SB I’s education loans now come with credit
cards
State Bank of India is offering credit cards along with education loans to
students to stay connected with them and to keep bad loans down. India’s
largest bank is expecting the usage of the credit card and payment of dues by
students to build up credit history, giving it a clue on the borrower’s credit
behavior. The credit card has a credit limit of Rs 5,000 which is guaranteed by
the parent. As at June-end 2014, SBI had an education loan portfolio of Rs
14,945 crore, up 7.21 per cent year-on-year.
PSBs need to raise Rs 2.2 lakh cr to meet Basel
III norms: Moody’s2
Major public sector banks in India will need to raise Rs. 1.5-2.2 lakh crore in
the next four-five years to meet Basel III norms, rating agency Moody’s said in
a report. The public sector banks that it rates could need external capital,
assuming a moderate recovery in GDP growth and a gradual decline in
non-performing loans from the current levels, the agency said.
Moody’s rates 11 public sector banks, representing 62 per cent of net loans in
the Indian banking system.
Banks may tap the equity markets to raise capital, but with still-low bank
valuations they could struggle to raise the required amount. That’s even with
the recent rally in Indian stock prices, the report highlighted.
Moody’s noted that a significant part of the required capital — around Rs.
80,000-90,000 crore could be in the form of Additional Tier 1 capital.
Basel III raises the minimum required capital levels for both Total Tier 1 to 7
per cent and Common Equity Tier 1 capital to 5.5 per cent. Besides, banks will
also need to meet a Capital Conservation Buffer in order to pay dividends. That
will put pressure on public sector banks, as low capital levels remain a key
credit weakness, Moody’s said.
About basel-iii norms
Basel III or Basel 3 released in December, 2010 is the third in the series of
Basel Accords. These accords deal with risk management aspects for the banking
sector. In a nut shell we can say that Basel iii is the global regulatory
standard (agreed upon by the members of the Basel Committee on Banking
Supervision) on bank capital adequacy, stress testing and market liquidity
risk. (Basel I and Basel II are the earlier versions of the same, and were less
stringent)
Philips to split into 2 companies
Dutch electronics group Philips NV said 23rd Septemeber it would split itself
into two companies, spinning off its iconic lighting business 123 years after
making its first incandescent light bulb.
It's the latest in a series of restructuring moves for the Dutch conglomerate,
amid consecutive profit warnings and criticism its cumbersome corporate
structure is slowing it down. Philips said it would merge its health-care and
consumer-electronics divisions into a single company, which will remain the
core of Philips's business. At the same time, it plans to hive off its lighting
business, and possibly spin that division off in an initial public offering as
early as 2016.
Philips was founded in 1891 by Frederik Philips and his son Gerard in the
southern Dutch town of Eindhoven. Initially a producer of light bulbs, Philips
grew to become one of Europe's largest industrial companies in the 20th
century. It is credited with innovations like the compact disc and the electric
shaver. In the 1970s, it employed more than 400,000 people globally.
RBI Panel recommends 360-degree feed back
A report by a Reserve Bank of India (RBI) panel has said 360-degree feedback is
important for a transparent and comprehensive performance assessment exercise,
one that ensures adequate performance differentiation between employees.
In its report, the central bank’s committee on capacity building in banks and
non-banking financial entities said posts of chief learning officer should be
created in commercial banks, adding those appointed to such posts should
develop a ‘learnability index’, a measure of an individual’s ability to learn.
This would be applied as an input to judge “promotability”, disseminate
knowledge across the organization and monitor and augment learning and sharing,
it said.
Bankers will need to specialize in different business functions, while
maintaining basic general competency. Banks need to identify five-six such
tracks within which the staff can be groomed,” the report said.
The panel also suggested a stronger and more competitive human resource
framework for the overall skill development of banks and non-banking financial
entities regulated by RBI.
The committee was set up with the objective of implementing non-legislative
recommendations of the Financial Sector Legislative Reforms Commission (FSLRC)
related to capacity building in banks and non-banking financial companies
(NBFCs), streamlining training intervention and suggesting changes to address
the increasing challenges in these sectors. The committee is chaired by G
Gopalakrishna, former executive director of RBI.
The panel was also tasked with evolving an appropriate certification mechanism
for training by examining possible incentives for undertaking certification
programmes and covering all levels — from the lowest rung to the board-level.
The committee added banks must avoid transfers for the sake of preset norms.
“Job rotation in banks especially public sector banks should not be done in a
mechanical manner, but through well laid-down criteria,” it said.
It also suggested ways to address replacement of talent within banks. The panel
said the lack of replacement talent was one of the biggest challenges, adding
to address this, banks should develop an internal expert pool and allow free
movement of talent within the organisation.
Key Points:
Create the position of “chief learning
officer”, responsible for leadership development and collaborative learning in
commercial banks
Banks should Endeavour to expand enrolment of
select internal employees as part-time faculty to provide internal support for
training initiatives
To deal with talent replacement, there should
be free movement of talent within the organization for creation of a larger
workforce of trained personnel
Job rotation, especially in PSBs, should not be
carried in a mechanical manner but through a well laid down criterion
All banks may adopt e-learning methods and
ensure that function-specific lessons are made available to its staff
Conducting a common Banking Aptitude Test (BAT)
at entry levels.
Apex court scraps 214 of 218 coal blocks
allotted since 1993
In a major blow to companies involved in coal mining, the Supreme Court on 24th
September ordered the cancellation of 214 of the 218 coal blocks that were
allocated between 1993 and 2011. It also imposed a penalty of Rs 295 per ton on
the coal illegally extracted by 42 companies which had commenced production.
A three-judge Bench comprising Chief Justice RM Lodha and Justices Madan Lokur
and Kurian Joseph rejected the argument made on behalf of the coal companies
that the cancellation of the blocks would have a huge impact on the economy.
The order said though the allotment of 42 of 46 coal blocks were quashed, the
cancellation would take effect only after six months, with effect from March
31, 2015.
According to the court, the estimated loss is Rs 295 per ton of coal and the
compensatory payment on this basis should be made by the companies which had
commenced extraction within three months and, in any case, on or before
December 31, 2014. The coal extracted hereafter till March 31, 2015, will also
attract the additional levy of Rs 295/tone.
The Government is expected to mop up Rs 8,000-10,000 crore through this
compensatory payment. Acting on two public interest writ petitions, the court
on August 25 held that the allotment of coal blocks made by the Screening
Committee of the Government, as also those made through the Government
dispensation route, were arbitrary and illegal.
Blocks allocated to Anil Ambani-run Reliance Power’s 3,950 MW Sasan Ultra Mega
Power Project — Moher and Moher Amroli Extension — and one each belonging to
Steel Authority of India (Tasra) and NTPC’s (Pakri Barwadih) were spared the
de-allocation. The reason for exempting Reliance’s two coal blocks was that the
Sasan project was awarded to Reliance Power through a tariff-based
international competitive bidding process. The blocks awarded to NTPC and SAIL
were not de-allocated because both are Central public sector undertakings
eligible to mine under the Coal Mining Nationalization Act.
Chronology
July, 1992: The Coal Ministry orders setting up
of a screening committee to consider proposals from private power companies for
captive coal mining on first-cum-first-serve basis. Screening committee
guidelines give preference to large projects of power and steel companies.
July 14, 1992: Many coal blocks, which were not
in the production plans of Coal India or the Singareni Collieries Company, were
identified and a list of 143 blocks were prepared.
1993-2010: A total of 70 coal mines or blocks
were allocated between 1993 and 2005, 53 in 2006, 52 in 2007, 24 in 2008, 16 in
2009 and 1 in 2010.
In all, 216 blocks were given between 1993 and
2010. Of these, 24 were taken away at different points in time, effectively
leaving the total number of coal permits at 194.
March, 2012: A draft CAG report accuses the
government of 'inefficient' allocation of blocks during 2004-2009; estimates
windfall gains to allotters at Rs 10.7 lakh crore.
May 29, 2012: Prime Minister Manmohan Singh
offers to give up his public life if found guilty in the scam.
May 31, 2012: The CVC, based on a complaint of
two BJP MPs, Prakash Javadekar and Hansraj Ahir, directs a CBI inquiry.
June, 2012: The Coal Ministry forms an
inter-ministerial panel to review the process of allocation of blocks and to
decide either on de-allocations or forfeiture of bank guarantees. Since then,
the government has taken back about 80 coal fields while bank guarantees in 42
cases have been forfeited.
August 2012: CAG's final report, tabled in
Parliament, tones down loss to exchequer figure to Rs 1.86 lakh crore.
August 25, 2012: The government claims CAG's
presumptive loss theory flawed, no mining yet.
August 27, 2012: PM says CAG flawed; "The
observations of the CAG are clearly disputable."
September 6, 2012: A PIL in the Supreme Court
seeks cancellation of 194 coal block allotments. The apex court begins
monitoring the CBI probe into the coal field allocations
March 2013: The apex court asks CBI not to
share probe details with the government.
April 23, 2013: The Standing Committee on Coal
and Steel in a report tabled in Parliament says coal blocks distributed between
1993-2008 done in unauthorised manner. Says allotment of mines where production
not started should be cancelled
April 26, 2013: CBI Director Ranjit Sinha
submits affidavit saying investigation report shared with Law Minister Ashwani
Kumar.
May 10, 2013: Ashwani Kumar resigns.
June 11, 2013: CBI registers first information
report (FIR) against Naveen Jindal and Dasari Narayana Rao.
October 16, 2013: CBI files an FIR against
industrialist Kumar Mangalam Birla and former Cal Secretary P C Parakh.
July 2014: The Supreme Court sets up a special
CBI court to try all coal field allocation cases.
August, 2014: The CBI decides to close its case
against Birla and Parakh.
August 25, 2014: The Supreme Court rules that
coal blocks allocated by the government between 1993 and 2010 were illegal.
ADB ups growth forecast to 6.3%
A revival of investment and improved growth in advanced economies is set to
benefit the Indian economy, says an Asian Development Bank report. The Asian
Development Outlook 2014, an annual publication by the ADB has maintained its
forecast for India’s growth for FY15 at 5.5 percent but has upgraded its
forecast for fiscal year ending 31 March 2016 (FY16) to 6.3 percent from 6
percent.
The Asian Development Bank is a regional development bank established on 22
August 1966 which is headquartered in Metro, Philippines to facilitate economic
development of countries in Asia. The bank admits the members of the United
Nations Economic and Social Commission for Asia and the Pacific (UNESCAP,
formerly known as the United Nations Economic Commission for Asia and the Far
East) and non-regional developed countries. From 31 members at its
establishment, ADB now has 67 members - of which 48 are from within Asia and
the Pacific and 19 outside
Industry lines up behind Modi’s pitch
Prime Minister Narendra Modi launched the ‘Make in India’ campaign at a
high-profile event on 25th September, which captains of industry from India and
abroad immediately joined by committing multi-crore investments and projects in
the presence of Mr. Modi.
Unveiling the campaign logo earlier, Mr. Modi said “FDI should be understood as
‘First Develop India’ along with ‘Foreign Direct Investment’” while encouraging
investors not to just look at India as merely a market but also as an
opportunity.
The Prime Minister pointed out that it was crucial to increase the purchasing
power of the common man to boost demand and thus spur development.
All about programme
The launch of Prime Minister Narendra Modi’s flagship ‘Make in India’ campaign
was simultaneous at the national, State and global level in Indian missions
abroad. The ‘Make in India’ initiative has its origin in the Prime Minister’s
Independence Day speech where he called for the initiative coupled with a ‘Zero
Defect Zero Effect’ policy.
Given the government’s intention to boost domestic manufacturing and create new
jobs, its proposal to introduce a new policy for Micro, Small and Medium
Enterprises (MSMEs)
India’s MSME sector has recorded more than 10 per cent growth in recent years
despite the economic slowdown.
MSMEs contribute nearly eight per cent to the national GDP, employing over
eight crore people in nearly four crore enterprises and accounting for 45 per
cent of manufactured output and 40 per cent of exports from India. Thus, the
focus of the government on MSMEs at this juncture is justified given their
potential for providing growth and employment.
In view of the significance of the sector, the government had announced a
number of measures in its first budget. Some of the significant initiatives
were setting up of Rs.10,000 crore of venture capital fund and establishing a
nationwide, district-level incubation and accelerator programme for encouraging
entrepreneurship.
Other important budgetary announcements included establishing a network of
Technology Centres; revising the definition of MSMEs for providing higher
capital ceiling, friendly legal bankruptcy framework to enable easy exit, a
programme to facilitate forward and backward linkages with multiple value chain
of manufacturing and service delivery to be put in place, and launching the
Skill India movement for youth with an emphasis on employability and
entrepreneurship.
A committee was also proposed to examine the financial architecture with a view
to removing bottlenecks and creating new rules and structures for the sector.
The government recently inaugurated a holistic, innovative and low-cost
National Small Industries Corporation’s online e-commerce shopping portal for
buying and selling of products produced by MSMEs.
MSMEs are mainly classified as manufacturing and service enterprises.
There is a specific stipulated limit on investment in plant and machinery for
each of the respective micro, small and medium segments in manufacturing with a
maximum limit of Rs.10 crore, and for equipment in service enterprises with a
maximum limit of Rs.5 crore.
MSMEs with 94 per cent of units unregistered are highly diverse in terms of
their size and the level of technology employed. The production in the sector
ranges from output of grass-root village industries and auto components, to
microprocessors, electronic components and electro-medical devices.
Since 1948, successive governments have been making intense efforts to
encourage MSMEs but the sector continues to be under stress.
The office of Development Commissioner for MSMEs was set up in 1954 and a
dedicated Ministry for MSMEs in 1999. The Small Industries Development Bank of
India (SIDBI), established in 1990, is the principal financial institution for
promotion, financing and development of the MSMEs in addition to commercial
banks, State financial corporations, and State industrial development
corporations.
Despite such efforts, some of the key problems faced by MSMEs continue to be
related to availability of technology, infrastructure and managerial
competence, and limitations posed by labour laws, taxation policy, market uncertainty,
imperfect competition and the skill level of the workforce.
‘Made in China’ launched…..
The Chinese government launched a ‘Made in China’ campaign, with a host of tax
concessions. China would encourage high-tech imports, research and development
(R&D) to upgrade ‘Made in China’, a decision by the Chinese government
said.
Under the new campaign, China will use tax breaks to encourage enterprises to
upgrade their equipment and increase R&D efforts to improve the
manufacturing industry. Companies that bought new R&D equipment and
facilities after January 1 or possess minor fixed assets will have taxes
reduced on the basis of value, the Cabinet, presided over by Premier Li
Keqiang, has decided.
Imported high-tech equipment will also enjoy tax deductions in aviation,
bio-medicine production, manufacturing of railway and ships, electronics
production, including computer and telecommunications, instrument production
and those used in making IT products and software, state-run Xinhua news agency
reported on 25th September.
China’s new move aims to prompt technical improvement of companies, especially
innovation of small and medium-sized enterprises, which in the past three
decades propelled it to become the world’s second-largest economy and made it a
powerhouse of the manufacturing industry.
China's manufacturing sector, a key driver of its economic growth, is regarded
highly competitive in the global market.
Govt. to shut six ailing PSUs
The government on 25th September said it has begun the process of reviving five
ailing PSUs and is working on one-time settlement involving voluntary
retirement scheme entailing a cost of Rs 1,000 crore for employees of six
state-run units not capable of revival.
Govt. trims borrowing target by Rs 8,000 crore
The Central Government on 26th September said it would borrow Rs.2.40 lakh
crore from markets in the second half of the current fiscal, Rs.8,000 crore
less than the annual estimate. With this, the borrowing by way of dated
securities (G-secs) for the entire fiscal will total Rs.5.92 lakh crore as
against the Budget Estimate (BE) of Rs.6 lakh crore. Borrowing calendar was
finalized by the government in consultation with the Reserve Bank of India.
S & P’s rating upgrade to boost foreign
investments
The global ratings agency Standard & Poor’s raised India’s sovereign
outlook from “negative” to “stable.” The upgrade signals a greater margin of
safety on creditworthiness and thus improves India’s attractiveness as an
investment destination to foreign investors. The benefits further extend to
Indian companies as overseas borrowing rates come down. The stable outlook
augurs well for the rupee that has weakened in the past week. The S&P cited
two reasons for the change in outlook. First, a stronger political mandate
improves the government’s ability to implement reforms, spur growth and improve
its fiscal performance. Then, India’s external account has improved.
With the S&P upgrade, all three major global credit agencies have now
placed India’s sovereign rating at the lowest investment grade but with a
stable outlook. S&P cut India’s rating to “BBB-minus” in April 2012.
Analysis
One of the significant reasons for the upward
revision according to S&P was that “the new government has both the
willingness and capacity to implement reforms necessary to restore some of
India’s lost growth potential. This is exactly what Mr. Modi appears eager to
convey through his Make in India campaign, launched in New Delhi’s
Prime Minister Modi struck pointed out how
Indian companies were forced to consider investing outside the country due to
policy flip-flops and delays in clearances. In that sense, his FDI — First
Develop India — was a signal to companies that his government would create an
enabling environment for investment, which he expected they would reciprocate
by committing their energies and investments to the country.
It is also significant that he thought it fit
to point out India’s low ranking as regards the ease of doing business,
assuring investors thereby that he was sensitising the bureaucracy to get its
act together on this critical point.
The jury will be out on this issue, going by
the experience of the collapse of similar efforts to untangle red tape.
Indeed, S&P has referred to the fiscal
constraints in terms of the high subsidy burden on the government, observing
that successive governments have been unable to either increase the revenue
base or curb expenditure.
The remarkable turnaround in the external
finances of the country with the current account deficit at a low of 1.8 per
cent has obviously been an important factor, along with political stability,
for S&P’s outlook revision.
Standard and Poor:
Standard & Poor's Financial Services LLC (S&P) is an American
financial services company. It is a division of McGraw Hill Financial that
publishes financial research and analysis on stocks and bonds. S&P is
considered one of the Big Three credit-rating agencies, which also include
Moody's Investor Service and Fitch Ratings. Its head office is located in New
York City
ADB sells its 5.2% stake in Petronet
Asian Development Bank (ADB) sold its entire 5.2 per cent shareholding in
Petronet LNG in a bulk deal on 26th September. ADB sold its 39 million shares
for Rs 183.2 apiece. The total transaction size was Rs 714.48 crore. Some of
the shares were bought by foreign institutional investor Citigroup Global
Markets (Mauritius) Pvt Ltd, HDFC Top 200 Fund and HDFC Equity Fund.The promoter
shareholders of PLL are Indian Oil Corporation, GAIL, ONGC and Bharat Petroleum
Corporation, which hold 12.5 per cent each.
SEBI notified final rules for REITs and InvITs
Security Exchange Board of India on 26th September 2014 notified the final rules
for setting up of Real Estate Investment Trusts (REITs) Regulations 2014 and
Infrastructure Investment Trusts (InvITs) Regulations 2014. The notifications
would help in attracting more funds in a transparent manner into the realty and
infrastructure sectors.
The notification on REITs has been issued after SEBI in August 2014 said that
the REITs should operate with an asset pool of at least 5 billion rupees (81.8
million dollars). It also said that the REITs should have an initial issue size
of at least 2.5 billion rupees for shareholders.
About REITs and InvITs
The REITs and InvITs are listed entities that mainly invest in income-producing
assets, the earnings of which are mostly distributed to their shareholders.
They generally get special tax treatment.
SBI and Korea bank agreement
State Bank of India (SBI), on 26th September 2014 announced that it has signed
a Line of Credit (LoC) of 500 million dollar with Export-Import Bank of Korea
(Korea Eximbank). The LoC will be utilised to provide finance to SBI’s clients
in India and neighbouring countries that have business relationships either by
way of equity participation or regular trade with Korean companies globally, as
well as joint ventures or subsidiaries of Korean companies.
SBI, ICICI allowed kids to operate bank
accounts independently
State Bank of India (SBI) and Industrial Credit and Investment Corporation of
India (ICICI) on 24 September 2014 allowed kids to operate bank accounts
independently.
The bank account is available for all kids above 10 who can sign uniformly. A
uniform signature is a prerequisite since the banks are not making any
allowance in signature variation for children and cheques can be returned where
signatures do not match. On 5 September 2014, SBI had launched new accounts
Pehla Kadam and Pehli Udaan for kids.
Now, ICICI Bank has launched Smart Stars account and Federal Bank Limited has
Young Champ Account for minors. Further, ICICI Bank has imposed a debit
transaction limit of 50000 rupees annually for minor-operated accounts. If the
account is operated with a guardian's consent, the annual limit is enhanced to
2 lakh rupees.
The banks are offering full-fledged services to minors, including photo debit
cards and access to mobile and net banking.
These minor-operated accounts were allowed by the Reserve Bank of India in May
2014 to inculcate savings behavior among the young. The only condition was that
minors should not be given any overdraft or credit facility.
Use technology to detect fraud, tax panel tells
customs
The Tax Administration Reform Commission (TARC), headed by Parthasarathi Shome,
has recommended that the Customs department shift its focus from traditional
methods of processing trade documents to a risk-management system with greater
reliance on technology.
While the Customs department has initiated a risk-based management system, it
has not developed an enterprise risk management framework. The framework should
facilitate legitimate trade while subjecting riskier transactions to closer
scrutiny, the report said.
The report is the second in a series by the commission. The first report, filed
in June, had recommended abolition of the post of revenue secretary and merging
CBEC and the Central Board of Direct Taxes (CBDT). Such far-reaching
recommendations were not part of the second report.
The commission said risk-based management included principles of
self-assessment that the Customs department had already incorporated. However,
the philosophy behind self-assessment had not been internalized in the
department, particularly at the operational level.
