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Prime Minister Narendra Modi's demonetisation may have thrown economic activity out of gear, but the Reserve Bank of India says that it could lead to far-reaching changes in the economy that would help foster a new digital age. “The withdrawal of specified bank notes will impart far-reaching changes going forward,“ RBI Governor Urjit Patel has said in the foreword to the Financial Stability Report, a half-yearly report that diagnoses the health of the financial system and examines t .. “It is expected to significantly transform the domestic economy in due course in terms of greater intermediation, efficiency gains, accountability and transparency through increasing adoption of digital modes of payments, notwithstanding the short -term disruptions in certain segments of the economy and public hardship,“ he said. Although the RBI is the prime actor behind the demonetisation exercise, it is now aggressively batting for the success of the programme. On November 8, Modi had decl

The Reserve Bank of India (RBI) has proposed the setting up of an ombudsman specifically for non-banking finance companies (NBFCs). This is part of a series of reforms the regulator is planning, it said in its Trends and Progress of Banking in India report released on Thursday. An ombudsman could allow customers to lodge complaints against NBFCs for levying charges without prior notice, non-observance of RBI directives on interest rates, non-acceptance of applications for loans without valid reasons or non-compliance of guidelines on engaging recovery agents. For banks, the ombudsman was appointed two decades ago. According to data available in the report, the 15 regional offices of the banking ombudsman received 95,377 complaints in fiscal 2016 compared to 85,131 the previous year. “We welcome an external mechanism for looking into customer complaints against NBFCs. Currently, each company has a grievance redressal mechanism under the fair practices code,” said Raman Agarwal,

The government is proposing a staggered relaxation of existing restrictions on cash withdrawals from banks after 30 December. This is aimed at smoothening the transition as the Reserve Bank of India (RBI) supplies new notes to replace the Rs500 and Rs1,000 notes withdrawn after demonetization, said a person familiar with the development. The withdrawal limit for an individual at present is Rs24,000 per week from a bank and Rs2,500 per day from an ATM. Separately, finance minister Arun Jaitley said robust revenue collections and winter crop sowing suggest that the 50-day demonetization exercise had benefited the economy. He said there has been an increase in both indirect and direct tax receipts. For the eight months ended November, central indirect tax receipts have risen 26.2% and direct tax receipts 13.6%. If this trend continues, then the revised estimates for tax collection this fiscal will exceed estimates in the 2016-17 budget. Mint New Delhi,30th Delhi 2016

Finance Minister Arun Jaitley said on Thursday that for the period between April 1 and December 19, direct tax collections grew at a net rate of 13.6% year-on-year (y-o-y). This is lower than the net y-o-y growth of 15.1% for April 1 to November 30, the data for which were released earlier this month. There were fears with the announcement of demonetisation by Prime Minister Narendra Modi on November 8 the move would lead to a substantial fall in direct tax collections. Jaitley said all the data available, including that of indirect taxes and rabi crop sowing, showed the situation was better than what the critics of demonetisation feared. Jaitley was addressing journalists on the government’s demonetisation drive in New Delhi on Thursday, a day before the December 30 deadline for depositing old Rs 500 and Rs 1,000 notes in banks. “Direct tax figures of income tax till December 19 are now available. If one factors in very large quantum of refunds — because these days refunds are

The Financial Stability Report (FSR) published by the Reserve Bank of India (RBI) on Thursday raised red flags about the health of the banking sector as lenders struggle with rapid deterioration in asset quality at a time of lower business growth. Overall, India’s financial system remains stable, but the stress on banking sector, particularly on the public sector banks (PSBs) “remain significant”, the central bank noted. “The risks to the banking sector remained elevated due to continuous deterioration in asset quality, low profitability and liquidity,” said the biannual FSR, published by RBI after taking inputs from all financial sector regulators. Business growth in banks remained subdued, particularly in case of PSBs, which lagged their private sector counterparts. System level profit also contracted in the first half of 2016-17. Add to that, the gross non-performing advances (GNPA), or bad debts, ratio of banks increased to 9.1% at the end of September 2016 from 7.8% in M