Tag: Nirmala Sitharaman

Restored normalcy in PSU banks hamstrung by sticky bad assets: Finance minister Nirmala Sitharaman

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She said there are lot of changes happening in the banking sector at a fast pace through digitisation. (File)

Union finance minister Nirmala Sitharaman on Sunday said the government was able to bring back normalcy with regards to mounting non-performing assets (NPAs) in most of the public sector banks that have been a cause of concern since 2014.

The Centre, apart from infusing required capital, monitored  the PSU banks with regular assessment and reviews while taking prompt corrective actions.

Inaugurating the centenary celebrations of Tamilnad Mercantile Bank (TMB) at Tuticorin, Sitharaman said the problems in banking sector are major problems that concern the entire country which also made everyone feel concerned about the sector.

“Post 2014, we had witnessed major NPA problems in the PSU banks, it took five to six years to reverse the trend and bring back normalcy in most of the banks. While the banks spent energy in the recovery process, even as trying to grow their businesses,” she said.

While speaking on bringing about the efficiency in the banking system, she said the way forward for any bank was to adopt complete technology-enabled solutions.

“Today financial technology is the biggest area and using that we could cross-populate data into forms. Auto-populating data of a consumer has been very useful and it can be done only through digitisation and the management of TMB should think of greater use of digitisation. Digitisation cannot be avoided for your own good and for the sake of customers,” she said.

She said there are lot of changes happening in the banking sector at a fast pace through digitisation. “There is no necessity to open a branch in a place which does not have a  bank. To reach a customer’s bank account of the people who live there, all kind of technologies are available today. Even sitting from Tuticorin one can serve the banking requirements of people living in small villages through technology”, she said.

Sitharaman said even during Covid-19 pandemic with the use of digitisation through banking correspondents, the government’s financial disbursements were distributed to the needy after verifying their details.

“Prime Minister Narendra Modi was clearly aware that banking is important and did not hesitate that there can be zero balance accounts if they were opened under the Jandhan Yojana scheme, launched in 2014. He ensured that every one must hold a bank account and be able to transact,” she said.

K V Rama Moorthy, MD & CEO, TMB, said, “To help borrowers to overcome the adverse impact of Covid-19, till date, the bank has covered 13,753 beneficiaries and the exposure to the tune of Rs 1,567.62 crore. In the era of digital banking, we were the first bank to introduce robotics in currency chest to sort and bundling of currencies in order to provide quality service to the customers. Disbursement of loans to pharma and health care units will be at the heart of a year- long series of events and initiatives from us.”

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Delay in legislation on crypto boosts lobbying, BFSI News, ET BFSI

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NEW DELHI: The delay in the government finalising the legislation on cryptocurrency has prompted intense lobbying, with agencies worried over the risks emanating from an unregulated segment with extreme price volatility, posing a threat to investors, many of whom do not understand the instrument.

Besides, there are concerns over the instrument being used for money laundering and terror funding, an issue that has been flagged by other agencies across the globe, sources told TOI.

While the Supreme Court had lifted the ban imposed by the RBI, the government had listed a bill on cryptocurrency to be introduced during the Budget session of Parliament but with the session cut short, the legislation could not make it.

During the monsoon session, the government remained silent on the future of the proposed bill with finance minister Nirmala Sitharaman recently saying that it has been sent for clearance by the Union Cabinet before it can be introduced in Parliament. The next session is at least two months away.

But crypto exchanges have used the interim period to launch a massive lobbying initiative with several governments and regulatory agencies, raising concerns. The exchanges have argued that a ban on digital currency transactions will result in job losses.

While there are fears that a ban will lead to investors getting locked into the instrument, sources indicated that a three-six month window will be provided for investors to exit.

Several officials have junked the argument that crypto currencies are an asset class. Besides, there are worries over the legal basis for the presence of some of the exchanges, which remain outside the jurisdiction of either Sebi or the RBI. “There has to be global coordination to combat the challenge posed by cryptocurrencies. They are not a currency as only the sovereign can issue currency. There is a grave danger in allowing these instruments,” said a source.



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Finance Minister Nirmala Sitharaman lays foundation for Income Tax office building, BFSI News, ET BFSI

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Union Finance Minister Nirmala Sitharaman on Sunday laid the foundation for the office building of the Income Tax Department in Bengaluru, which officials said, would be one of its kind, oriented to harness maximum natural lighting and GRIHA rating IV compliant. The building has provision for solar panels for power generation and a Rain Water Harvesting system, they said.

Recycled water will be used for gardening and dual plumbing. The Central Air Cleaning system will be equipped with magnetic filter and UV-Ray Sterilization, officials said, adding the building will be constructed by the Bengaluru Project Circle of the Central Public Works Department.

The officials said the state-of-the art building will comprise an exclusive public relations office to address grievances on priority and a waiting lounge for tax payers.

It also houses Aaykar Seva Kendra for providing hassle free taxpayer services. This centrally located office building is taxpayer friendly. Design and space allocation of the building provides congenial working environment for officers and staff of Income Tax Department, they said.

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Will Centre’s crypto hesitancy extinguish a thriving asset class?, BFSI News, ET BFSI

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While the Cabinet ruminates on the cryptocurrency bill, 15 million Indians are now trading in digital coins. This almost puts us in the same league as the US where 23 million people trade in cryptos. At this point, the lack of legal clarity seems to be the only thing stopping a cryptocurrency revolution in India.

For the Indian investor, with cryptocurrency comes hesitancy, particularly in the face of hostility from the Reserve Bank and the Finance Ministry. However, investments in crypto have grown from around $200 million to nearly $40 billion in the past year, as per Chainalysis.

“We are hoping for positive regulations from the government that give clarity to investors and foster the crypto industry further,” said Sharan Nair, Chief Business Officer of crypto exchange platform CoinSwitch Kuber. “There are many people who have been hesitant to invest in cryptocurrencies due to the lack of legal clarity,” he added.

CoinSwitch Kuber has seen exponential growth since beginning operations in June 2020, and expects growth to speed up even more in the event of a favourable regulatory outcome.

“We’ve always voiced in favour of regulatory clarity around crypto assets and we’re looking forward to a regulatory framework that protects investor interest and helps businesses grow in this industry,” said Avinash Shekhar, Co-CEO of cryptocurrency exchange ZebPay.

Zebpay is one of the biggest crypto exchange platforms in the country with over 4 million users and over $1 billion in monthly transaction volumes.

The RBI’s view has been that cryptocurrencies are distinct from blockchain technology. “The Reserve Bank’s position has been that cryptocurrencies should be banned,” Finance Minister Nirmala Sitharaman recently told ET.

An inter-ministerial panel headed by former finance secretary Subhash Chandra Garg had earlier submitted a report seeking a ban on cryptocurrencies and authorising a digital currency of the RBI.

However, there has been more positive messaging from the Finance Minister: “We are not saying no to cryptocurrency. We are saying we’ll have to see how this technology can help fintech maximise the potential that it has,” Sitharaman said.

Crypto exchanges believe that a regulatory framework for crypto assets is the way forward instead of a blanket ban.

“We do not believe that a complete ban is likely as there have been some positive comments from the Finance Minister and talks of developing blockchain technology that is quickly gaining global prominence,” explains Nair.

Cryptocurrencies are also seeing wider acceptance among both retail and institutional investors. India should not be left behind in this revolution, he adds.

There are examples of other countries like Singapore that have effectively implemented laws and regulations around crypto assets, Shekhar points out. “We hope to see regulations that will help investors to experiment with this new asset class and take advantage of this global market.”

Sitharaman wants to work with the Reserve Bank to try and make the regulation a sophisticated one. “I can say the work is nearly complete. It is now for the cabinet to go into it,” the FM told ET.

RBI has indicated that it might soon unveil a central bank digital currency (CBDC), which is legal tender in digital form; essentially a digital rupee. Both Nair and Shekhar – despite differences with RBI on the future of crypto assets – believe this is a step in the right direction.

“e-RUPI, though not backed by blockchain, was a huge step towards acceptance of digital currencies. India’s own CBDC will make transactions and transfers easier”, Nair says.

Shekhar looks forward to seeing the design and role of a nationalized cryptocurrency in the Indian economy: “Especially, the features of the crypto — whether it’ll have a public ledger or not, the type of blockchain it’ll function, and so on.”

Let’s see how it’s handled, Sitharaman remarked.

“Is it possible with just a notification and a rule or is legislation definitely required? It’s a call which the cabinet will have to take,” she said.



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Depositors of stressed 23 cooperative banks including PMC to get up to Rs 5 lakh back, BFSI News, ET BFSI

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Depositors of stressed banks like Punjab & Maharashtra Cooperative (PMC) Bank are now set to get up to Rs 5 lakh back from November 30 as the government has notified the amendment to the DICGC Act.

Parliament earlier this month passed the Deposit Insurance and Credit Guarantee Corporation (Amendment) Bill, 2021 ensuring that account holders get up to Rs 5 lakh within 90 days of the RBI imposing moratorium on the banks.
The amount of Rs 5 lakh would be provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC).
The government has notified September 1, 2021 as the date on which the provisions of the Act shall come into force, according to a gazette notification dated August 27, 2021.

“In exercise of the powers conferred by sub-section (2) of section 1 of the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, 2021 (30 of 2021), the Central Government hereby appoints the 1st day of September, 2021, as the date on which the provisions of the said Act shall come into force,” it said.

Effective date

Consequently, 90 days from the effective date is November 30, 2021 for depositors to get their funds back.

The first 45 days are meant for the bank, which has come under stress, to collect all the details of the accounts where the claims will have to be made. This will then be forwarded to the insurance company, which in real-time will check it all up, and nearer the 90th day, depositors will get the money, Finance Minister Nirmala Sitharaman had said.
The benefit will also accrue to the depositors of 23 cooperative banks which are in financial stress and on which the Reserve Bank of India (RBI) has imposed certain restrictions.

DICGC, a wholly-owned subsidiary of the RBI, provides insurance cover on bank deposits. At present, it takes 8-10 years for the depositors of a stressed bank to get their insured money and other claims.

Cooperative bank failures

Though the RBI and the Centre keep monitoring the health of all banks, there have been numerous recent cases of lenders, especially cooperative banks, being unable to fulfil their obligations towards the depositors due to the imposition of a moratorium by the RBI.

Last year, the government increased the insurance cover on deposits by five times to Rs 5 lakh. The enhanced deposit insurance cover of Rs 5 lakh came into effect from February 4, 2020. Every bank used to pay 10 paise as an insurance premium per Rs 100 of deposit.



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Depositors of stressed banks to get up to Rs five lakh back from November 30, BFSI News, ET BFSI

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Depositors of stressed banks like Punjab & Maharashtra Cooperative (PMC) Bank are now set to get up to Rs 5 lakh back from November 30 as the government has notified the amendment to the DICGC Act. Parliament earlier this month passed the Deposit Insurance and Credit Guarantee Corporation (Amendment) Bill, 2021 ensuring that account holders get up to Rs 5 lakh within 90 days of the RBI imposing moratorium on the banks.

The amount of Rs 5 lakh would be provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC).

The government has notified September 1, 2021 as the date on which the provisions of the Act shall come into force, according to a gazette notification dated August 27, 2021.

“In exercise of the powers conferred by sub-section (2) of section 1 of the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, 2021 (30 of 2021), the Central Government hereby appoints the 1st day of September, 2021, as the date on which the provisions of the said Act shall come into force,” it said.

Consequently, 90 days from the effective date is November 30, 2021 for depositors to get their funds back.

The first 45 days are meant for the bank, which has come under stress, to collect all the details of the accounts where the claims will have to be made. This will then be forwarded to the insurance company, which in real-time will check it all up, and nearer the 90th day, depositors will get the money, Finance Minister Nirmala Sitharaman had said.

The benefit will also accrue to the depositors of 23 cooperative banks which are in financial stress and on which the Reserve Bank of India (RBI) has imposed certain restrictions.

DICGC, a wholly-owned subsidiary of the RBI, provides insurance cover on bank deposits.

At present, it takes 8-10 years for the depositors of a stressed bank to get their insured money and other claims.

Though the RBI and the Centre keep monitoring the health of all banks, there have been numerous recent cases of lenders, especially cooperative banks, being unable to fulfil their obligations towards the depositors due to the imposition of a moratorium by the RBI.

Last year, the government increased the insurance cover on deposits by five times to Rs 5 lakh. The enhanced deposit insurance cover of Rs 5 lakh came into effect from February 4, 2020.

Every bank used to pay 10 paise as an insurance premium per Rs 100 of deposit.



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Why Factoring failed to address delayed payments for MSMEs and how recent amendments can help, BFSI News, ET BFSI

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The Factoring Regulation (Amendment) Bill, was recently passed by the Rajya Sabha to provide an efficient working capital cycle for micro, small and medium enterprises (MSMEs) and in turn provide a boost to the economy of the country. The amendment bill aims at expanding credit facilities for small businesses and access to funds from thousands of non-banking financial companies (NBFCs). The basic purpose of this bill is to make available the factoring service of well over 5000 NBFCs to the starved MSME sector where currently a lot of businesses are suffering due to lack of funds.

The change is marked to bring about a key legislation to make it easier for small businesses to monetize their receivables. The bill was tabled in September last year and was recently passed on 29th July, 2021. The amendment bill makes it easier for NBFCs to participate in the factoring business. It also removes the tedious requirement of an entity in this business to report factoring information within 30 days.

The 2011 Factoring Regulation Act allowed the Reserve Bank of India (RBI) to authorise NBFCs to remain in Factoring business only if that’s their main focus of the business and over 50% of their assets have been deployed and 50% of their revenue is earned from the factoring business. This bill aims at removing this threshold which will open new avenues in this business to more non-bank lenders at the current times of financial stress during the pandemic.

What is Factoring and why is it important?
Factoring is a transaction where the accounts receivables of an entity, known as the factor, is paid by another entity, known as the assignor. A factor can be a bank or an NBFC or any institution registered under the Companies Act. Factoring helps businesses to monetize its receivables quickly and tackle cash-flow problems conveniently and in time. This bill enables NBFCs and other companies to enter the factoring businesses and help small businesses survive during these difficult times. The move will help bring down the overall cost to acquire funds and empower small businesses to generate cashflows even at difficult times. The provision of liquidity to support MSMEs have been a key element of the government’s plans and policies to cushion the impact of the pandemic. Empowering the MSMEs is important because they are a major source of employment generation in the rural and urban areas.

Finance Minister Nirmala Sitharaman said, “Amending the Factoring Regulation Act, and changing the definition of “assignment”, “factoring business” and “receivables”, “will bring them in consonance with international definitions”, she further added, “The Bill seeks to provide a strong oversight mechanism for the factoring ecosystem, and will empower the Reserve Bank of India to make regulations with respect to factoring business”.

Currently due to the number of issues, the factoring credit constitutes only 2.6 percent of total formal SME credit finance in India. The estimate points out that only 10% of the receivable market is presently covered under the bill discounting system while the rest is covered under conventional cash credit overdraft arrangements with financial institutions. The delay in getting payments against their bills, the MSMEs struggle with working capital and it hampers with the efficient activity and functioning of the MSMEs and this bill aims to remedy just that.

Factoring and its growth in China
We already discussed factoring, but China adopted Factoring in a big way a decade ago and they are far ahead of the world as far as the number of MSMEs are concerned. They have adopted debtor financing where the company sells accounts receivables at a discount to clear current debts and seek capital for smooth functioning of the business. Banking and e-commerce sector has found this to be a sustainable business model across various industries.

Large companies, especially e-commerce, set up in-house financing or Factoring company as a subsidiary to fund and support thousands of small and medium enterprise clients, with huge amounts of receivables in the ledger. This dual layered model of factoring is called double factoring. Banks finance the subsidiaries which are a separate entity from the company being funded within the umbrella.

Double factoring helps suppliers meet their immediate credit and cash flow needs and increases the asset liquidity of the in-house factoring entities. The costs of funding reduces significantly from that of a bank and proves beneficial in the long run.

Conclusion
Factoring is an important step towards stabilizing the economy in current times. NBFCS can come to the aid of the cash-starved MSMEs and help them with their financing needs.

In the current environment where access to finance is critical to jumpstarting economic growth, the Factoring Regulation Bill may play a key role in bridging the gap and helping Indian businesses push forward into 2022.

In the past, in other countries, what we’ve seen is that a more liberalized approach to factoring takes the pressure off lending institutions – this means more access to capital for the businesses that need it. In the long term, the implications here are clear. The Factoring Regulation Bill isn’t just going to help businesses come out of the pandemic induced crisis situation. As we move into the next decade, the enhanced access to capital will help Indian businesses drive consistent economic growth.

(The writer is Co-founder, Cashinvoice)



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Union Finance Minister Nirmala Sitharaman inaugurated 12 developmental projects in Tripura, BFSI News, ET BFSI

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Union Finance Minister Nirmala Sitharaman inaugurated 12 developmental projects in Tripura. She reviewed the progress of Externally Aided Projects (EAP) worth Rs 7,719 crore.

The finance minister is on a two-day visit to Tripura. The state is implementing EAPs in the afforestation and livelihood, power transmission, water supply sectors and infrastructure development.

Tripura chief minister Biplab Kumar Deb tweeted, “Attended the Externally Aided Project’s review meeting with FM Smt. @nsitharaman Ji Deputy CM @Jishnu_Devvarma & other officials were present on the occasion These EAPs are important for the holistic development of the state and the betterment of the livelihood of its citizens”.

Tripura Chief Secretary Kumar Alok the finance minister reviewed the EAPs and appreciated the pace of implementation. Tripura might get more EAPs.

The finance minister inaugurated Rs 38.03 crore World Bank aided 132 KV electric sub-station besides Rs 20 crore worth three Surface Water Treatment plants funded by Asian Development Bank.

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FM promises Rs 1,300 crore development package for Tripura tribal areas, BFSI News, ET BFSI

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Union Finance Minister Nirmala Sitharaman on Friday promised that a Rs 1300-crore project for Sustainable Development and Infrastructure Development for Tripura‘s Tribal areas would be cleared within the next 10 days.

Addressing a meeting after inaugurating a slew of 11 projects at Mohanpur, about 50 km from here, Sitharaman said the Rs. 1300-crore project with World Bank funding would ensure an all-round development in the state’s tribal areas.

Tribals form one third of the state’s population. In recent elections to the Tripura Tribal Areas Autonomous District Council, the ruling BJP and its allies were trounced by the newly formed Tipraha Indigenous Progressive Regional Alliance led by a former royal, Pradyot Kishore Deb Barman, causing alarms about the future electoral prospects of the ruling alliance.

She also announced that two other projects worth over Rs 21 crore were cleared by the Centre on Friday morning itself. The two projects include- widening of state highways (Rs. 14.15 crore) and various works in the capital city (7.4 crore).

The Union Finance Minister, who arrived in Tripura on a two-day visit, besides inaugurating local projects worth Rs. 189 crore, also reviewed the status of on-going Externally-Aided Projects (EAPs).

Besides, Sitharaman the review meeting was also attended by Chief Minister Biplab Kumar Deb, Deputy Chief Minister Jishnu Dev Varma, Chief Secretary Kumar Alok and other senior officials.

According to a tweet from Sitharaman’s office, the EAPs include Project for Sustainable Catchment Forest Management in Tripura (funding by Japan Internal Cooperation Agency), Tripura Urban and Tourism Development Project (funded by Asian Development Bank) and North Eastern Region Power System Improvement Project (funded by World Bank). These projects are meant for overall development of the state cutting across areas like education, health, communication, infrastructure, power and livelihood support.

Chief Minister Biplab Kumar Deb in a social media post also said the Union Minister had congratulated the state government for work done through EAPs in Tripura.

“FM Nirmala Sitharaman congratulates state officials on work done through EAPs for the holistic development of the state,” Deb wrote on his official Facebook handle.

The Union Finance Minister also interacted with health officials and met beneficiaries of Tripura’s ongoing Covid vaccination drive at a centre at Gandhigram, about 10 km from here. Sitharaman’s office later tweeted, “As on August 27, 33,24,427 anti-COVID vaccine doses have been administered in Tripura. 24,53,931 beneficiaries have received the first dose while 8,70,496 beneficiaries have received the second dose of vaccine. Tripura has 358 sites conducting vaccination.”

Accompanied by chief minister Deb, the Union Minister also paid a visit to Hatipara Forest Complex at Gandhigram. She inspected the Non-Timber Forest Products (NTFP) Centre and Agar plantation where she was apprised by the officials about the potentials of Tripura’s Agar sector. She also planted a sapling.

Sitharaman will visit Matabari temple at Udaipur and then Dasarath Deb Memorial School Ground at Killa village council under Gomati district where she will hold a meeting and interact with the members of women-run Self-Help Groups.

She is also slated to flag-off a mobile van of Tripura State Cooperative Bank Ltd on the occasion of 7th anniversary of Pradhan Mantri Van Dhan Yojana, before leaving the state.



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PSBs may have to provide for over Rs 21,000 crore annually for family pension revision, BFSI News, ET BFSI

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Public sector banks will have to make an additional provision of over Rs 21,300 crore annually on account of a hike in family pension and higher contribution toward the National Pension System (NPS), according to a report.

A special dispensation will be sought from the Reserve Bank of India (RBI) to allow provisions over the next five years, it said.

The plan

Acknowledging that family pension for bank employees is at a paltry level, the government this week had announced that it would raise the same to 30% of the last drawn salary.

Earlier, kin of a deceased PSB employee used to get a maximum of Rs 9,284 per month as a family pension, said Department of Financial Services Secretary Debasish Panda.

“The cap has been completely removed and a uniform slab of 30% at the last-drawn salary will be entitled as family pension,” Panda told reporters here, admitting that the earlier levels were “paltry”.

NPS hike

Similarly, the ministry has also decided to increase the employer’s contribution to the New Pension Scheme (NPS) to 14% of the salary from the current 10%, he said.

Finance Minister Nirmala Sitharaman expressed her satisfaction at public sector banks’ performance in the past few years and appreciated that many of them have come out of the RBI’s prompt corrective action framework.

Panda said a dozen PSBs have become leaner and started delivering profits which have upped the investor confidence in them and made them self-dependent for capital raising.

He said that since last year, the banks have collectively raised over Rs 69,000 crore, including Rs 10,000 crore in equity, and are in the process of raising another Rs 12,000 crore at present.

As on March 31, the total number of pensioners stood at around 5.66 lakh and family pensioners at over 1.55 lakh.



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