News highlights : 12 September 2016

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President Pranab Mukherjee

01. New lending norms may nudge banks towards retail loans: SBI

Stringent RBI norms proposed for corporate lending are expected to nudge banks towards consumer loans, SBI Chairperson Arundhati Bhattacharya has said while reiterating that there is no bubble in the retail segment. The Reserve Bank had last month come out with draft guidelines on credit to large corporate borrowers asking banks to make additional provisions if the loan amount crosses the prescribed limit. “The latest norms regarding lending to large corporates make corporate lending more costly both for banks as well as the borrowing companies,” Bhattacharya told PTI in an interview. “So, the Reserve Bank itself is nudging us towards a model that is more retail,” she added. She was quick to add however that State Bank of India has not seen any stress and only RBI would know about the system as a whole. RBI had on August 25 issued new guidelines on capping lending to large corporate/related parties. With a view to reducing risks in the system, RBI proposed to limit exposure of a bank to a business group to up to 25 per cent of its capital, down from the existing 55 per cent.

02. NPCI widens shareholding base to 56 banks :

National Payments Corporation of India (NPCI) said it has broadened its shareholding base to 56 banks from 10 earlier. The 46 new entities comprising 13 public, 15 private, 1 foreign, 10 multistate co-operative banks and 7 RRBs have now joined the shareholding base, NPCI said in a statement. The addition of new banks has increased NPCI's paid up capital to Rs 133 crore from Rs 100 crore, its MD and CEO A P Hota said. "Being the payments system utility for all the banks in the country, it was a natural progression and was also a requirement from the Reserve Bank. The expansion will make NPCI a truly community-owned institution," he said. Earlier, the 10 promoter banks of NPCI were State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Bank of India, Union Bank of India, ICICI Bank, HDFC Bank, Citibank and HSBC. Earlier, six public sector banks were holding 60 per cent stake in the corporation while private and foreign banks held the rest.

03. Direct tax mop-up rises 15% to Rs 1.89 lakh crore in April-August :

Net direct tax collections during the April-August period has grown 15.03 per cent to Rs 1.89 lakh crore, led by robust collections in personal income tax. Direct taxes, which include corporate income tax and personal income tax, collection in the first five months till August is 22.30 per cent of Budget estimates for the full fiscal. "The figures for direct tax collections up to August, 2016 show that net revenue collections are at Rs 1.89 lakh crore which is 15.03 per cent more than the net collections for the corresponding period last year," the CBDT said in a statement. The gross collection of Corporate Income Tax (CIT) grew at 11.55 per cent, while that under personal income tax (PIT) it was 24.06 per cent. However, after adjusting for refunds, the net growth in CIT collections is (-)1.89 per cent while that in PIT collections is 31.76 per cent.Refunds amounting to Rs 77,080 crore have been issued during April-August, which is 22.18 per cent higher than the refunds issued during the corresponding period last year. The government hopes to collect Rs 8.47 lakh crore from direct taxes and Rs 7.79 lakh crore from indirect taxes, which includes customs, excise and service tax, in 2016-17 fiscal.

04. Half of Indian banks may breach capital triggers under Basel 3, says Fitch:

The progressive increase in minimum capital requirements under Basel III is likely to put nearly half of Indian banks in danger of breaching capital triggers, according to Fitch Ratings. State banks are the most at risk, given their poor existing capital buffers and weak prospects for raising capital through market channels, said the credit rating agency. "Our analysis of 27 Indian banks with outstanding hybrid capital instruments indicates that at end-June 2016 the total capital adequacy ratio (CAR) for 11 banks was at or lower than the minimum of 11.5% required by end-March 2019 (FYE19). "Of these, six did not have enough capital to meet the minimum required by FYE17," said Fitch Ratings. The minimum total CAR is a prerequisite for payment of coupons on both legacy and Basel III perpetual debt capital instruments. For Basel III perpetual instruments, coupon deferral is also linked to banks meeting both minimum regulatory common equity tier 1 (CET1) ratio and Tier 1 ratio. According to the agency, more than half of the banks currently have a CET1 ratio that is below the required 8% minimum that will be applied from FYE19.

05. Huge NPA provisioning by banks limits credit growth: President

Huge provisions made for NPAs (non-performing assets) by banks constrained the credit disbursement, which is essential to support economic growth, pointed out President Pranab Mukherjee at a function. Though Indian banking sector stood solidly despite global economic crisis and challenges, a major area of concern for the sector is the huge NPAs, he said at the centenary celebrations of Karur Vysya Bank. Elaborating on the NPAs, he said the aggregate provisions made by all scheduled commercial banks increased significantly to Rs.170,630 crore for the year ending March 2016 from Rs. 73,887 crore for the year March 2015. Provisions for NPAs swelled due to increase in stressed assets. Stressed advances to gross advances of scheduled commercial banks increased from 10.90 per cent in March 2015 to 11.40 per cent in March 2016. As a result, resources available for credit disbursement by commercial banks have been affected and this is not in a desirable situation. There is need for credit expansion in a growing economy like India. Overall, the Indian banking sector has done well. However, they must remain prudent about the situation of NPAs, he added.

06. Government notifies GST Council, in effect from 12th Sep 2016:

Following presidential assent last week to the GST Bill, the Union Finance Ministry on 12TH Sept 2016, notified the provisions of the Constitution Amendment Act that allows for setting up the Goods and Services Tax (GST) Council. “The Central Government hereby appoints the 12th day of September, 2016 as the date on which the provisions of section 12 of the said Act shall come into force,” a ministry notification said. According to the provisions of the Constitution Amendment Act, the GST Council will have to be set up within 60 days of its notification. It is to be chaired by the Union Finance Minister and will include State Ministers as members. The GST Council will decide on the tax rate, will recommend the taxes to be subsumed and exempted from GST, the rates of taxation and the model Central, State and Integrated GST laws. It will also decide the threshold for levy of the tax, as well as the dispute resolution mechanism, among other important issues.Noting that 20 states had already ratified the GST, President Pranab Mukherjee said in Chennai on 10th Sept 2016 that it was the GST Council’s responsibility to have one uniform rate of GST tax to be introduced all over India. The government targets to implement the new pan-India indirect tax regime from April 1, 2017.

07. Nitin Gadkari’s 5 innovative initiatives for roads, transport & inland waterways :

Nitin Gadkari, the Union Minister of Road Transport & Highways and Shipping, is coming up with some interesting initiatives to deal with the chrinic problem of traffic congestion across the country and use infrastructure in mutiple ways to better cater to transportation needs of both urban and remote areas. At a time when pollution levels globally are under focus, Gadkari is looking to introduce driverless pods and build a robust network of inland waterways for environment friendly solutions to transport issues. Water taxis: , Metrino pods, New Delhi-Jaipur highway, Highways for aircraft landing, Using waste for highway construction.

08. Soon all cars to come with overspeeding alert system, airbags :

Government will soon make it mandatory to put an overspeeding warning system with beeps or continuous alarms and airbags in all cars, while cameras would be also installed on roads to check errant drivers. "We are going to make audio alerts in vehicles mandatory to check overspeeding and curb accidents," an official told PTI. Once the vehicle crosses the speed of 80 km, there would be sounds of beeps alerting the driver, and in case the speed crosses 90 km, there would be continuous special beeps so that the driver and co-passengers both are alarmed, the official said. "The Road Transport and Highways Ministry has approved it and the file has gone for vetting to the Legal Department. Once it is through, we will notify it within a fortnight," the official said. Besides, the government is going to install cameras to check overspeeding, the official said, adding another crucial step would be mandatory airbags in cars. India accounts for as high as five lakh road accidents annually in which 1.5 lakh people die and another 3 lakh are crippled.

09. MFIs may face loan quality shocks: ICRA

With rising competition, high pace of growth, and increased focus of some players on individual loans without group guarantee, asset quality indicators of micro-finance institutions (MFIs) could deteriorate from present levels, cautioned credit rating agency ICRA. The agency said discipline at both the borrower and MFI levels, and tactful interventions by stakeholders in tackling field-level issues would be key determinants of asset quality, going forward. “Some pressure on asset quality was witnessed in FY2016 due to communal and political issues in certain pockets of Madhya Pradesh, Uttar Pradesh, Bihar, Jharkhand and Karnataka, while other States were impacted by environmental issues like drought and floods. “However, timely action by MFIs, with support from self-regulatory organisations (SROs) and government bodies, helped arrest delinquencies in most cases,” ICRA said.

10. Forex reserve hits all-time high of $367.76 bn :

The country’s forex reserves increased by USD 989.5 million to an all-time high of USD 367.76 billion on the back of a healthy increase in core currency assets, the Reserve Bank said. The total reserves had declined marginally by USD 392.6 million to USD 366.77 billion in the previous reporting week. The reserves had touched an all-time high of USD 367.16 billion previously. Foreign currency assets (FCAs), a major component of the overall reserves, swelled by USD 952.2 million to USD 342.23 billion for the week ended September 2, RBI said today. FCAs, expressed in dollar terms, include the effect of appreciation/depreciation of non-US currencies such as euro, pound and yen held in the reserves. Gold reserves rose USD 58.1 million to USD 21.64 billion at the end of the reporting week, it said. The country’s special drawing rights with IMF fell USD 8 million to USD 1.48 billion while the reserve position in IMF was down by USD 12.8 million to USD 2.39 billion, RBI said