Skip to main content

Govt, RBI drawing up list of new banking reforms

Govt, RBI drawing up list of new banking reforms
The finance ministry and the Reserve Bank of India (RBI) are drawing up a list of reform measures to accompany the recent Rs 2.11-lakh- crore bank recapitalisation plan.These are being prepared in consultation with banks and might be classified into short-, medium- and longterm measures.
Officials are tight-lipped about what these reforms might entail as preparations are still on. However, there are indications that some of the measures announced in Indradhanush — a seven-point plan to revamp state-owned banks but not completed — might be taken up again.“If there are some areas which have already been identified and on which action has not been taken, these will be included in the new effort,” outgoing Finance Secretary Ashok Lavasa told Business Standard
“It has been made amply clear that injection of capital, by itself, is not enough. It has to be accompanied by several other measures, internal and external, to the banks. I think all these measures have to come in for a healthy turn around package.”How these measures would be carried out, whether alongside recapitalisation or after it, is being decided by the government in consultation with the RBI and the banks, he said. “It is up to the department of financial services to sit with the banks and the RBI and identify what are the measures to be taken in the immediate short term and what are the measures that the banks should initiate for medium and longer terms.”
The Narendra Modi government had announced Indradhanush in 2015 to recapitalise the lenders based on certain performance parameters. A Banks Board Bureau was set up, large-scale management changes introduced in public sector banks and steps announced to clean up banks’ books, including the setting up of joint lenders’ forums and more debt recovery tribunals. While a number of these steps have been taken, many have floundered. Experts and banking sector insiders have been doubtful about the effectiveness of these steps.
Government sources said restructuring of banks, including through mergers and reduction of government’s stakes, were pending reforms.This would happen after the recap as the new bonds would lead to a temporary increase in the Centre’s stake in these banks, they said. Additionally, banks might be asked to write off some of the smaller non-performing loan accounts to clean up their books further. This would be apart from the cases being referred to the National Companies Law Tribunal under the Insolvency and Bankruptcy Code.
The Rs 2.11-lakh-crore recapitalisation plan includes Rs 1.35 lakh crore as bonds, Rs 58,000 crore of fresh capital from the markets and Rs 18,000 crore in government outlay. Finance Minister Arun Jaitley had while announcing the recap measures said these would be accompanied by more banking reforms.These reforms are being prepared in consultation with banks and might be classified into short-, medium and long-term measures

The Business Standard, New Delhi, 30th October 2017

Comments

Popular posts from this blog

At 18%, GST Rate to be Less Taxing for Most Goods

About 70% of all goods and some consumer durables likely to cost less

A number of goods such as cosmetics, shaving creams, shampoo, toothpaste, soap, plastics, paints and some consumer durables could become cheaper under the proposed goods and services tax (GST) regime as most items are likely to be subject to the rate of 18% rather than the higher one of 28%.

India is likely to rely on the effective tax rate currently applicable on a commodity to get a fix on the GST slab, said a government official, allowing most goods to make it to the lower bracket.

For instance, if an item comes within the 12% excise slab but the effective tax is 8% due to abatement, then the latter will be considered for GST fitment.

Going by this formulation, about 70% of all goods could fall in the 18% bracket.

The GST Council has finalised a four-tier tax structure of 5%, 12%, 18% and 28% but has left room for the highest slab to be pegged at 40%. A committee of officials will work out the fitment and the council…

Firms with sales below Rs.50 crore out of ambit

The tax department has reiterated that the PoEM rules, which require foreign firms to pay taxes in India if the effective control is here, will not apply to companies withaturnover of Rs.50 crore or less inafinancial year. Last month, the tax department had come out with the longawaited Place of Effective Management (PoEM) rules, which require foreign companies in India and Indian firms with overseas subsidiaries to pay local taxes if their businesses are effectively controlled by Indians. Then the rules did not setathreshold above which they were to apply. However, the accompanying press release states that the rules will not apply to companies withaturnover of up to Rs.50 crore inayear. That created confusion whether the threshold will be adhered to. Inacircular to clarify things, the Central Board of Direct Taxes (CBDT) said the provision "shall not apply toacompany havingaturnover or gross receipts of ~50 crore or less inafinancial year".

PoEM rules essentially target shell …