Tag: Covid-19

Jana SFB expands its branch network to 601

Banking & Finance

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Jana Small Finance Bank digitally inaugurated 18 bank branches in Maharashtra.

With the conversion of its asset centres to bank branches, Jana Bank’s presence in Maharashtra will reach 70 and 601 all India.

Maharashtra is the second highest of the 22 States where the bank has a presence. Staying true to their promise of paise ki kadar, Jana Bank is all set to increase its footprint across rural India.

Jana Small Finance Bank started its journey in Maharashtra in 2010 and have served over 15 lakh customers in the State who are mainly women. The bank offers unsecured loans to women under the group loan model as well as individual loans for small businesses.

The average loan size for the group loan model is ₹34,900 and individual loan for small businesses ₹60,000. The bank also offers agriculture loan, MSME loans, gold loan, affordable home loan & home improvement loan. With the conversion of asset centres into bank branches our customers will now be able to avail of banking products like savings account, current account, fixed deposits, recurring deposits, OD account.

Ajay Kanwal, MD & CEO, Jana Small Finance Bank said, “All our new branches across Maharashtra have digitised environment with best in class offerings”.

M Rajeshwar Rao, Deputy Governor, Reserve Bank of India said “Credit expansion is an important ingredient of growth and prosperity. There are enormous opportunities to bridge the financial inclusion gap in the country and I am happy to note that Jana Small Finance Bank is committed to do so.”

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Rollback of policy support can impact health of banks: RBI

Banking & Finance

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The Reserve Bank of India has warned that as policy support is rolled back, the impact of the Covid-19 pandemic can make a dent in the health of banks and non-banks in 2020-21.

With the gradual rollback of policy measures, deterioration in asset quality may pose challenges, although the build-up of buffers like Covid-19 provisions and fund-raising from market may help alleviate the stress, the RBI said in the Report on Trend and Progress of Banking in India 2019-20.

The RBI observed that with the loan moratorium coming to an end, the deadline for restructuring proposals is fast approaching. And, with the possible lifting of the asset quality standstill, banks’ financials are likely to be impacted in terms of asset quality and future incomes.

Going forward, the housing finance sector may need to brace for large slippages of loan assets and higher provisioning, said the report.

The RBI underscored that the data on gross non-performing assets (GNPA) of banks are yet to reflect the stress, obscured as they are under the asset quality standstill with attendant financial stability implications. An unprecedented economic contraction has taken its toll on the financials of banks and non-banks and purveyed a generalised risk aversion that has reduced the efficacy of the financial intermediation function, it added.

“Although stretched asset valuations are in apparent disconnect with the real economy, life support in the form of adequate credit flows to some of the productive and Covid-stressed sectors has been deficient. Going forward, the restoration of the health of the banking and non-banking sectors depends on how quickly the animal spirits return, and on the revival of the real economy,” the RBI said.

Its analysis of published quarterly results of a sample of banks indicates that their GNPA ratios would have been higher, in the range of 0.10 per cent to 0.66 per cent, at end-September 2020. Scheduled commercial banks’ GNPA ratio declined from 9.1 per cent at end-March 2019 to 8.2 per cent at end-March 2020 and further to 7.5 per cent at end-September 2020.

Subdued profitability

The central bank assessed that going forward, the muted credit expansion, the persistence of a low interest rate environment and the impending asset stress on account of the pandemic suggest that the profitability of banks is likely to remain subdued.

Covid-19 provisioning and ploughing back of dividends would help shield banks’s balance-sheets from stress to a certain extent, it said.

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What you need to know about assured income plans

Personal Finance

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The Covid-19 pandemic has led to increased awareness, and interest, about life insurance and more importantly about in financial security. Taking cues from this, some life insurers have launched guaranteed income products — Assured Income Plus Plan by Aditya Birla Sun Life and New Assured Wealth Plan by Future Generali are a few of them to name.

These products are considered long-term savings plans that offer assured returns at a pre-determined rate at regular intervals. But they may not suit everyone. The premium for these products are on the higher side compared to term plans.

So, before you go for an assured income plan, you must understand the basics of the product to decide if it meets yours and your family’s requirements.

How does it work

Guaranteed income products are usually non-participating, non-linked policies. That means, these products are not market-linked and insurers don’t share profits of the company (in the form of bonus) with the policyholders. Instead of declaring bonus, life insurers provide guaranteed returns (at a pre-determined rate on total annualised premium paid) and sum assured will be paid on maturity.

Many insurers offer the choice on how you want to receive your maturity amount, provided the premiums have been paid regularly. You can receive the pay-out either monthly, quarterly, half-yearly or annually or as a lump-sum.

When it comes to premium, you have the option of paying for a limited period while the policy covers you for the entire period. Most insurers offer 3-4 options for premium payment term. That means, if it’s a 20 year policy, you could pay premium for, say, five years only, and the policy will continue to cover you for another 15 years.

In case of death of the policyholder during the policy period, most policies in the market would pay the sum assured to the nominee, higher of 10 times of annualised premium or 105 or 110 per cent (varies with each policy) of total premiums paid up to the date of death.

Advantages

Guaranteed products come with a few advantages. One, the maturity proceeds from such products are exempt from tax. Two, policyholders get a fixed rate (determined at the time of policy issuance) until maturity of the policy. According to Vivek Jain, Head – Investments (Life Insurance), Policybazaar.com, the top guaranteed products in the market offer 5.5 to 5.8 per cent on average as return. This is in addition to the life cover they offer. On the other hand, guaranteed life insurance plans are suitable mainly for risk-averse individuals. Sarita Joshi, Product Head, Probus Insurance, says, “People who are aged 40-years and above should consider adding guaranteed product to their investment portfolio”

Also, guaranteed products usually entail high premium payments in the initial period when compared to plain vanilla term covers. The maturity proceeds are received only after a long period of, say 15 or 20 years. Your money gets locked-in for a long time and your returns may not always factor in the prevailing inflation.

Today, with interest rates having possibly bottomed out, and expected to rise going forward, you will be locking in to a conservative return for the next 10-15 years. Further, it is advisable to opt for a term plan for protection and consider other financial instruments, if one wants better returns.

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Barriers to a cashless society in India, BFSI News, ET BFSI

Personal Finance

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by Padmini Gupta, CEO and Co-founder rise Fintech

Padmini Gupta, CEO and Co-founder rise Fintech

Despite much-debated demonetisation and the massive stigma associated with cash circulation, currency usage in the Indian economy is poised to hit an all-time high. Currency in the hands of the public is now crossing $26 trillion and given the economic contraction is likely to be around 15% of GDP this year – a record high. ATM withdrawals are back up in October / November this year after suffering a decline in the first half of the year. This is happening at the same time as digital payments are taking off. The number of users of Unified Payment Interface or UPI has nearly doubled in a year, with the number of UPI transactions on apps such as Google Pay or Phone Pe nearing 2.2 billion in November 2020, with a total value exceeding Rs 3.3 trillion.

The case for digital payments
It is a case of two extremes. Despite the astonishing growth of digital payments – cash still accounts for around 70% of all consumer transactions in the country. This is despite all the gains made by UPI and digital payment methods. It’s important to understand that the number of people using UPI in India is still around 150 million, while the number of unique credit card holders is only approximately 35 million. This gap looks even starker if you compare to it the total number of debit cardholders which is around 850 million – clearly highlighting that even though many people can use UPI to transact, they do not. Understanding why requires a view into who still spends in cash in India and what are the barriers to digital payment adoption.

Three barriers to going cashless
The very first being the income barrier. Once you get paid your salary in cash, it becomes exceedingly challenging to digitise that cash and transact digitally. Over 75% of the Indian labour force is employed in the informal sector, and more than 100 million micro-loan accounts are serviced in cash every week. For this stratum of society, if they get paid in cash–they will transact in currency. Once the informal sector workers who are migrants start receiving their salaries in their bank accounts, it will change the face of digital India. Digitising payments would also make it much simpler for individuals to calculate and file their income taxes and for governments to make sure they are being paid.
Building on the momentum, fintech companies in India need to develop a digital ecosystem to facilitate greater access to finance to informal and new-to-bank segments. It is time fintech’s launch new apps digitising the informal sector. Many such apps have already been launched which allows people to share access to their cards or UPI, with their tribe members in a secure, digital and controlled manner is such a game-changer. The first time someone uses UPI is likely to be handheld by a friend or family member and likely transacting on their UPI id or card – rather than creating an account of their own. The app will facilitate activities in the digital market for those who rely heavily on cash, individuals who do not get paid into a bank account and even families of international migrants that receive their remittances in cash and hence spend in cash. The second they were the infrastructure barrier. Another large section of society either lives in low connectivity areas or transacts mainly with merchants who are not comfortable accepting digital payments. This goes back to the point of informal labourer. Suppose your local thela guy or your domestic helper is a migrant who is not necessarily licensed to do this job. In that case, he/ she is unlikely to set up a merchant account to receive UPI payments and will continue to rely on cash payments as a way to transact – both upstream (buying his goods) and downstream (accepting from his customers). Apart from the various government policies, factors that enable going cashless will be the penetration of technology, such as smartphones, e-commerce, and internet access adding to the penetration of banking services, such as online banking, mobile banking, cards, and POS devices.

The last barrier in the motivation barrier and includes both consumers and merchants who have no obstacles to use digital tools, but decide not to for reasons associated either with the comfort of using digital tools or other reasons (like tax avoidance). This is where regulatory efforts like requiring PAN for large cash transactions will drive the adoption of digital tools. However, this is also, where for a section of society – especially elders – where community support and training can play a significant role.

The right environment
The real questions are, how do you circumvent these barriers? By making both top-down supply-side efforts, including regulatory push and bottom-up community-driven push to adopt digital payments. Apart from promising regulatory environment, factors that enable going cashless are the penetration of technology in rural India, such as smartphones, e-commerce, and internet access plus the penetration of banking services, such as online banking, mobile banking, cards, and POS devices. This group demands flexibility in terms of price, mobility, and a low entry threshold. The pandemic has given the slow rise of digital currency a gigantic boost. The shift will be disruptive but is a leap in the right direction. To conclude, we believe that the longer the pandemic will last, the more cashless-friendly the societies will become. COVID-19 has changed people’s behaviour, and this change is likely to be permanent.

DISCLAIMER: The views expressed are solely of the author and ETBFSI.com does not necessarily subscribe to it. ETBFSI.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.



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What should home buyers know about stamp duty and registration charges?

Personal Finance

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Since the outbreak of the Covid-19 pandemic, demand for house property has slowed, with many postponing big-ticket purchases. In a bid to attract home buyers, the Maharashtra Government recently announced reduction in stamp duty rates on property purchases. It has lowered the stamp duty rate to 2 per cent (from 5 per cent) of the property value; this is applicable across Maharashtra from September 1 to December 31, 2020. The State has kept the stamp duty rate at 3 per cent from January 2021 to March 31. This reduction in stamp duty rates is expected to boost residential demand, and help developers bring down the level of unsold inventories in the market.

With demand slowdown in the property market and economic uncertainty, property prices too have remained stagnant, and in some regions it has declined. As stamp duty rates (and registration charges) add to the total cost of the property, any increase or decrease in these rates influences demand to some extent. So, if you are looking to buy a property, it would be good to have a fair idea about these charges.

Basics

In addition to the property price, a home buyer has to incur other charges as well, most of which are mandatory. Among such unavoidable expenses are stamp duty and registration charges that are payable to the respective state Governments.

Stamp duty is the tax levied when a property is transferred from the seller to the buyer.

The receipt or acknowledgement of payment of stamp duty is a crucial, legally recognised document that acts as proof of ownership in court, in case of any dispute. So you are considered an owner of a house property when your sale agreement is registered and signed, and the stamp duty and registration charges are paid. Stamp duty is applicable on conveyance deeds, sale deeds and power of attorney papers and this rate varies with each State (2-8 per cent). For instance, stamp duty in Maharashtra is currently around 2 per cent of the value of the property, while in Tamil Nadu, it is around 7 per cent.

Registration fee, on the other hand, is charged to record the execution of transaction between the buyer and the seller. This, too, varies with each State. For instance, in Maharashtra, registration charges are around ₹30,000 (flat fee), while in Karnataka, it is 1 per cent of the value of the property.

The amount paid as stamp duty and registration charges depends on the value of the property and the circle rate (price of the residential or commercial property or land for a given area, published and regulated by the state government), whichever is higher.

Aarthi Lakshminarayanan, Partner, Shardul Amarchand Mangaldas & Co, says “The value of any house or building, in Tamil Nadu, is arrived at based on a common schedule of plinth area rates prepared by the PWD department and published by the Government of Tamil Nadu every year”.

Do keep in mind that, both stamp duty and registration charges, are over and above the purchase value of the property. So, if you are a buyer, plan for such outgo as well at the time of buying a property.

Say, the house property you plan to buy is a resale property and costs ₹1 crore. While this is the price you pay to the seller, you will have to pay stamp duty of, say, 7 per cent and registration of, say, 4 per cent, (on ₹1 crore), in addition to the purchase price. In total, you will pay ₹1.11 crore (₹1 crore plus 11 per cent on ₹1 crore).

In case of under-construction property, the payment varies with each state. In Tamil Nadu, for instance, you will pay stamp duty on the guideline value or market value of undivided share (land), whichever is higher. Say, the cost of property is ₹60 lakh, of which the undivided share of land accounts for ₹20 lakh, then the stamp duty (7 per cent) and registration charges (4 per cent) are levied on this amount. On the balance ₹40 lakh, registration charges of 1 per cent (in Tamil Nadu) on the cost of construction or the amount mentioned in the construction agreement, whichever is higher, will apply. The Government of Tamil Nadu also charges 1 per cent stamp duty on the same. You will also have to pay Goods and Services Tax (GST) (around 5 per cent or 1 per cent in case of affordable housing) on the total consideration of the property. GST is not applicable on completed properties.

Payment

Usually, it is the buyer who pays the stamp duty at the time of registration of property. There are two popular ways to make this payment: e-stamping and through non-judicial stamp paper.

When it comes to e-stamping, a buyer has to visit the website of Stock Holding Corporation of India, the central record keeping agency for all e-stamps in the country. It has authorised collection centres (ACC) that issue such e-stamps. You can go to schilestamp.com and check if your State government provides for such facility.

So, if your State allows e-stamping, first you will have to fill an application by providing details of the transaction, name of the parties involved (buyer and seller) and PAN number of the parties, value of the property (for which stamp paper is required), and mode of payment (NEFT/cheque/DD). If you are making payment via NEFT, then the website will generate an acknowledgement for the payment. Next, at the ACC, buyers/payers have to submit the filled up form along with the amount to be paid as stamp duty or submit acknowledgement. The e-stamp certificate will be generated immediately after realisation of the funds.

The advantages of using e-stamps are that it can be generated within minutes and is tamper proof. But on the downside, once an e-stamp is generated, it is a difficult process to modify or cancel the e-stamp; so, fill the details with care.

With restrictions of movement due to the coronavirus, home buyers can pay stamp duty online and print e-stamp certificate from home. But this facility is provided only by a few states such as New Delhi, Karnataka and Chandigarh. You can also use the e-payment facility, if provided, by your State government for making payment of both stamp duty and registration charges.

Another and the most common method of paying stamp duty is by purchasing non-judicial stamp paper from a licensed vendor. Under this, the stamp paper — either purchased for the value of the stamp duty or a lesser amount (rest can be remitted as cheque or DD to the designated banks), will contain the agreement details and should be signed by the parties involved.

Note that once the payment of stamp duty is made and signed by the parties, registration of the property can be done immediately or within a certain time period, say three to six months. The applicable registration charges will be paid at the time of registration of property.

Payment modes:

e-stamping

e-payment

Non-judicial stamp paper

Additional cost to buyer

Stamp duty and registration charges are costs over and above the cost of a house property

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