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Showing posts from February 8, 2019

RBI Cuts Repo 25 bps, Softer Rate Regime on the Horizon

The Reserve Bank of India on Thursday cut the key interest rate by 25 basis points to 6.25% and shifted the policy stance to ‘neutral’ terming it a ‘decisive’ act to promote investment and consumption in an economy facing weak demand. The move may open the doors to a lower interest rate cycle based on receding inflation, though it could only be for a short term going by past trends. After claiming success in tackling price pressures since inflation targeting was adopted about two years ago, the Monetary Policy Committee voted unanimously on Thursday for a shift in stance to ‘neutral’ from ‘calibrated tightening’ and lowered inflation forecast. The central bank also brought nonbanking finance companies (NBFCs) on a par with manufacturing companies with regard to capital requirements for banks that lend to them. The credit rating of an NBFC will now determine how much capital the bank has to set aside, making thousands of crores of rupees available for lending to a sector buffeted by con…

CBDT Chairman Promises Speedy Solution to Startups’ Tax Worries

The government may soon find a solution to address the tax concerns of startups, Central Board of Direct Taxes (CBDT) chairman Sushil Chandra said. “Very shortly, we will find out a solution on the basis of the suggestions we have received. We will have to decide which startups are real startups and how they can be exempted from Section 56 (2) of the Income Tax Act,” he said at an Assocham function here on Thursday. Various startups had raised concerns over the notices sent to them under this section to pay tax on angel investments. The CBDT chief said any startup recognised by the Department for Promotion of Industry and Internal Trade is exempt from Section 56 (2) and the tax notices sent to startups have been stayed. Last week, officials from the department, along with tax department officials, met startup industry representatives to hear their suggestions. Section 56 (2) provides that the amount raised by a startup in excess of its fair market value would be deemed income from oth…

RBI to Step up Scrutiny of NBFCs

The Reserve Bank of India said it would intensify its scrutiny of nonbanking finance companies to ensure better compliance and financial strength, but did not indicate an asset-quality review like the one carried out on banks. NBFCs showed high growth taking advantage of the poor financial health of several public sector banks but the recent default by the group firms of non-bank lender IL&FS raised alarm and called for a reality check. Former chief economic advisor Arvind Subramanian suggested asset quality review (AQR) for these lenders to fully measure the extent of the hidden stress in the system. “Like Raghu (former governor Raghuram Rajan) did an AQR for the banks, we need to an asset quality review for the NBFCs,” he told ETNow in December. RBI data showed that NBFCs cumulatively had loans assets worth ?3.42 lakh crore at the end of September with industry accounting for more than half of total credit extended by them, followed by retail, services and agriculture. The central…

RBI Move to Regulate ePayments may Secure, Stabilise Ecosystem

The central bank on Thursday said it is examining the possibility of bringing payment gateway operators under its direct regulatory ambit, a move that industry players said will make the digital payments ecosystem more secure and stable. “We are considering the feasibility of directly regulating these payment operators…given their growing importance in the payment systems of the country, we deem such a step to be important,” Reserve Bank of India governor Shaktikanta Das said during his monetary policy speech. The RBI said it will soon publish a draft of the regulatory guidelines for stakeholder consultations. Mint Road and New Delhi have been in talks for some time now to come up with a comprehensive regulatory solution for the burgeoning payment systems in the country, which is riding the growth of ecommerce and m-commerce transactions. Meanwhile, issues ranging from the fees that businesses pay for accepting digital payments to grievance redressal for failed transactions and even di…