Banking and Financial Awareness – 09/09/2016

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• Rules may be eased for banks and NBFCs under GST: The government may look at relaxing some rules in the Goods and Services Tax (GST) framework that could make life a little easier for banks, NBFCs and insurance companies, people in the know said. In the revised model law set to be released in the first weeks of October, two main changes — single registration and centralised audit — may be announced for banks, NBFCs and the insurance companies. Under the current GST framework, banking and financial companies will have to register all their branches in a state separately, and treat them as separate entity. This is set to make registering and then calculating GST in each transaction in every branch complicated. A centralised registration would mean the bank would be registered with a central agency, and a separate agency would audit it. This agency would audit the transactions where revenues would be pooled, analysed and a GST be levied thereafter and then distributed to the states as per the calculation and where the transaction occurred. • Robots to perform a fifth of internal jobs at ICICI Bank: ICICI Bank is employing robots to perform tasks like generating customer IDs, updating addresses and mobile numbers, resolving ATM-related queries, etc. Claiming to be the first Indian bank to use software robotics, ICICI Bank on Thursday said the technology has helped them in reducing response time by up to 60 per cent. Ms.Chanda Kochhar, managing director & chief executive officer, ICICI Bank, said by the end of FY17, the bank would more than double the number of transactions cleared by the robots. “Currently, about 10 per cent of our internal transactions are being carried out via the software robots and by the end of this year, we believe, this will go up to 20 per cent of our transactions. This has helped us in improving productivity and efficiency and will help us in handling larger volumes as we continue to grow.” • RBI will not interfere with independence of banks: Urjit tells PAC: RBI Governor Urjit Patel told the Public Accounts Committee (PAC) of Parliament on Thursday that the central bank will not interfere in the independence of banks and said the regulator’s effort is not to create a unitary system for public banks. Patel appeared before the panel to brief about the public debt management, based on a Comptroller & Auditor General of India report, and the RBI’s role in it. Responding to queries from PAC members that why there is no uniform rate of interest even in public sector banks, Patel, according to a member in the panel, said: “Each bank has its own pluses and minuses. Each bank has a different lending and investment pattern.” He said the RBI will not interfere in this right for uniqueness for each bank. • PSBs using AT1 bonds to shore up capital base: Many Public Sector Banks (PSBs) are using additional tier I (AT1) bonds — a hybrid instrument — to shore up capital base. This is coming at a cost in the form of high coupon or interest rate, as investors factor in risks from a huge pile of bad loans on their books. IDBI Bank agreed to a hefty 11.06 per cent coupon rate, while Union Bank of India struck a deal for 9.5 per cent. In fact, State Bank of India (SBI) placed its AT1 bonds at a lower rate of nine per cent. Analysts at rating agencies and arrangers to offering said the high interest on coupon suggests this is seen as a risky instrument, since issuing banks have the option to not pay coupon or principal when finances are weak. It also points to the huge pool of non-performing loans and the liquidity of these instruments in markets. • Yes Bank pulls back $1 billion QIP: In a move that took investors and analysts by surprise, Yes Bank on Thursday decided to defer an ongoing qualified institutions placement (QIP) issue for raising up to $1 billion. The bank cited misinterpretation of new QIP guidelines for the move. “Due to extreme volatility during today’s trading day because of misinterpretation of new QIP guidelines, YES Bank has been advised by its appointed Merchant Bankers to defer its proposed QIP,” the bank said in a statement to the stock exchange. Yes Bank shares crashed 5.32 % to end at Rs.1,330.65 per share on the BSE on Thursday. • RBI chief to brief PAC members on public debt management: The new RBI Governor Mr.Urjit Patel will address the Public Accounts Committee of Parliament. On Thursday, Mr.Patel will answer questions from PAC members on a CAG report on public debt management. The report, tabled during the monsoon session, had said that the existing legal framework does not define the term ‘Public Debt’. Urging the Centre and the RBI to create a strong legal framework, the report also said that the existing framework does not indicate the objectives of public debt and borrowing purpose, and also does not require the formulation of a debt management strategy. “The RBI Governor’s presence in the meeting will be helpful for the members to get a perspective of the regulators,” a member in the panel said. • India not ready for PSU banks privatisation: Jaitley Attaching highest priority to the health of public sector banks, Finance Minister Arun Jaitley said India is not ready for their privatisation and the present characteristics of PSU banks will continue except for IDBI Bank. “We are trying to consolidate some of the banks, which may otherwise find it difficult in a competitive environment… in one case we are thinking of reducing the government stake to 49 per cent in IDBI Bank,” the minister said at the Economist India Summit. Mr.Jaitley added that in a consolidated manner they would probably continue to be in the present state. “But I think India still realises that there has been a very important role that some of these banks have performed,” he said. • Banks’ boards should be tough on KYC compliance, embrace tech: SS Mundra: Lack of Board-level oversight and commitment from executive managements have led to several instances of banks allowing transactions in their customers’ accounts, without due consideration to their declared business profiles in recent times, according to RBI Deputy Governor Mr.SS Mundra.While regulations on Know Your Customer (KYC)/Anti-Money Laundering (AML) are robust across jurisdictions, the RBI, however, has often found banks not having robust systems to comply with regulations.“At the time of on-boarding of customers, banks are required to assess them, their business and expected turnover in their account, source of such transactions, etc. In recent times, we have come across several instances of banks having allowed transactions in their customers’ accounts without due consideration to their declared business profiles,” said Mr.Mundra at a seminar organised in Mumbai. He observed that the accounts received multiple RTGS / NEFT inward transactions and several such remittances were sent out of these accounts as well. Several accounts were abused to send money abroad in the form of advance import remittances. • SBI, Tata to make loans easier for homebuyers: State Bank of India and Tata Housing Development Company have entered into a partnership to enable easier financing and purchase of homes by the middle class.Under this partnership, initially, government employees and defence personnel having SBI salary accounts will get ‘offers’ on Tata Housing Homes should they avail an SBI Home Loan for the same. The offers will later be extended to other customers. A senior SBI official said under the MOU, which is valid for three years, the two partners will roll out multiple offers. • ICICI and Union Bank benefit from construction sector package: Recent government initiatives to ease the construction sector’s woes have come at a time when the sector’s growth has slumped to 1.5 per cent in the first quarter of this financial year from 5.6 per cent a year before. Besides reducing the burden of companies, struggling with high debt, these steps are expected to reduce the problem of bad loans. Advances to the construction sector account for only 1.1 per cent of all bank loans. But 27 per cent of these loans are stressed, according to Kotal Institutional Equities, making it the second-highest stressed sector, after basic metals. The biggest banking sector beneficiaries of these measures would include ICICI Bank and Union Bank, which reported the highest NPA ratios in the sector, Ishan Bakshi reports.]]>

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