BANKING Awareness MAY 2017

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IndiatoholdIndiaMobileCongressfromSept27-29,toattractinvestmentsintelecomandmanufacturing

MinisterofCommunication– Manoj Sinha

NoflagshipeventinIndiaVacuum

IntheWestwehavetheBarcelonaMobileWorldCongressintheEastthereistheShanghaiMobileWorldCongress

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TheReserveBankofIndia(RBI)willsoonintroducecurrencynotesofonerupee

denomination

Thenotes,whichhavealreadybeenprintedbytheGovernmentofIndia,arelegaltenderundertheCoinageAct,2011.Theexistingcurrency

notesinthisdenominationincirculationwillalsocontinuetobelegaltender

• Thenewnotewillhaveanoverallcolour schemeofpinkandgreenontheobverseandreverse,incombinationwithother

colours.

• ThenotewillhavethebilingualsignatureofShaktikanta Das,Secretary,MinistryofFinance.Itwillcontainthewords

‘GovernmentofIndia’and‘भारत सरकार’ andhavethereplicaofthenewonerupeecoinwiththe‘₹’symbolof

2017. ‘स'यमेव जयते’,thewordsprintedonallofIndia’scurrencynotes,willbefeaturedaswell.

• Thesurroundingdesignofthenoteconsistsofapictureof‘Sagar Samrat’,theoilexplorationplatforminMaharashtra.Aninsetletterincapitals,‘L’willalsobeprintedonthenote.Apartfromthis,theAshoka Pillar,ahiddennumber‘1’and

thehiddenword‘भारत’willbeprintedonthenote.

Itwillbe 9.7by8.3cmindimension.

InJanuary2015,thegovernmentstartedRE-printingofRe1notesaftergettingreports

ofcoinshortage

Theprintingofnewonerupeenotewillcost 94paise,whencomparedtotheonerupeecoin,

whichwillcost70paise.

Theonerupeenotewasdiscontinued in1994 -Moreexpensivetoproducethesenotes

comparedtotheone-rupeecoins.

In1995, Rs. 2and Rs. 5noteswerealsodiscontinuedtofreeup printingfacilitiesfor

higherdenominationnotes.

StillLEGAL

DIPPthe department of industrial policy and promotion (DIPP) will

now process the applications for grant of license for manufacture of defense items.

Earlier, the home ministry was carrying out this exercise.

DIPP – Works under the commerce and industry ministry, is mainly responsible for formulation of polices with regard to

promotion of foreign investment and manufacturing industries

DIPP was first established in 1995, and then reconstituted in 2000 and merged with the Department of Industrial

Development.)

DIPPStartupIndiawaslaunchedbytheGovernmentofIndiaon16th

January,2016tobuildastrongeco-systemfornurturinginnovationandStartupsinthecountrytodriveeconomicgrowthandgenerate

largescaleemploymentopportunities.

Inordertopromoteentrepreneurshipinthecountry,theGovernmentofIndiahasamendedthedefinitionofaStartup.

a) AgeofStartup increased:TakingintoaccountthelonggestationperiodbyStartupstoestablish,anentityshallbeconsideredasaStartupuptosevenyearsfromthedateofitsincorporation/

registration(fromearlier5years).However,inthecaseofStartupsintheBiotechnologysector,theperiodshallbeuptotenyearsfromthe

dateofincorporation/registration.

.

b) NoLetterofRecommendationrequired:Noletterofrecommendationfroman

incubator/industryassociationshallberequiredforeitherrecognitionortaxbenefits

c) PotentialofJobandWealthCreation:Thescopeofdefinitionhasbeenbroadenedto

includescalabilityofbusinessmodelwithpotentialofemploymentgenerationorwealth

creation

TATA- MostValuableBrandBrandfinance2017report

India’s100mostvaluablebrands

TataGroup– Estimatedbrandvalueof$13.1billion.Asperthereport,the

Airtel – Second- $7.7billionLIC– Third- $6.8billion.Infosys - 4th - $6.2billion

StateBankofIndia - 5th - $5.5billion

ITC- Mostpowerfulbrandinthecountry.

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BharatSancharNigamLimited(BSNL)hassignedagreementswith

Facebook andMobiKwik

BSNLwillfacilitateconnectivityforFacebook’s `ExpressWi-FiProgram’.

BSNL– HasSignedMoUwith DisneyLandIndiato offerpremiumonlinegamingservicesto

its mobilecustomers.

BSNLandMobiKwik willworktogethertocreate aBSNLmobilewallet

Facebook - “ExpressWi-Fi”launchedcommerciallyinIndia

via700hotspotsacrossfourstatesofUttarakhand,Gujarat,Rajasthanand

Meghalaya.

GSTRevenueSecretaryHasmukh Adhia(4%moreGDPgrowth)

GSTCouncilmeet– Srinagar1211GoodsandServices

14percentofGoodsandServices- 5percent17percentofGoodsandServices- 12percent19percentofGoodsandServices- 28percent43percentofGoodsandServices- 18percent

7percent- exemptlistMilk,cereals,fruits etc

HouseholditemslikeSugar,Tea,Coffeeandedibleoilwillattract5%levy. Cerealsandmilkwill

beexemptedfromthetax.

Manufacturedgoodswillattract18%levy.Luxurycarswillattract28%GSTinadditiontoacess of

15%.

Smallpetrolcars willattract28%GSTplusa1%cess,anddieselcarswillbetaxedat 28%plus3%

cess.Capitalgoods,akeyassetforthemanufacturingsector,willbetaxedat28%.

• ThestateswouldreceiveprovisionalcompensationfromCentreforlossofrevenueduetoabolitionoftaxessuchasVAT(valueaddedtax),octroi andimplementationofGST.Thecompensationwouldbemetthroughlevyofa'GSTCompensationCess'onluxuryitemsandsingoodsliketobacco,forthefirstfiveyears.

• Thecess onluxurygoodshavebeencappedat15percent.Whiletheeffectivecess ongoodssuchas“luxury”carswill12percent

Basedontherecommendationofthefitmentpanel,theCouncilisalsolikelytoexaminetheoptionofplacingservicesundertwotaxslabs—12and18

percent.

Themovewilllikelyevenouttheoverallpriceimpactonconsumerswhonowpaytaxof15percentonall

services.

Mostservices,exceptthoseinthenegativelistofessentialservicessuchashealthcareandeducation,

willcomeunderGST.

ImpactonFMCG

• Hairoil,toothpasteandsoapswillbetaxedat18percentunderGST,significantlylowerthanthepresenteffectiverateof28percent.

• Someproductslikedetergent,shampoo etcmaybecomecostlierastheyarekeptin28%bracket

ImpactonpowerTariff

• Coalwillbetaxedat5percentunderGST,comparedtoacurrenteffectiverateof11.7percent,raisingprospectsoflowerpowertariffs.

GSTrateshavenotbeenyetbeenfinalised onsixcategoriesofproducts—

bio-diesel,beedi andcigarettes,footwear,textiles,agriculturalimplementsandgold.

TheGSTwouldreplacethefollowingtaxes:(i)TaxescurrentlyleviedandcollectedbytheCentre:

CentralExcisedutyDutiesofExcise(MedicinalandToiletPreparations)

AdditionalDutiesofExcise(GoodsofSpecialImportance)AdditionalDutiesofExcise(TextilesandTextileProducts)AdditionalDutiesofCustoms(commonlyknownasCVD)

SpecialAdditionalDutyofCustoms(SAD)ServiceTax.

(ii)StatetaxesthatwouldbesubsumedundertheGSTare:StateVAT

CentralSalesTaxLuxuryTaxd.EntryTax(allforms)

EntertainmentandAmusementTax(exceptwhenleviedbythelocalbodies)Taxesonadvertisements

PurchaseTax.Taxesonlotteries,bettingandgambling.

• StateswillalsobepermittedtolevyanynewtaxasthetaxationpowersofthestateshaveonlybeenrestrictedandnotabolishedaftertherolloutofGST.

GOI raised Rs. 1,200 crore by divesting 9.2% of paid-up capital in National Aluminum Company Ltd. (NALCO)

Now, the Government’s shareholding has become 65.37% in NALCO

>51% (Limit)

Department of Investment and Public Asset Management (DIPAM), Ministry of Finance, has set a record target of Rs. 72,500 crore to be realized through

disinvestment in this fiscal.

In 2016-17 - Rs. 46,247 crore.

The Department of Disinvestment – December 10 1999 - under the Ministry of Finance since 2004.

- In 2016, the Department of Disinvestment was renamed as Department of Investment and Public Asset Management (DIPAM).

-National Aluminium Company Limited (NALCO) is a Navratna company functioning

under Ministry of Mines.

Dinesh Sharma CommitteeDineshSharma,specialsecretaryintheeconomicaffairs

department.

ThecommitteewilltakestockofthepresentstatusofvirtualcurrenciesbothinIndiaandglobally,examine

existingglobalregulatoryandlegalstructuresgoverningthem,suggestmeasuresonconsumerprotection,money

laundering,andexamineanyotherrelevantmatterrelatedtovirtualcurrencies.

Bitcoin,Litecoin,Darkcoin,Peercoin,Dogecoin,Primecoin

IndiaLicensingExpoisscheduledtobeheldonAugust20-21inMumbai.

TheexpowillbeIndia’s first and most influential brand licensingeventthatwillcollateopportunities,knowledgeandrecognitionsunderoneroof.

TheexpowillbeorganizedbyLicenseIndia,India’sfirstlicensingmediaServicesCompanyandsupportedby

FranchiseIndia.

Licensing– 1Billion$industry

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Promptcorrectiveaction

• Asthefinancialhealthofbankshaddeterioratedoverthelastthreeyears,theReserveBankofIndia(RBI)revisedthenormsforpromptcorrectiveaction

• WhatisPCA?• PCAnormsallowtheregulatortoplacecertainrestrictionssuchas

haltingbranchexpansionandstoppingdividendpayment.Itcanevencapabank’slendinglimittooneentityorsector.Othercorrectiveactionthatcanbeimposedonbanksincludespecialaudit,restructuringoperationsandactivationofrecoveryplan.Banks’promoterscanbeaskedtobringinnewmanagement,too.TheRBIcanalsosupersedethebank’sboard,underPCA.

• TheprovisionsoftherevisedPCAframeworkwillbeeffectiveApril1,2017basedonthefinancialsofthebanksfortheyearendedMarch31,2017.Theframeworkwillbereviewedafterthreeyears.

WhenisPCAinvoked?ThePCAisinvokedwhencertainriskthresholdsarebreached.Therearethreeriskthresholdswhicharebasedoncertainlevelsofassetquality,profitability,capitalandthelike.Thethirdsuchthreshold,whichismaximumtolerancelimit,setsnetNPAatover12percentandnegativereturnonassetsfor

fourconsecutiveyears.

Whatarethetypesofsanctions?Therearetwotypeofrestrictions,mandatoryand

discretionary.Restrictionsondividend,branchexpansion,directors'compensation,aremandatorywhilediscretionaryrestrictionscouldincludecurbsonlendinganddeposit.InthecasesoftwobankswherePCAwasinvokedaftertherevisedguidelineswereissued— IDBIBankandUCOBank— onlymandatoryrestrictionswereimposed.Boththebanks

breachedriskthreshold2.

Whatnext?Somemorelendersareexpectedtocomeunderthe

correctiveactionframeworkasandwhentheirassetqualityworsens,puttingprofitabilityunderpressure.Somepublic

sectorbankshavebreachedthenetNPAparameteraswellastheprofitabilityparameter.Thesebanksarecomfortableon

thecapitalparameter,thankstothegovernment’scommitmenttoensurethePSUbanksarenotstarvedof

capital.However,asthegovernmenthasitsowncommitmentformaintainingfiscaldiscipline,itremainstobeenseenhow

longitcanaffordtoinfusecapitalinthesebanks.

FIPB

Foreigndirectinvestment (FDI)

isaninvestmentmadebyacompanyorindividualinonecountryinbusinessinterestsin

anothercountry,intheformofeitherestablishingbusinessoperationsoracquiringbusinessassetsintheothercountry,suchasownershiporcontrollinginterestinaforeign

company.

Green-fieldandbrown-fieldinvestmentsaretwodifferenttypesof foreigndirectinvestment (FDI).

Green-field investmentsoccurwhena parentcompany beginsanewventurebyconstructingnewfacilitiesinacountryoutsideofwherethecompany

isheadquartered.

Brown-field investmentsoccurwhenacompanyorgovernmentpurchasesanexistingfacilitytobegin

newproduction.

Green-fieldandbrown-fieldinvestmentsaretwodifferenttypesof foreigndirectinvestment (FDI).

Green-field investmentsoccurwhena parentcompany beginsanewventurebyconstructingnewfacilitiesinacountryoutsideofwherethecompany

isheadquartered.

Brown-field investmentsoccurwhenacompanyorgovernmentpurchasesanexistingfacilitytobegin

newproduction.

• Automaticroute:Bythis route FDIisallowedwithoutprior approval byGovernmentorReserveBankofIndia.

• Government route:Prior approval bygovernmentisneededviathis route.

Somesectorswith100%FDIbyAutomaticroute

AgricultureAirports(BothGandB)

Pharma(OnlyG)Plantationsector

Explorationofoilandnaturalgas

SomesectorswithFDIbyApprovalrouteDefenseSatellites

PrintmediaBankingTelecom

ForeignInvestmentPromotionBoard

TheForeignInvestmentPromotionBoard (FIPB) offersasinglewindowclearanceforapplicationsonForeignDirectInvestment

(FDI)inIndiathatareundertheapprovalroute.

FIPBishousedunderdepartmentofEconomicAffairs,MinistryofFinance

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FIPBcomprisesofthefollowingSecretariestotheGovernmentofIndia:

(i)SecretarytoGovernment,DepartmentofEconomicAffairs,MinistryofFinance– Chairperson

(ii)SecretarytoGovernment,DepartmentofIndustrialPolicy&Promotion,MinistryofCommerce&Industry

(iii)SecretarytoGovernment,DepartmentofCommerce,MinistryofCommerce&Industry

(iv)SecretarytoGovernment,EconomicRelations,MinistryofExternalAffairs

(v)SecretarytoGovernment,MinistryofOverseasIndianAffairs.

FIPB

UPTO5000CRORES– FIPB– MoF isfinalauthority

Morethanthat,CCEA

DowereallyrequireFIPB90%ALREADYcomingthroughautomaticroute

Weneedmoreliberalpolicies

• Advancedcountriesgenerallywelcomeallforeigninvestmentsbuttheyhaveinstitutionalmechanismstoblockinvestmentthathurtsnationalinterest

Whatwasthealternative?• RBIcouldhaveactedasnodalagency• (RBIisalreadyconcernedwithforeignexchange),i.e.AnycompanythatisinvestinginINDIAneedstocomplywithforeignexchangereportingrequirements

Newrules• FDIproposalswould be approvedbytheministries

concernedbyfollowingthe standardoperatingprocedureapprovedbytheCabinet.

• Those11sectorsthatrequireapprovalwouldbedealtdirectlybytheconcernedministry.

• Inproposalsrelatedtosecurity,theproposalswillalsoneedtorequiretheapprovalofHomeMinistry.Thoseproposalswhicharepresentlypendingbefore

theFIPBwillbesentbacktotheministriesconcerned.

BeforeIsignoffReporate: 6.25%.

ReverseRepoRate:6%.

MarginalStandingFacility(MSF)Rate:5%.

BankRate:5%.

CashReserveRatio(CRR): 4%.

StatutoryLiquidityRatio(SLR): 20.50%.

Medium-termtargetforretailinflationis4%.

Inflationprojectionissettoanaverageof4.5%inthefirsthalfof2017-18and5%inthesecond

half.

GVAgrowthprojectionunchangedat7.4%for2017-18

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