. In the U.S., there has been consolidation of banks since 1916. In India, many banks in the past were merged with other banks. Illustratively, New Bank of India and Punjab National Bank, both PSBs, were merged in 1993. Similarly, State Bank of Saurashtra and State Bank of Indore had merged with the SBI in 2008 and 2010, respectively. Theoretically, key reasons for merger are economies of scale and scope, revenue enhancement, value maximisation, efficiency gains, cost savings, diversification of customers and assets, and also that large banks help in international recognition. Therefore, the decision to merge SBI and its affiliates is a step in the right direction.

Mergers, in general, are a challenge and have to be carefully crafted. It is important to consider the strengths and weaknesses of eligible PSBs before binding them together. Mergers can be successful in similar institutions with a similar culture but cannot be extensively adopted because they lead to job cuts, branch closures and, in some cases, lowering of quality and quantity of services. That is why mergers have always been considered as only one alternative to consolidation.

Privatisation as an alternative

In addition to mergers, the government could consider other alternatives. The loss of Rs.18,000 crore incurred by PSBs has implications for the national exchequer. On the one hand, the government foregoes revenues through dividends and profits, while on the other it would need to provide resources through enhanced expenditure to bail out loss-making banks from a pool of resources garnered from a small subset of population — taxpayers. The government could consider setting standards for the banking industry — privatising some of the inefficient PSBs while rewarding profit-making ones. This implies that the 60-year-old policy of social control needs to be reviewed. One of the objectives of social banking under which private sector banks were nationalised in 1969 and 1980 was to ensure banking penetration in rural areas and to avoid a nexus between industry and banking.

In the past two years, the Central government has been successful in ensuring a bank account in every household under the Prime Minister’s Jan-Dhan Yojana. The advancement in technology is already making possible safe banking transaction through mobile phones. In a digital India, and with widespread availability of credit rating, bank accounts, Aadhaar information and mobile phones, technology can help in eliminating human intervention in sanctioning and extending credit to the borrower. Small banks and payment banks are expected to penetrate deep into rural India, and therefore the need for a brick-and-mortar commercial bank branch is diminishing.

Privatising loss-making PSBs will have a deterrent effect on the staff and management of such banks. Also, privatising a few loss-making PSBs will ensure that market discipline forces them to rectify their strategy, and this will have a ripple effect on other PSBs. As the Planning Commission was a vestige of the socialist era, so is social banking. It is time to reconsider whether PSBs, all 27 of them, are really required to serve the purpose of social banking in our country and at what cost.

How Income Tax Department Is Tracking Your Transactions

o check tax evasion, the Income Tax Department has stepped up its vigilance against undeclared income. Now, you have to report PAN on all your high-value transactions. Property registrars and financial institutions with which you deal with like your bank, insurer, mutual fund company and credit card company feed the tax department with information regarding your big transactions.

The tax department compares this information with the return filed by you. "Through these reporting the tax department is trying to compare your overall income with your expenses and investment to assess the correct tax liability and finally the evasion if there is any," says Sudhir Kaushik, CEO and co-founder of Taxspanner.com.

Here are some of the ways through which the tax department is monitoring your high-value transactions:

1) Your bank will inform the tax department if you have deposited cash, made a demand draft or fixed deposits aggregating up to Rs 10 lakh or more in a financial year under different accounts.

2) The property registrar is liable to report purchase or sale of immovable property exceeding Rs 30 lakh.

3) Now, TCS (tax collected at source) at the rate of 1 per cent is deducted and deposited to the tax department by the buyer in case of purchase of property over Rs 50 lakh. This is just another way of reporting the transaction.

4) If you have made a cash payment of Rs 1 lakh towards your credit card or Rs 10 lakh or more through any other mode during the financial year, your credit card company will report the transactions to the tax authorities.

5) Purchase of shares, debentures and mutual funds of Rs 10 lakh or more will have to be reported by the companies to the tax authorities.

6) If you are earning more than Rs 50 lakh a year, you have to report your assets and liabilities in a new ITR (income tax return) form this year.

7) Now reporting of PAN is mandatory for making any purchase of goods and services of more than Rs 2 lakh. Also, a TCS (tax collected at source) has been introduced from June 1 in case of purchase or sale of any goods and services for Rs 2 lakh and more in cash.

8) According to experts, TDS is another way of tracking income of tax payers. Banks deduct TDS if interest income on fixed deposits is more than Rs 10,000 in a year.

9) A 1 per cent luxury tax is levied on purchase of car priced over Rs 10 lakh. It will be deducted by the seller of the car and will be applicable on ex-showroom price. However, this extra payment could be set off against the total tax liability of the buyer.

10) You also have to give your PAN for the following transactions:

a) Sale or purchase of vehicles other than two-wheelers

b) Opening a bank or a demat account; applying for credit card

c) Opening a fixed deposit of more than Rs 50,000

d) Payment of more than Rs 50,000 towards insurance premium

e) Paying more than Rs 50,000 in cash towards restaurant or hotel or foreign trip bills

f) Purchase of mutual funds, debenture, bonds worth more than Rs 50,000

g) Depositing cash or more than Rs 50,000 in bank

source NDTV Profit