Tag: tax

Choosing the right annuity plan for post-retirement life

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We spend about 30 years plus of our life working to make a living. With increase in life spans, planning for retirement has become even more important. Most of us will enjoy two decades plus of retired life. Thus, retirement planning is essential for everyone irrespective of their income or lifestyle.

Annuity plans are an important part of retirement planning. In simple words, an annuity plan provides a regular and guaranteed income, or ‘salary’ in the retirement years. Annuity is treated as income for tax purposes and is taxed as such. The annuity paid is dependent on the lump sum investment that you make to the insurance company when buying the plan. Insurers invest this money into various financial instruments and the returns generated are used to pay the annuity. An annuity is usually purchased by people above the age of 55.

Here are a few key factors that you should consider when purchasing one.

Identify the amount you want every month

The first step is to identify how much lump sum investment you can make or how much pay-out you need. An easy-to-use calculator on insurers’ website will allow you to determine the lump sum amount based on the pay-out you wish to receive, or vice versa. Insurers also allow you to choose the periodicity – ranging from monthly, quarterly, half-yearly to yearly.

Choose the right category

There are primarily two types of annuity products. One is the ‘Immediate Annuity Plan’, wherein the pay-outs begin as soon as the lump sum amount is invested. This is suitable for a person buying the plan very close to retirement. The second is ‘Deferred Annuity’, wherein the pay-outs begin after a certain date. This option is suitable for a person who is buying a policy before retirement age and would need the pay-out only after a few years.

Find the right plan

You need to choose between Policy with Return of Purchase Price (ROP) or Policy Without ROP. For the former, the principal amount invested is returned to the legal heirs on death of the policyholder. This allows you to leave a lump sum amount for your nominee on your demise. For policy without ROP, the principal amount invested is not passed on to legal heirs, but the annuity amount paid each month is much higher as compared to first option. This is a good option to pass on the risk of living too long to the insurer. For an investment of ₹10 lakh today, a 60-year-old person in policy with ROP will get around ₹4,500 per month. For the same investment in a policy without ROP, he / she will get around ₹6,000 per month.

Expand coverage to include life of spouse

One also needs to choose prudently on whether the annuity is for a single life or joint life. In a case of single life policy, the annuity is paid till the death of the policyholder. But in case of a joint life policy, the annuity is paid till the death of last survivor among self and spouse. The annuity payout for joint life is lower than for single life. Hence you need to weigh your option judiciously.

To sum up, annuity provides steady income throughout your life. In the end, choose a plan that will help you play your second innings even better than the first.

The writer is President-Business Strategy, SBI Life Insurance

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Investors rush to seek tax advice on cryptocurrency investments, BFSI News, ET BFSI

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Many investors who invest or trade frequently in cryptocurrencies are rushing to their advisors to figure out the tax implications of their investments, even as the government looks to introduce a legal framework around cryptocurrencies. Investors want to know the income tax implications on their returns, which can range anywhere up to 30%, say tax experts, given the regulatory vacuum around cryptocurrencies.

Tax experts are divided as to whether the returns from crypto assets must be categorised as capital gains-what is applicable on assets such as equities or real estate – or business income.

“As regards tax treatment of sale of cryptocurrency held by individual investors, the principles governing taxation of securities as capital gains versus business income would equally apply in respect of cryptocurrency assets,” said Sudhir Kapadia, national leader-tax at EY India.

“In other words, if the frequency and number of purchase and sale transactions is very high, the tax authorities may be inclined to assert business income characteristics for these transactions.”

Many investors have made substantial returns from cryptocurrencies and have even squared off some of their positions, say tax experts.

In most cases, the money has come back to their bank accounts directly from crypto wallets or through some other channels and this is set to attract taxman’s attention.

This comes at a time when the government is looking to come up with a cryptocurrency law.

The government is planning to define cryptocurrencies in the new draft bill and will treat them as an asset/commodity for all purposes, including taxation, ET first reported on September 3.

The draft bill also moots proposals to compartmentalise virtual currencies based on their use cases into payments, investment/security, and utility (source of income), people close to the development told ET.

Tax experts say that tax on cryptocurrencies will also depend on how the government defines the asset.

Many investors have started enquiring on how to tax their returns from crypto assets, say tax experts. “The enquires relate around aspects such as whether cryptos are to be treated as assets or goods, exchange of one type of crypto currency for another crypto currency, valuation of cryptos, conversion of cryptos into fiat, taxability of consideration received in cryptos by non-crypto businesses, gifts of cryptos (i.e. transfer of cryptos from one soft wallet to another without consideration), computation of income on cryptos and the tax rates, indexation, deductions allowable on such income,” said Paras Savla, partner at KPB & Associates, a tax advisory firm.



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We remain optimistic on growth, says ICICI Lombard CEO

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With the merger of Bharti AXA’s non-life business complete, ICICI Lombard General Insurance is excited about the business opportunities it has brought. In an interview with BusinessLine, Bhargav Dasgupta, Managing Director and CEO, ICICI Lombard outlines plans for the company post the second wave of the pandemic. Excerpts:

What is the strategy for the second half of the fiscal, especially with the merger of Bharti AXA’s non-life business?

We remain optimistic. For us the focus was in terms of getting the integration done. We got the approval and we had three working days to make it effective. It has gone smoothly. We are now working as a team. The reorganisation also has happened. Apart from that, there are a lot of business opportunities that we remain confident about. We believe health will be a big opportunity, we think motor will come back, and our corporate lines are doing well.

What’s the roadmap going forward post the Bharti AXA transaction?

Bharti AXA’s non-life business is around 20 per cent of our size as a company. As part of the transaction, we diluted about 7.3 per cent of our company. There are two things that we are looking at in terms of business, apart from people integration. One is the operational synergies. Over the last 12 months since we announced the deal, we’ve done a lot of preparatory work. Next three-to-six months we want to implement some of those things. The second is the revenue synergy and that is visible in terms of our quarterly numbers. We believe there is an even bigger opportunity with their distributors to give them new products. Some of these partners can sell more products in more markets. There is a scope for growth.

Are you re-entering the crop insurance segment?

We are already back in crop insurance because Bharti AXA was writing crop insurance. We will have the crop business, but as a percentage of our overall business, it may be relatively low. For the whole year, it will be about five per cent of our business. We want to stay invested and see how it goes for a couple of years before we take a decision on it.

We had a concern in crop insurance at two levels — one the reinsurance terms became very unfavourable. The underwriting aggression was also a bit high. And some of the challenges were in terms of the ground level implementation of the scheme on the crop cutting. Now, improvements has happened on all of these, so we’ll have to observe it.

As an industry, we are paying 18 per cent GST for health insurance, which is extremely high compared to global standards. The GST rate could be reduced to 5 or 12 per cent Bhargav Dasgupta MD and CEO ICICI Lombard

Motor segment continues to be very weak right now. Is that a concern?

There is an interesting dichotomy in motor, which has three components – private car, two-wheeler and commercial vehicles. In private cars, there is demand but there are supply-side constraints in terms of chip shortage.

On the two-wheeler, there is no supply-side issue but there seems to be a demand constraint at this point in time. It’s very unusual. We are hopeful that this festival season, the two-wheeler demand will pick up.

Motor third-party insurance rates have not increased. Is that another concern?

That is of course a concern because typically, the regulator would look at the actuarial data and give a price increase every year. It had issued an exposure draft in February-March of 2020, which had talked about a price increase about 7-8 per cent on a portfolio basis. That did not take place because of the pandemic-induced lockdown. This year, again, we had the second wave, so there was no price increase. In the meantime, there have been some judgments from the Supreme Court, which has increased the cost of claims. It’s an area of concern. We as an industry, need a price increase.

Any wish list for the Budget?

One wish list is for the budget, the other is for the GST Council. As an industry, we are paying 18 per cent GST for health insurance, which is extremely high compared to global standards. The GST rate could be reduced to 5 or 12 per cent. It’s been reduced to 12 per cent for commercial motor policy. Something similar on the health will be one ask that the industry has had for a long time. And a linked issue is the input credit for corporates as when they buy health insurance, they also don’t get that benefit.

On the Budget, we respect the fact that there are a lot of fiscal constraints and that the Finance Minister wants to streamline the personal benefits. But within the benefit pool that is there, if there could be some increase for health insurance and something for home insurance, in terms of tax breaks. It won’t be very expensive for the exchequer, but it will be a good nudge for people to buy insurance.

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IDBI Bank Q2 results: Net profit up 75%

Banking & Finance

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IDBI Bank reported a 75 per cent year-on-year (yoy) increase in second quarter standalone net profit at ₹567crore, supported by a huge write-back in provisions for non-performing assets (NPAs) and lower tax expense.

The Bank had posted a net profit of ₹324 crore in the year ago quarter.

Net interest income increased 9 per cent yoy in the reporting quarter to ₹1,854 crore (₹1,694 crore in the year ago quarter).

Other income, including income from non-fund based banking activities such as commission, fees, earnings from foreign exchange and derivative transactions, and profit and loss from sale of investment, declined about 4 per cent yoy at ₹846 crore (₹881 crore).

The received a write-back of ₹1,426 crore in provisions for NPAs against ₹165 crore in the year ago quarter. Tax expense burden was lower at ₹215 crore (₹347 crore).

As at September-end 2021, gross advances barely nudged up to ₹1,64,506 crore (₹1,63,841 crore as at September-end 2020).

Rakesh Sharma, MD & CEO, said the Bank has built up a sanctions pipeline in the mid and large corporate segments and disbursals are expected to pick up from year-end onwards.

The Bank expects to grow its corporate loan book by about ₹6,000 crore in the current financial year.

Samuel Joseph, Deputy Managing Director, said the Bank has an exposure of about ₹400 crore to the SREI group, which is undergoing corporate insolvency resolution process, and has made 100 per cent provision towards this exposure. IDBI Bank recovered ₹196 crore from DHFL.

P Sitaram, CFO, emphasised that the Bank will grow the corporate loan book even as the emphasis will continue to be on structured retail loans.

Gross NPAs declined about ₹1,186 crore during the reporting quarter to ₹34,408 crore.

Gross NPAs as a percentage of gross advances declined to 20.92 per cent against 21.48 per cent in the preceding quarter. Net NPAs, however, nudged up to 1.62 per cent of net advances against 1.56 per cent.

Fresh slippages rose by ₹1,438 crore (₹1,332 crore in the first quarter). The Bank settled NPAs aggregating ₹1,436 crore (₹587 crore).

ends

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SBI, BFSI News, ET BFSI

Banking & Finance

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Retail depositors are earning negative returns on their bank deposits and hence, there is a need for reviewing taxes on interest earned, economists at the country’s largest lender SBI have said.

If not for all the depositors, the taxation review should be carried out for at least the deposits made by senior citizens who depend on the interest for their daily needs, the economists led by Soumya Kanti Ghosh said in a note, which pegged the overall retail deposits in the system at Rs 102 lakh crore.

Senior citizens hit most

At present, banks deduct tax at source at the time of crediting interest income of over Rs 40,000 for all the depositors, while for senior citizens the taxes set-in if the income exceeds Rs 50,000 per year. As the policy focus has shifted to growth, the interest rates are going down in the system which pinches a depositor.

“Clearly, real rate of return on bank deposits has been negative for a sizeable period of time and with RBI making it abundantly clear that supporting growth is the primary goal, the low banking rate of interest is unlikely to make a northbound movement anytime soon as liquidity continues to be plentiful,” the note said.

Bull run gives leeway

It said the current bull run in financial markets is possibly a break from the past as households may have got into the bandwagon of self-fulfilling prophecy of a decent return on their investment.

“We thus believe, it is now the opportune time to revisit the taxation of interest on bank deposits, or at least increasing the threshold of exemption for senior citizens,” the note said.

The RBI can also relook at the regulation that does not allow interest rates of banks to be determined as per age-wise demographics, it said.

It can be noted that at present, banks are lending for as low as under 7 per cent for retail loans and have been public with their preference to lend to highly-rated corporate borrowers, where the lending rates get very competitive.



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European banks book 20 billion euros, or 14% of their profits, in tax havens annually, BFSI News, ET BFSI

Banking & Finance

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Europe’s biggest banks are booking an average of 20 billion euros ($23.7 billion) in tax havens every year, which is about 14% of their profits, according to a report by report from the EU Tax Observatory.

The report looked into the activities of 36 systemic European banks, headquartered in 11 countries across Europe, that have been subject to mandatory country-by-country reporting on their actions since 2015.

The tax havens looked into include Bahamas, Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey, Gibraltar, Hong Kong, Ireland, Isle of Man, Jersey, Kuwait, Luxembourg, Macao, Malta, Mauritius, Panama and Qatar.

About 25% of the banks’ profits were booked in countries where the effective tax rate was lower than 15%.

“Bank profitability in tax havens is abnormally high: 238,000 euros per employee, as opposed to around 65,000 euros in non-haven countries,” the authors added. “This suggests that the profits booked in tax havens are primarily shifted out of other countries where service production occurs.”

The profits

HSBC booked a mean 58% of its pre-tax profits in tax havens between 2014 and 2020, according to the study, making it the lender funneling the largest percentage of profits into the EUTO’s list of tax havens.

Standard Chartered booked an average of around a third of its pre-tax profits in tax havens, according to the report, while Deutsche Bank, Nord LB and RBS all booked, on average, more than 20% of their pre-tax profits in tax havens between 2014 and 2020.

Bankia BFA, Erste, Nykredit Realkredit, Swedbank and Banco Sabadell booked none of their profits in tax havens during the seven-year sample period.

Curbs needed

Taxes have become a sensitive issue, with cash-strapped governments plugging holes in the economy due to COVID seeking to agree on a common rate for taxing Big Tech, in particular.

Country-by-country reporting to shed light on the inner workings of banks has failed to change behaviour despite the rise of tax issues on the public agenda, the report said.

“More ambitious initiatives — such as a global minimum tax with a 25% rate — may be necessary to curb the use of tax havens by the banking sector.”



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Neobanks are crucial for SME, MSE and retail customers., BFSI News, ET BFSI

Banking & Finance

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Today Neo-banks are disrupting the banking system with their customer-centric digital offerings across retail and Small-to-Medium Enterprise (SME) banking, remittances, money transfers, utility payments and personal finance. They focus on applying design thinking approach to a particular banking area and tailor their products, services and processes in a manner that makes banking simpler and convenient. This has provided a differentiated experience to the end user, resulting in higher client adoption rates.

Globally, top neo-banks have captured the attention of investors, which is reflected in their high valuations. Neo-banks are able to attract funding due to their disruptive capabilities and innovative approach to the way financial services are offered. For example:

  • A U.K.-based neo-bank is now the most valuable fintech firm at ~USD30 billion as of 2021 as it raised USD750+ million for product development and expansion.
  • A U.S.-based startup that delivers mobile banking services (like savings account and VISA debit cards) was valued at USD14+ billion in 2020.
  • An e-commerce giant, a multinational technology company and a multinational financial services corporation are separately eyeing a stake in a neo-bank, which is looking to raise ~USD100+ million. If it does manage to raise the amount, its valuation is likely to jump three times to around USD600+ million.

The global neo-banking market size is expected to reach USD333.4 billion by 2026, a market growth of 47.1 per cent CAGR over the next five years.Countries like the U.S. and Australia have licensed neo-banks, whereas in India, these are not licensed banks. Neo-banks collaborate with commercial banks to provide better adoptable solutions across business segments with the use of technology like open banking APIs, artificial intelligence, machine learning and data science. This dual combination creates value as the neo-bank handles technology and innovation while the licensed bank handles trust, franchise, risk, underwriting and collections. Low-cost operations of neo-banks result in better offerings and promotes business. However, the key value addition that neo-banks provide is a seamless and integrated customer experience while managing their financing and business banking needs. This is done through providing an integrated platform for automated transaction banking, payments, tax compliance, accounting services, investment needs, etc.

Case Study -1 – Building Current Account Balance with SME Focus

A Neo-bank offers a business banking platform over current accounts that helps SMEs automate and run their finances effectively. This platform seeks to integrate banking into an SME’s business workflow through APIs, instant receipts and payments gateway, real time cashflow monitoring, automated accounting and bookkeeping, payroll management, and vendor management. The platform is estimated to process USD10-15 billions in transactions annually with its multiple bank tie-up.

Case Study -2 – Enhance retail customer experience of traditional bank

While attempting to provide better customer experience, traditional banks face challenges of seamlessly integrating different platforms that run processing, card controls, authentication, rewards, etc. A Neo- bank helps such banks by providing a single integrated, modular, cloud-native, mobile first, banking platform that enables financial institutions to provide next-gen banking experiences to customers, thereby increasing customer engagement, retention and revenue. The customer gets a high degree of personalisation through value-added features like faster account opening, simplified money tracking, smart reporting, low cost international payments and money transfers, better interest rates on loans and deposits, globally accessible debit cards, etc. These measures result in higher adoption rates.

In India, banks and neo-banks have struck a collaborative partnership. While banks remain the money custodian, neo-banks are emerging as the crucial data and technology via medium for empowering the customer. However, this can also be seen as a roadblock for the neo-banks as they might never be allowed to operate independently, and the rising number of emerging fintech companies are making the environment highly competitive. Although neo-banks are scaling up their presence, there is a lack of regulations as the 100 per cent digital bank model has not been permitted in India yet.

In summary, as the regulatory landscape evolves, neo-banks can play an important role to address SME, Midsize Enterprise (MSE) and retail individual customer requirements beyond traditional banking in a seamless and integrated environment.

Written By- Sanjay Doshi (Partner and Head – Financial Services Advisory, KPMG in India) and
Amit Wagh ( Partner and Leader – Financial Services Business Consulting, KPMG in India)

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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Tax query: What’s the tax liability for buying resale property using proceeds of equity investment?

Personal Finance

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I am planning to buy a resale property using the proceeds from sale of my shares held in ICICI direct. What will be my tax liability, considering the fact the shares held in the account are one year old to seven-year old? Also, advise me on the precautions needed while buying a resale house.

Nilesh

Assuming that the shares held in ICICI direct are listed on Indian stock exchanges and are held for a period of more than 12 months, the gain/loss arising on sale of these shares shall be treated as long-term capital gain /long-term capital loss (LTCG/LTCL). As per Section 112A of the Act, LTCG in excess of ₹1,00,000 earned from sale of listed equity shares on which securities transaction tax has been paid shall be subject to income tax at the rate of 10 per cent (excluding surcharge and education cess).

Where the shares are purchased before January 31, 2018, the cost of acquisition shall be the higher of the following:

· actual cost of acquisition; or

· lower of (i) fair market value (FMV) of such share on January 31, 2018 (highest quoted price) or (ii) full value of consideration as a result of transfer.

You can explore deduction under Section 54F of the Act in case the net sale consideration arising from the sale of shares is invested in purchase of a residential house property within one year before the transfer date or within two years after the transfer date subject to specified conditions.

In regards to the purchase of immovable property, as per Section 194-IA of the Act, you will be required to deduct taxes at source (TDS) at the time of making payment of the sale consideration to the seller @ 1 per cent (assuming seller is a resident of India), where the sale consideration of the said property is equal to or exceeds ₹50 lakh. In such case, you will also be required to file a TDS return in Form 26QB and issue a Form 16B to the seller of the property.

A senior citizen engaged in businessis expected to make payment of advance tax based on his earnings. I would like to know the following: (i) if a senior citizen makes investment on equity, does he need to pay advance tax based on the quarterly earnings? (ii) if a senior citizen does trading on equity (buying and selling shares) will the same (payment of advance tax) be applicable? Please clarify while keeping in mind long- and short-term gains.

RM Ramanathan

As per Section 208 of the Income Tax Act, 1961 advance tax is applicable if the tax liability (net of taxes deducted or collected at source) on taxable income is ₹10,000 or more. As per Section 207 of the Act, liability to pay advance tax doesn’t apply to a resident senior citizen (who is aged 60 years or more), not having the income from business or profession.

Scenario I

The senior citizen doesn’t have income from business/profession:

Earnings on investment in equity could be in the form of dividend & capital gains (long term or short term, depending upon the period of holding) which are chargeable to tax under the head ‘Income from other sources & Income from Capital gains, respectively.

In view of the provision discussed above, payment of advance tax provision doesn’t apply in this scenario.

Scenario II

Senior citizen derives income from business/profession (trading of shares):

Since the senior citizen is trading in equity (which may include shares held as stock-in trade, intraday transactions etc.), it would tantamount to carrying on a business.

Accordingly, the advance tax provision of section 208 shall apply and he is required to pay advance tax if the net tax liability exceeds ₹10,000 in a FY.

The writer is Partner, Deloitte India. Send your queries to taxtalk@thehindu.co.in

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Will home purchase by mother using NRI son’s money face tax?

Personal Finance

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My son is an NRI and he wants to gift his earnings to his mother, who is a housewife and has no income. She wants to invest the amount in a residential site in her name. Please let me know tax implications on both the mother and son. Also, should she file I-T return on account of this?

LAKSHMISHA

Gifts will not attract income tax in the hands of the donor. Further, it will not attract taxation in the hands of the recipient if gifts are received from a relative as defined under the income tax act.

Parents are covered under the definition of relatives. As a result, any amount gifted by your son to your wife is not taxable in her hands.

However, any income that your spouse earns from the gift will be taxable in her hands. Further, under the provisions of the Income Tax Act, 1961 an individual is required to file a tax return where:

· the taxable income during the Financial Year (FY) exceeds the maximum amount not chargeable to tax, i.e., ₹2,50,000;

· has deposited an amount or aggregate of the amounts exceeding ₹ 1 crore in one or more current accounts maintained with a banking company or a co-operative bank; or

· has incurred expenditure of an amount or aggregate of the amounts exceeding ₹2 lakh for himself or any other person for travel to a foreign country; or

· has incurred expenditure of an amount or aggregate of the amounts exceeding ₹1 lakh towards consumption of electricity. or

· holds a foreign asset outside India either as a beneficial owner or otherwise

In case, the taxable income of your spouse from the said residential site during the relevant financial year exceeds ₹2,50,000 in any financial year or she fulfils any of the criteria mentioned above, she will be required to file a tax return.

I have an HUF, with demat account. I would like to transfer some shares of a listed entity from HUF to one of its members. This will be done via off-market transaction. The member (or the recipient) will pay fair and adequate consideration (say based on market price on the date of transaction) for this transaction. In such case, what will be the implications from income tax perspective, specifically: a) Will this be treated as sale of shares and HUF becomes eligible for payment of capital gains from this transaction? b) What will be the date of acquisition of these shares for the member (or the recipient)? c) Since these is adequate consideration, won’t this be treated as a gift? d) Also, will there be any difference in taxability, if the recipient is not a member of the HUF?

Ashish Ladha

The shares received by a member from the HUF shall be chargeable to tax in the hands of individual member as it neither is in the nature of gift nor is received from a relative defined under the Act.

a) As per Section 45 of the Act, any profits or gains arising from transfer of capital asset shall be chargeable to tax under the head Capital Gains in the year in which the transfer took place. Transfer of shares by the HUF to its member shall be treated as transfer and HUF shall be liable to pay tax on gains arising from such transfer.

As per Section 112 of the Act, long term capital gain arising from sale of listed securities shall be subject to tax at the rate of 20 per cent where cost has been indexed or at the rate of 10 per cent where the benefit of indexation of cost is not availed. Surcharge, if applicable and health & education cess at 4 per cent shall be payable in addition.

b) The date of acquisition of the shares for the member of the HUF shall be the date when the off-market transaction is initiated and shares are transferred to the member.

c) Given that the shares are transferred by HUF to its individual member for adequate consideration, i.e., at the fair market value of the shares as on the date of transfer, the said transfer cannot be treated as gift.

d) If the shares are transferred to any other person, who is not a member of HUF, there shall be no difference in the income tax treatment discussed above. All the points discussed above shall hold good.

The writer is Partner, Deloitte India. Send your queries to taxtalk@thehindu.co.in

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Budget proposes tax neutral benefit for conversion of UCBs into banking company

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In a move that will help cooperative banks to convert to banks, the Budget has proposed tax exemptions.

It has provided tax neutral benefit for conversion of urban cooperative bank into banking company.

“It is proposed to expand the scope of business reorganisation to include conversion of a primary co-operative bank to a banking company and the deductions available under Section 44DB of the Act shall also be made applicable in relation to such conversion,”said the Memorandum to the Financial Bill.

The Budget has also proposed that transfer of a capital asset by the primary co-operative bank to the banking company as a result of conversion shall not be treated as transfer under Section 47 of the Act. Consequently, the allotment of shares of the converted banking company to the shareholders of the predecessor primary co-operative bank shall not be treated as transfer under the said Section of the Act, it further said.

These amendments will take effect from April 1, and will accordingly apply to the assessment year 2021-22 and subsequent assessment years, it said.

The Reserve Bank of India had, in September 2018, permitted voluntary transition of primary cooperative banks [urban co-operative banks (UCB)] into small finance banks through transfer of Assets and Liabilities.

However, players say that the scheme has till now enthused few cooperative banks.

Vidyadhar Anaskar, President, Maharashtra Urban Cooperative Bank Federation, said the proposal aims to help cooperative banks that have applied to convert to an SFB.

The RBI had in January granted an “in-principle” approval to Shivalik Mercantile Co-operative Bank, an Uttar Pradesh-based multi-state urban co-operative bank, to transition into a small finance bank.

According to a recent statement, Shivalik Small Finance Bank (SSFB) will start its banking operations from April.

With the developments at Punjab and Maharasthra Cooperative Bank, the government and RBI have been working to improve governance and oversight of the co-operative banking system.

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