Over 2.09 lakh firms struck off, bank accounts frozen: Govt

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In a major clampdown against black money, the government on Tuesday directed freezing bank accounts of more than 2.09 lakh companies whose names have been struck off from the records and said action would be taken against more such firms.

Banks have also been asked to step up their vigil against those companies that are non-compliant with various regulations and not carrying out business activities for long, a senior finance ministry official said as authorities continue their crackdown against shell entities The official said banks have been directed to freeze the bank accounts of these deregistered companies.

While warning that action would be taken against erring firms, the official said the efforts would help in enhancing corporate governance standards as well as clean up the system that otherwise is prone to be misused.

The names of over 2.09 lakh firms have been struck off from register of companies for failing to comply with regulatory requirements

“The names of 2,09,032 companies have been struck off from the register of companies under Section 248 (5) of the Act. The existing directors and authorised signatories of such struck-off companies will now become ex-directors or ex- authorised signatories,” an official release said

Section 248 of the Companies Act – which is implemented by the corporate affairs ministry – provides powers to strike off names of companies from the register on various grounds including for being inactive for long.

According to the official, since these companies had ceased to be legal entities, there was no reason having active bank accounts which could be prone to misuse.

Once these companies become compliant, banks would activate their accounts, the official added. “Furthering our war against #BlackMoney, banks have been advised to immediately restrict bank accounts of struck-off companies,” Minister of State for Corporate Affairs P P Chaudhary said in a tweet.

The official said a detailed analysis has been initiated to check whether these deregistered companies were used as conduits for channelising unaccounted money into the system, especially during demonetisation.

Amid efforts against shell companies which are allegedly used as conduits for illicit fund flows and tax evasion, the government said the directors of deregistered firms would not be able to operate the bank accounts till these entities are legally restored

About the directors and signatories of the over 2.09 lakh firms, the government said they would not be able to operate bank accounts of such companies till these entities are legally restored. The restoration, as and when it happens, would be reflected in the official records by way of change in the status from ‘struck off’ to ‘active’. “Since such ‘struck off’ companies have ceased to exist, action has been initiated to restrict the operation of bank accounts of such companies,” the release said.

The Department of Financial Services, through the Indian Banks Association, has advised banks that they should take immediate steps to put restrictions on bank accounts of such struck-off companies. “In addition to such struck-off companies, banks have also been advised to go in for enhanced diligence while dealing with companies in general,” the release said.

A company even having an active status on the corporate affairs ministry website but defaulting in filing of its due financial statements or annual returns, among others, “should be seen with suspicion as, prima facie, the company is not complying with its mandatory statutory obligations”. In another tweet, Chaudhary said the ministry is committed “in attaining @narendramodi ji’s vision of eliminating black money”.

Source:DD News

I-T Department to focus more on e-assessment to reduce human interface

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The Income Tax Department will focus on widening of tax base and maximise e-assessment to cut down on human interface, according to an official statement.

The Income Tax Department will focus on widening of tax base and maximise e-assessment to cut down on human interface, according to an official statement. Also, efforts will be made by the Central Board of Direct Taxes (CBDT) to exceed the income tax collection target set for current fiscal by use of big-data analytics, said the statement after the end of the two-day annual retreat of central and state government tax officers. The conference also discussed strategies for widening of tax base, with special focus on verification of data collected during demonetisation and SFT (statement of financial transactions).

 “The CBDT aims to add a sizeable number of new taxpayers in the current fiscal,” an official statement said. Prime Minister Narendra Modi, while inaugurating the Rajaswa Gyan Sangam yesterday, had nudged tax officials to use data analytics to track undeclared wealth and fix clear targets for improving tax administration by 2022. He asked taxmen to clear pendency of cases and create an environment that instills confidence among honest taxpayers and uproots corruption.

Revenue Secretary Hasmukh Adhia said that revenue was a cross sectoral subject and required coordination between both the CBDT and CBEC. He encouraged that officers of both CBDT and CBEC to share best practices with each other regularly. The CBDT said that in the conference “it was decided that assessing officers be encouraged to maximise e-assessment in a phased manner and to ensure that work be completed online so that there is complete transparency”. As a step towards effective litigation management, CBDT aims to achieve the twin objectives of substantially reducing the number of appeals and the disputed demand before CIT (appeals), it said.

“The focus is to dispose off 70 per cent of smaller appeals and 30 per cent of high demand appeals including 100 per cent of appeals involving disputed demand of Rs 50 crore and above,” the CBDT said. Strategies for revenue maximisation were discussed at length especially since the CBDT has been tasked to collect revenue of Rs 9.80 lakh crore in the present fiscal. “The officers were urged to utilise data effectively such that the target for collection of Personal Income Tax should not only be met but also be exceeded,” it added. With regard to redressal of grievances, the CBDT said 85 per cent of grievances have been disposed off online through the e-nivaran portal. “There was emphasis on redressal of grievances for both CBDT and CBEC,” the statement said.

It said that special focus should be given to popularise the Operation Clean Money portal such that an environment of voluntary compliance can be created. The indirect tax wing – Central Board of Excise and Customs – discussed issues relating to ease of doing business, litigation management among others. “There was also a Sunshine session to highlight a formation’s initiative in improving taxpayer services or individual initiative outside of the regular area of responsibility,” the statement said.

Besides, Adhia underlined the importance of increasing efforts to garner revenue in light of the data that is available post demonetisation. He also stressed that genuine grievances of taxpayers should be disposed off on priority and taxpayers should be treated with courtesy.

 

Source: Financial Express

Record reserves turn costly cash pile for RBI

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As India’s foreign-exchange reserves march toward the unprecedented $400 billion mark, its central bank faces a costly conundrum.

As India’s foreign-exchange reserves march toward the unprecedented $400 billion mark, its central bank faces a costly conundrum. To keep the rupee stable and exports competitive, it is having to mop up inflows that’s adding cash to the local banking system. Problem is, banks are flush with money following Prime Minister Narendra Modi’s demonetization program last year, leaving them already struggling to pay interest on the deposits in an environment where loans aren’t picking up. The resulting need to absorb both dollar- and rupee-liquidity is stretching the Reserve Bank of India’s range of tools and complicating policy. Costs to mop up these inflows have eroded the RBI’s earnings, halving its annual dividend to the government. “The RBI would be paying more on its sterilization bills than it gets on its reserve assets, so it would cut into its profits,” said Brad W. Setser, senior fellow at New York-based thinktank Council on Foreign Relations. “Selling sterilization paper in a country with a relatively high nominal interest rate like India is costly.”

Governor Urjit Patel aims to revert to neutral liquidity in the coming months from the current surplus. Lenders parked an average 2.9 trillion rupees ($45 billion) of excess cash with the central bank each day this month compared with 259 billion rupees the same time last year. This peaked at 5.5 trillion in March. The surge in liquidity has pushed the RBI to resume open-market bond sales as well as auctions of longer duration repos besides imposing costs on the government for special instruments such as cash management bills and market stabilization scheme bonds. Meanwhile foreign investors have poured $18.5 billion into Indian equities and bonds in the year through June, during which period the RBI has added $23.4 billion to its reserves. Its forward dollar book has also increased to a net long position of $17.1 billion end-June from a net short $7.4 billion a year ago. “My guess is reserves over 20 percent of GDP would start to raise questions about cost – but that is just a guess,” said Setser. India’s reserves have ranged between 15 and 20 percent of GDP since 2008 global crisis — a level that’s neither too low to create vulnerability or too high indicating excess intervention, he said.

Consistent buildup in the forward book may have cost the RBI some 70 billion rupees, while total liquidity-absorption costs due to the demonetization deluge from November to June were 100 billion rupees, according to calculations by Kotak Mahindra Bank Ltd. The RBI paid another 50 billion rupees to 70 billion rupees to print banknotes, the bank estimates. A weakening dollar would also have led to losses due to the foreign-currency cash pile, which has traditionally been dominated by the greenback. The Bloomberg Dollar Index has fallen 8.5 percent this year. After all these expenses, the RBI transferred 306.6 billion rupees as annual dividend to the government, compared with 749 billion rupees budgeted to come from the RBI and financial institutions. More clarity will emerge with the RBI’s annual report typically published in the final week of August. “This disturbs the fiscal math for the year through March 2018,” said Madhavi Arora, an economist at Kotak Mahindra Bank. Assuming everything else stays constant, she estimates the budget deficit may come in at 3.4 percent of gross domestic product rather than the government’s goal of 3.2 percent.

Apart from the high costs, there’s another dimension to the surge in liquidity. The RBI could face a shortage of bonds it places as collateral with its creditors. It is said to be preparing a fresh proposal to the government for creation of a window — the so-called standing deposit facility — which doesn’t require any collateral. “As the excess liquidity challenge looks set to persist, the RBI will need more tools to manage this, such as the standing deposit facility,” economists at Morgan Stanley, including Derrick Kam, wrote in an Aug. 16 note. He predicts that at the current rate of accretion, foreign-exchange reserves will hit $400 billion by Sept. 8 from $393 billion this month.

Source: Financial Express

Economic Survey 2016-17: Arvind Subramanian says 5.4 lakh new tax payers added post demonetisation, calls GST astonishing feat

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Chief Economic Adviser Arvind Subramanian while speaking at the Economic Survey 2016-17 said that there has been a regime shift in terms of macroeconomic stability since demonetisation.

Economic Survey 2016-17: Chief Economic Adviser Arvind Subramanian while speaking at the Economic Survey 2016-17 said that there has been a regime shift in terms of macroeconomic stability since demonetisation.

He revealed that about 5.4 lakh new tax payers have been added since Prime Minister Narendra Modi declared Rs 500 and Rs 1000 notes invalid on November 8, 2016. “5.4 lakh new tax payers added in post-demonetisation period, a big number,” he was quoted as saying by ANI.

Talking more about the impact of demonetisation on the Indian economy, Subramanian said the long term effect is that there has been a 20% reduction in cash in the economy.

He added that so far the government has overachieved its targets on inflation and it will soon be within target. “Substantially overachieved on checking inflation; by the end of March, inflation will be well within the target. Long term effect of demonetisation has been a 20% reduction in cash in economy”, the CEA added.

Talking about the boom to mobile banking, Subramanian said both level and pace of digital payments have been different since demonetisation.

While speaking about the historic Goods and Service Tax which was implemented last month, Subramanian said it is an astonishing feat of administration, politics and technology.

He said farm loans are going to have a deflationary, not inflationary effect if states’ borrowing limit is not raised. The Chief Economic Adviser further added that the balance of risks to growth has shifted to the downside.

His comments came in the backdrop of protests being held by farmers across the country. He said a structural decline in inflation rates and outlook has created scope for lower interest rates and monetary policy.

Source: Financial Express

 

Bad loans at Indian banks climb to a 15-year high and may increase further Bad loans at Indian banks climb to a 15-year high and may increase further

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Bad debts at Indian lenders, especially state-run banks, have climbed to a 15-year high and may increase further, a central bank study showed.

Bad debts at Indian lenders, especially state-run banks, have climbed to a 15-year high and may increase further, a central bank study showed. Under the baseline scenario in a “macro stress test,” the industry’s gross bad-loan ratio may increase to 10.2 percent by March 2018 after climbing to 9.6 percent in March 2017, the highest since 2002, according to the Reserve Bank of India’s Financial Stability Report released Friday. Stressed assets, including soured debt and restructured loans, eased slightly to 12 percent in March 2017 from 12.3 percent in September 2016.

Weakness in the Indian banking system is a threat to growth in Asia’s third-largest economy and may stall Prime Minister Narendra Modi’s plan to revive credit growth from near a two-decade low. The soured loans have contributed to a $191 billion pile of zombie debt that’s cast the future of some lenders in doubt and curbed investment by businesses. “The RBI and the government are proactively taking steps to resolve NPA challenges in the banking sector,” Deputy Governor NS Vishwanathan said in a foreword to the report. “We have also activated prompt corrective action to stem the slide in the banking system.”

State-run lenders under performed their peers in the private sector, the report showed, which measures risks to the banking system by tracking factors such as profitability, asset quality and liquidity. Last month, the government gave new powers to the RBI in an effort to clean up the country’s bad-debt mess, which has left banks struggling with billions of rupees in nonperforming loans. The government amended the Banking Regulation Act to enable the RBI to order lenders to initiate insolvency proceedings against defaulters and to create committees to advise banks on recovering their loans.

The RBI in June ordered the banks to use the insolvency courts to find a solution for 12 of the debtors, though it didn’t name the institutions on its list. Earlier in the decade, many Indian steel and construction companies borrowed to fund expansion at a time when the economy was expanding at 9 percent to 10 percent a year. Loans turned sour as that growth slowed, weakening demand for steel used in construction projects.

Source: http://www.financialexpress.com/economy/bad-loans-at-indian-banks-climb-to-a-15-year-high-and-may-increase-further/744225/

Modi, Putin agree to expand nuclear power plant, push defence ties

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India and Russia signed five pacts, including a crucial agreement on setting up two more atomic power plants at Kudankulam

India and Russia on Thursday reaffirmed their “special and privileged strategic partnership” and signed five pacts, including a crucial agreement on setting up two more atomic power plants at Kudankulam in Tamil Nadu, as Prime Minister Narendra Modi and President Vladimir Putin discussed ways to smoothen bilateral relations.

The pacts were signed in St Petersburg on the third leg of Modi’s four-nation, six-day tour of Europe. Modi is in St Petersburg for the 18th India-Russia annual summit as well as the St Petersburg International Economic Forum.

The two countries are also marking 70 years of the establishment of diplomatic relations between them this year.

“Met President Putin. We had a wonderful meeting during which we discussed India-Russia relations,” Modi wrote in a Twitter post after a one-to-one meeting with the Russian leader.

The highlight of the day was India and Russia concluding a much-awaited pact for setting up the last two units of the Kundankulam nuclear power plant with Moscow’s help. The general framework agreement (GFA) and credit protocol for units 5 and 6 of the Kudankulam nuclear plant was among the five pacts signed on Thursday.

The reactors will be built by Nuclear Power Corporation of India Ltd (NPCIL) and Russia’s JSC Atomstroyexport, a subsidiary of Rosatom, the regulatory body of the Russian nuclear complex. Each of the two units will have a capacity to produce 1,000 megawatt (MW)of power. One 1,000MW nuclear power plant in Kudankulam is operational while another 1,000MW capacity plant is expected to go on stream later this year. Two others of equal capacity are under construction. India’s current nuclear power generation capacity is about 7,000MW.

A joint statement noted that the economies of India and Russia complemented each other in the energy sector and both countries will strive to build an “energy bridge”. It said the future of Indian-Russian cooperation holds great promise across a wide spectrum covering nuclear power, nuclear fuel cycle and nuclear science and technology.

Traditionally, India and Russia have shared a close relationship that dates back to the days of the Cold War, when the US tilted toward India’s neighbour and arch rival Pakistan. Much of India’s military hardware is still of Russian origin though India has diversified its defence procurement with major purchases of military hardware from the US, Israel and France.

On its part, Russia has been concerned at the rapidly warming ties between India and the US including the recent signing of a military logistics agreement.

India’s concerns vis-à-vis its once “trusted strategic partner” include its present tilt towards China with which India has a difficult relationship mainly due to an unsettled border dispute and Beijing’s close ties with Pakistan. Last year, Russia held its first ever military exercises with Pakistan, raising concerns in India.

Once seen as on the same page vis-à-vis concerns on terrorism emanating from Pakistan and Afghanistan, currently there are divergences between New Delhi and Moscow on that issue as well with Russia favouring a role for the rebel Taliban in a future Afghanistan against the rise of the Islamic State in the war-torn country. That Russia did not back India’s demand to name two Pakistan-based terror groups as perpetrators of terrorism against India last year at the Goa Brics (Brazil-Russia-India-China-South Africa) summit did not go down well with India.

In an interview to PTI on Thursday, Putin tried to assuage some of India’s concerns. “Russia is respectful toward all Indian interests,” Putin said. “Russia does not have any tight military relations with Pakistan.”

Putin added: “No matter where terror threat comes from, it is unacceptable and Russia will always support India in fight against terror.”

“There is no other country in the world that Russia has “deep cooperation” in delicate areas such as missiles,” Putin said adding Russia’s “trust-based” ties with India will not be diluted by Moscow’s growing ties with Pakistan and others.

The statement also said that India and Russia were looking to expand trade from the current $ 7.7 billion level to $ 30 billion by 2025.

Source: http://www.livemint.com/Politics/sengcF8LFc2QxVWk75r4wK/Modi-visit-India-Russia-ink-pact-to-expand-Kudankulum-nucl.html

RBI gets nod to embark on India’s biggest banking clean-up

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The RBI will embark on its biggest banking clean-up exercise after President Pranab Mukherjee promulgated an ordinance authorising it to issue directions to banks to initiate insolvency resolution process in the case of loan default.

The tweak in the rules will help the Modi government tackle toxic loans that have crossed the Rs 6 lakh crore mark.

So, what does this mean?
1) The ordinance promulgated by the government on bad loans has now empowered the RBI to issue directions to banks for resolution of stressed assets. This basically implies the central bank can issue directions to any banking company or banking firms to initiate insolvency resolution process with respect to a default under the provisions of the Insolvency and Bankruptcy Code, 2016.

2) It has also empowered RBI to issue directions to banks for resolution of stressed assets.

3) The law will also empower RBI to set up sector related oversight panels that will shield bankers from later action by probe agencies looking into loan recasts.

4) RBI will be able to give specific solutions with regard to hair cut for specific cases and also, if required, look at providing relaxation in terms of current guidelines.

What is RBI’s target?
The central bank wants to resolve 60 largest delinquent-loan cases in nine months, a person familiar with the matter told Bloomberg.
Why is it being done now?

Ridding bank balance sheets of stressed assets is key to reviving credit growth and furthering Prime Minister Narendra Modi’s goal of creating more jobs in the $2 trillion economy.Various schemes proposed by RBI to resolve the problem have been unsuccessful, with lenders reluctant to write down assets sufficiently and company owners unwilling to negotiate repayment plans.

Stressed assets — bad loans, restructured debt and advances to companies that can’t meet servicing requirements — have risen to about 17 percent of total loans, the highest level among major economies, data compiled by the government shows.

Source : http://economictimes.indiatimes.com/articleshow/58530686.cms