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| July 21, 2017 |
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Impact 
In the near future, you will see fewer Public Sector Banks (PSBs) operating through the country. This sounds slightly unusual, especially, considering that RBI has been issuing licenses to new banks.
The Government is pondering on merging the existing PSBs to create 3-4 behemoths that can take on the global competition. If things pan out as planned, the number of PSBs will drop to 12 from the current count of 21.
As per the recent media reports, post consolidation, financially stable banks such as Bank of India (BOI), Bank of Baroda (BOB), Punjab National Bank (PNB) and Canara Bank, besides State Bank of India (SBI), will continue to exist apart from a few nationalised regional focused banks.
The obvious question that may come to your mind is, if we need more banks, why is the Government trying to create a monopoly for a few players?
The dire state of many PSBs and inability of the Government to pump in the fresh capital has left very few options open. For example, Indian Overseas Bank, Central Bank, UCO Bank, IDBI Bank, and Dena Bank have been under tremendous stress and barely managing to run the show. Merging weaker banks with stronger ones will eliminate the need to introduce fresh capital separately to these banks. Moreover, a more powerful hand gaining control of affairs will result in improved operational performance.
As proposed by the Finance Ministry, Indian PSB will have a 3-tier structure. This is in line with the recommendations of the Narasimham Committee. About 2-decades ago, Narsimham Committee had categorically prescribed a 3-tier structure for Indian banks, as a part of its recommendations on banking reforms. The committee was of the view that, India should have 3-4 international banks, 8-10 national banks and a number of regional banks. The Government seems to be convinced with this structure.
But contrary to the efforts of the Government to merge weaker banks with stronger players, the Committee was in favour of merging two strong banks.
After the amalgamation of SBI with its associates, the idea was to consolidate other PSBs. Quite predictably, the RBI and Government are on the same page on this issue. Even more predictably, bank unions are opposing the proposal to merge PSBs gained further ground lately.
Speaking about the issue of merger, the RBI Governor Dr Urjit Patel said, “As many have pointed out, it is not clear that we need so many public sector banks. The system could be better off if they are consolidated into fewer but healthier banks.”
Echoing these views, the Finance Minister stated, “We have now relooked at the whole system and there are some institutions within the public sector banks which can be consolidated even in the present circumstances. We are seriously examining them.”
All India Bank Employees’ Association expressed contrasting views—“The myth that big banks are automatically strong banks has since been broken by such huge bank failures. But unfortunately, the Government is pursuing this fatal policy, risking the hard-earned savings of the common people. Big banks would mean taking bigger risks which our country can hardly afford. Hence, we must oppose these pursuits of mergers and amalgamation of banks.”
Will anything change on the Non-Performing Assets (NPAs) front?
It’s difficult to predict this for now. But if the Government allows private sector entities to bid for its stake in PSUs, it will help resolve the problem of NPAs. Unless private capital enters the Indian Banking systems, addressing the issue of NPAs would be a deadlock.
The recent merger between ONGC and HPCL is a precursor of what may unfold in the banking sector. But unlike with the case of oil majors that are on a much better financial footing, none of the PSBs will have the appetite to bid for the Government’s stake.
If the health of PSBs improves, achieving above 8% growth would become easier.
What will change for depositors?
For now, it’s a wait and watch game. But one would expect quality of service to improve which at present has been rather poor in most PSBs.
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Impact
Do you use mobile apps to order your groceries, book a cab, manage your payments or do banking transactions?
In all likelihood, you do.
Have these apps made life convenient? For most of you, the answer would be “Yes”.
Reportedly, the Income-Tax (I-T) Department has been developing a mobile app in-house —‘My Tax App’— which it believes will help individuals handle all their tax concerns. While you can personalise this app through a unique login, so far it’s unclear if you can file a tax return using it.
To read more about this story and Personal FN’s views over it, please click here.
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Impact
Sometimes, even prominent media players misinterpret current developments.
A few days ago a story broke about NRIs being required to share the details of their foreign bank accounts with the Income-tax (I-T) Department. This seems to have created some confusion even among the finest news reporters and tax experts.
Some background...
For the purpose of taxation, if you stayed in India for less than 182 days in a financial year or more than 60 days in a year, but not more than 365 days over the earlier 4 financial years, you are classified as Non-Resident. As per I-T rules, Indian residents have to disclose their foreign bank accounts to the taxman. However, it's now believed that even non-residents too have to reveal details of accounts held abroad.
To read more about this story and Personal FN’s views over it, please click here.
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Impact 
Life is full of uncertainties.
Due to certain unavoidable circumstances, there is a possibility that you could end up missing the due date to file your tax returns. Another setback is the anxiety of having to pay a penalty for this lapse.
You may have read that a delay in filing tax returns could attract a fine that can go up to Rs 10,000, under the provisions of a new Section 234F of the Income Tax Act.
If this is a stressor, stay calm because the penalty for default, under Section 234F, is applicable from next year.
But please note, the penal interest will still apply. This could be a considerable amount if your tax dues are high.
To read more about this story and Personal FN’s views over it, please click here.
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Impact
Last week, the retail inflation (measured by the Consumer Price Index (CPI)) for June came in at 1.54%, lower from 2.10% in May. This historic low, attributed to a persistent dip in prices of food items like vegetables, pluses, eggs, and milk products, pushed food inflation (which has a weightage of around 45.86% in the CPI basket) down to the negative terrain of –2.1%.
After the CPI inflation data release, Chief Economic Advisor, Mr Arvind Subramanian said, "1.54% is historically low and reflects the firm and on-going consolidation of macro-economic stability…this low heartening number has been consistent with our analysis for some time now."
And perhaps paying cognisance to the fact that industrial activity has been anaemic, wobbly and economic growth has dwindled, expectations of a policy rate cut from the Reserve Bank of India (RBI) resurfaced again.
To read more about this story and Personal FN’s views over it, please click here.
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Impact
Beware!
Operation “Clean Money” is underway…
In the first wave of scrutiny, the Income-Tax (I-T) Department had identified nearly 17.92 lakh people who were questioned about their deposits. About 9.72 lakh people have already submitted their online responses.
Recently, the I-T Department sent SMS’ and emails additionally to nearly 5.5 lakh citizens, seeking an explanation.
Their deposits during demonetisation didn’t tally with their tax profile.
To read more about this story and Personal FN’s views over it, please click here.
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How Working Women Should Manage Their Personal Finances
Why You Should Begin Tax Planning Early
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If you are planning to pay someone abroad in crypto-currencies such as Bitcoin; you will have to fulfil the KYC (Know-Your-Customer) norms. The Government plans to introduce KYC norms for cross-border crypto-currency transactions, in the wake of increasing instances of money laundering and terror funding using crypto-currencies.
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Cryptocurrency: A cryptocurrency is a digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of this security feature. A defining feature of a cryptocurrency, and arguably its most endearing allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation.
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Quote :“The blockchain keeps everyone honest, and a whole layer of banking bureaucracy is removed, lowering costs.” - Paul Vigna
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