Indiabulls Housing sells stake in UK-based OakNorth Bank for Rs 630 cr

 The country’s third largest mortgage lender, Indiabulls Housing Finance (IHF), has sold a part of its stake in the UK-based OakNorth Bank to TEMF Limited, a fund managed by Toscafund Asset Management, for approximately Rs 630 crores. Earlier this month, the mortgage lender sold a part of its stake in the UK-based lender to HighSage Ventures, a Boston-based investment firm, for Rs 440 crore. The proceeds will be used to bolster the capital adequacy ratio of the lender.

IHF has now raised Rs 1,832 crore as fresh equity through stake sale in OakNorth Bank and qualified institutional placement (QIP). The mortgage lender raised Rs 683 crore from the issue of QIP and Rs 1,149 crore from the stake sale.

The mortgage lender had invested Rs 663 crore for a 40 per cent stake in OakNorth Bank in November 2015. A couple of years later, in November 2017, it sold around 10 per cent of its stake in the bank for Rs 770 crore to the government of Singapore-owned investment arm GIC for Rs 770 crore. The bank became profitable in just 11 months after its inception, and within four years of operations, its deposits have grown under to 3 billion pounds. It has lent over 4 billion pounds since its launch.

In a statement to the exchanges, the mortgage lender said it has issued bonds worth Rs 2,780 crores in the current fiscal till date and has raised Rs 1,832 crores in fresh equity in the same period, adding to the regulatory equity capital of the company. Further, the company has launched a buyback of all its bonds maturing in the next 12 months.

A high capital adequacy ratio will provide comfort to an investor in uncertain times, as real slippages from the moratorium book will be key for all financial companies.

Recently, the company saw some changes in the top management with Sameer Gehlaut stepping down as the executive chairman of the company and Independent Director S S Mundra being elevated to the post of non-executive chairman. Gehlaut, on the other hand, will continue as a non-executive, non-independent director of Indiabulls Housing Finance and will head Indiabulls Ventures.

FinMin to provide capital support from Rs 20k cr fund to some PSBs in Q3

 The Finance Ministry is likely to provide capital support from the Rs 20,000 crore fund approved by Parliament in recently concluded session to some Public Sector Banks (PSBs) in the third quarter itself.

Parliament approved Rs 20,000 crore for PSB capital infusion as part of the first batch of Supplementary Demands for Grants for 2020-21 which sought additional spending of a record Rs 2.35 trillion primarily to meet expenses for combating the Covid-19 pandemic.

The fund infusion would be for meeting regulatory capital requirements if the need arises in October-December quarter, sources said.

The second quarter result will give an idea as to which bank may require regulatory capital and accordingly recapitalisation bonds would be issued to them, sources said.

Besides, state-owned banks already have shareholders' approval for raising capital through a mix of equity and bonds during the current fiscal.

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It is to be noted that the government refrained from committing any capital in the Budget 2020-21 for PSBs, hoping that lenders will raise funds from the market depending on the requirement.

In 2019-20, the government infused Rs 70,000 crore into PSBs to boost credit for a strong impetus to the economy.

In the last financial year, Punjab National Bank got Rs 16,091 crore, Union Bank of India received Rs 11,768 crore while Canara Bank and Indian Bank got Rs 6,571 crore and Rs 2,534 crore, respectively.

Allahabad Bank received Rs 2,153 crore, United Bank of India got Rs 1,666 crore and Andhra Bank received Rs 200 crore. These three lenders have been merged with various PSBs.

Besides, Bank of Baroda got a capital infusion of Rs 7,000 crore, Indian Overseas Bank received Rs 4,360 crore and UCO Bank got Rs 2,142 crore. Punjab & Sind Bank received Rs 787 crore and Central Bank of India got Rs 3,353 crore.

In addition, LIC-controlled IDBI Bank received additional capital of Rs 4,557 crore.

Temporary retention, not diversion: FinMin sources on CAG audit of GST cess

 Finance ministry sources have countered CAG audit finding of central government wrongly retaining Rs 47,272 crore of GST compensation cess meant for states, saying temporary retention cannot be termed as diversion.

Days after the Comptroller and Auditor General (CAG) flagged that the Centre in first two years of the GST implementation wrongly retained GST compensation cess that was meant to be used specifically to compensate states for loss of revenue, ministry sources said compensation due for the year 2017-18 and 2018-19 was fully paid to states.

Time taken in reconciliation of compensation receipts can't be termed as diversion of GST cess fund when the dues to states were fully released by the central government, they said.

Sources said that in 2017-18, Rs 62,611 crore was collected, out of which the government released full compensation dues of Rs 41,146 crore to the states and union territories (UTs).

In 2018-19, an amount of Rs 95,081 crore was collected, out of which Rs 69,275 crore was paid as full compensation dues to states and UTs.

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They said an amount of Rs 47,271 crore collected in the 2017-18 and 2018-19 had remained unutilised for reconciliation post full payment of GST compensation dues.

For the year 2019-20, the central government released Rs 1,65,302 crore as GST compensation against a cess collection of Rs 95,444 crore which it could do so with the unutilised cess of Rs 47,271 crore.

The GST (Compensation to States) Act guarantees all states an annual growth rate of 14 per cent in their GST revenue in the first five years of implementation of GST beginning July 2017. It was introduced as a relief for states for the loss of revenues arising from the implementation of GST.

If a state's revenue grows slower than 14 per cent, it is supposed to be compensated by the Centre using the funds specifically collected as compensation cess. To provide these grants, a GST compensation cess is levied on certain luxury and sin goods.

The collected compensation cess flows into the consolidated fund of India (CFI), and is then transferred to the Public Account of India, where a GST compensation cess account has been created. States are compensated bi-monthly from the accumulated funds in this account.

However, instead of transferring the entire GST cess amount to the GST compensation fund during 2017-18 and 2018-19, the CAG found that the Centre retained these funds in the CFI and used it for other purposes.

The finance ministry sources said the compensation receipt in the CFI was subject to reconciliation in the coming months, as usual, in the forthcoming financial year.

If for that reason the amount remained in the CFI, how can that be treated as diversion, they asked adding even the CAG in its report has not said so.

The amount collected under compensation cess fund has been regularly and fully distributed to states as per their dues and budgetary provisions and by the end of July 2020, everything has been accounted for and released, source added.

The CAG in its report tabled in Parliament earlier this week said out of the Rs 62,612 crore GST Compensation Cess collected in 2017-18, Rs 56,146 crore was transferred to the non-lapsable fund.

In the following year (2018-19), Rs 54,275 crore out of Rs 95,081 crore collected was transferred to the fund.

The short transfer in 2017-18 was Rs 6,466 crore and in 2018-19 it was Rs 40,806 crore, the CAG said adding the Centre used this money for "other purposes" which "led to an overstatement of revenue receipts and understatement of fiscal deficit for the year".

Sources explained that all amounts including taxes and cess that are collected by the Centre should, under the Article 266 of the Constitution, get credited first to the CFI and then only it could be transferred to any other fund through a budget head in Union Budget.

The government makes all efforts to transfer all amounts collected by the end of every financial year into the fund by making necessary budget provisions, they said.

In case of compensation cess, since the final accounts of amounts collected are known only after the end of financial year, any amount collected over and above the estimate will remain in the CFI temporarily, they said adding after reconciliation, the amount is transferred to Compensation Fund and from that fund to states as per their compensation formula.

Therefore, such temporary retention of GST cess in CFI pending reconciliation cannot be treated as diversion by any stretch of imagination, sources said.

Since the cess collected by the Government has been used for full payment of due compensation, then it cannot be alleged that unutilizedcess amount has been diverted for other purposes, they insisted.

No decision to discontinue printing of Rs 2,000 currency note: FinMin in LS

 The Finance Ministry on Saturday informed the Lok Sabha that no decision has been taken to discontinue the printing of Rs 2,000 denomination currency notes.

In a written reply, Minister of State for Finance Anurag Thakur said printing of bank notes of particular denomination is decided by the government in consultation with the RBI to maintain desired denomination mix for facilitating transactional demand of public.

During the year 2019-20 and 2020-21, no indent was placed with the presses for printing of Rs 2,000 denomination notes.

"However, there is no decision to discontinue the printing of Rs 2,000 denomination bank notes by the government," the minister said.

Thakur also informed that as on March 31, 2020, there were 27,398 lakh pieces of Rs 2,000 notes in circulation compared to 32,910 lakh pieces on March 31, 2019.

He further said the RBI has informed that in view of nation-wide lockdown due to COVID-19 pandemic, printing of notes stopped temporarily.

However, the note printing presses resumed production in a phased manner, as per the guidelines issued by Central/State Government, he added.

The production activities at Bhartiya Reserve Bank Note Mudran Private Limited (BRBNMPL) presses were suspended from March 23, 2020, to May 3, 2020. Printing of bank notes at BRBNMPL presses resumed with effect May 4, 2020.

Thakur further said Security Printing and Minting Corporation of India Limited (SPMCIL) has informed that printing of bank notes at their presses was also affected due to COVID-19 pandemic.

Both, Bank Note Presses of SPMCIL -- Currency Note Press, Nashik and Bank Note Press, Dewas were closed down from March 23, 2020 due to lockdown.

Currency Note Press, Nashik and Bank Note Press, Dewas resumed full-fledged production activities from June 8, 2020 and June 1, 2020, respectively.

During the period of lockdown, note printing presses have uninterruptedly supplied notes to RBI offices/currency chests from stock of notes available with them through Indian Railway Treasury Wagons, Thakur added.

To another question, the minister said revision of family pension is one of the demands made by bank employee unions/associations during the course of their discussions with the Indian Banks Association (IBA), negotiating on behalf of its participating member banks, for the 11th bipartite wage settlement.

"IBA, has informed that during the discussions with representative employee unions/associations consensus was arrived at on recommending revision of family pension," Singh said.

To a question, he said strengthening of monitoring of the banking mechanism is reflected in steep reduction in the occurrence of frauds in public sector banks, with the amount involved in frauds declining from the peak of 0.96 per cent of bank loans in the fiscal 2013-14 to 0.15 per cent in 2019-20.

15th Finance Commission report: Devolution for FY20-21 cut marginally

The Fifteenth FinanceCommission (FC), in its report for fiscal year 2020-21, has recommended a marginal reduction in the vertical devolution of the divisible tax pool to 41 per cent from the prevailing 42 per cent.
This is due to the newly formed Union Territories of Jammu and Kashmir, and Ladakh, which will get funds from the Centre’s share, which means devolution will be for 28 states compared to 29 earlier. The FC also reintroduced performance-based incentives to states on two parameters — demographic performance and taxation efforts — and said it would recommend more incentives on further parameters, conditional upon states fulfilling certain criteria in the coming fiscal year.
While presenting her Budget, Finance Minister Nirmala Sitharaman said the Centre had decided to “substantially” accept the recommendations of the 15th FC but did not indicate which recommendations it had accepted.
The 15th FC, whose term was extended for 11 months , will submit its second report — for 2021-22 to 2025-26 — in October.
It stated in its first report that a number of key recommendations it was required to make will be examined in greater detail and will find space in the second report. The includes the feasibility of a separate defence and national security fund, for which it will form an expert group before giving its recommendations.
The report also said that the Centre should, in the coming year, rationalise centrally sponsored schemes and that centre and states should fully reveal the extent of their off-budget borrowings.
“The Commission has noted the tendency of the Union and state governments to borrow outside the Consolidated fund, leading to accumulation of extra-budgetary liabilities. We recommend that in the interest of transparency, both the centre and states need to make full disclosure of extra-budgetary borrowings and take steps to eliminate them in a time-bound manner,” it said.
While the horizontal devolution — the first step in which the Centre sets aside the kitty for the states’ share — was marginally reduced, there was a 21 per cent increase in revenue deficit grants for states from Revised Estimates of 2019-20 (the last year of the 14th Finance Commission award period) to 2020-21, budget documents show.
In its report, tabled alongside the Union Budget by Finance Minister Nirmala Sitharaman, the 15th FC said that while it was inclined to leave the vertical devolution unchanged from the 42 per cent recommended by the 14th Finance Commission, it had to take into account the new UTs.
“We notionally estimated that the share of erstwhile state of Jammu and Kashmir would have come to around 0.85 per cent of the divisible pool. We believe there is a strong case to enhance this to 1 per cent to meet the security and other special needs of J&K and Ladakh,” the report stated. “Since this enhancement has to be met from the Union’s resources, we recommend that the aggregate state of shares may be reduced by 1 percentage point to 41 per cent of the divisible pool,” it said.
“This rounding off works marginally in favour of the Centre,” said DK Srivastava, Chief Policy Advisor, EY India.
“By assuming nominal GDP growth rates at 10 per cent for FY20 and 11 per cent for FY21, the Fifteenth Finance Commission has made optimistic assumptions. These marginally optimistic growth assumptions imply an underestimation of Commission’s recommendation for the revenue gap grants,” Srivastava said.
Among other recommendations, the Commission also suggested that the country needs an overarching fiscal framework for Centre as well as states, on the lines of the FRBM Act, which would lay down accounting, budgeting and auditing standards to be followed at all levels of the government.
“We recommend the constitution of an expert group to draft such a legislation which will be an important first step in establishing a statutory framework to implement the essential features of a sound Public Financial Management System. The group should also clearly identify those aspects of the legislation that will require consistent legislation at the level of the states,” it said.
While making its recommendations, the Commission did not mince words on the economic slowdown and its impact on the centre and states’ resources. The report said that making forecasts for the next five years using 2019-20 as a base will be ‘excessively aspirational and inaccurate’. Conservatism will not help either. Hence, the 15th FC will wait for macroeconomic indicators over the next few quarters to make these forecasts in its next report.
The 15th FC departed in a way from previous commissions by increasing focus on local bodies. “We recommend an amount of Rs 90,000 crore as grants to local bodies for 2020-21, which is 4.3 per cent of the estimated divisible pool. We have also identified the need to increase the inter se shares for local bodies grants for urban areas as we regard cities as engines of growth.”

DoT to take no coercive action against telcos for missing AGR deadline

The Licensing FinancePolicy Wing (LFPW) of the Department of Telecommunications (DoT) has communicated to the controller of communications accounts (CCA) in different circles that they should, till further orders, take no “coercive action” against telecom operators if they fail to comply with the Supreme Court order on repayment of adjusted gross revenue (AGR) dues.
After the Supreme Court’s AGR order, telcos were required to pay Rs 1.47 trillion by 24 January, a deadline set by the apex court.
The DoT move provides a major relief to telcos, as three leading players — Bharti Airtel, Vodafone Idea Ltd and the Tata group (which does not have any telecom operations now) have informed DoT through separate letters that they will comply with the Supreme Court order on AGR dues, but they will wait until next week, when their “modification” petition will be heard by the Supreme Court, before making the payment. That means they are set to skip the 24 January deadline.
In its communication, the licensing wing has stated that access service licensees have already been informed to make payments to the DoT headquarters.
Meanwhile, Reliance Jio Infocomm, part of Mukesh Ambani’s Reliance Industries group and a challenger to Bharti Airtel and Vodafone Idea, has paid Rs 195 crore to DoT to clear all its AGR dues until January 31, according to official sources.

Budget: Govt mulls more incentives for taxpayers with lower flat tax rate

The government is considering a proposal to extend further incentives to salaried taxpayers in the upcoming budget. The FinanceMinistry may allow individual taxpayers to pay a lower flat rate of tax if they forego all exemptions.
The new structure would be similar to tax rates proposed by Finance Minister Nirmala Sitharaman late last year where the base corporate tax rate was reduced to 22 per cent from 30 per cent for companies that agreed to forgo all exemptions and incentives. The tax was kept at even lower rate of 15 per cent for new manufacturing companies.
"After tax sops for corporates last year, the government is looking at ways to incentivise the individual taxpayers that form a major source of revenue for the Centre. While major changes in tax slabs could wait for some time, a scheme similar to the one implemented for the corporate sector is being examined for individuals too," said a source privy to discussions on the issue in the government.
At present while individual income upto Rs 2.5 lakh per annum is exempt from tax, a 5 per cent tax is levied for income between Rs 2.5 lakh and Rs 5 lakh. A higher 20 per cent slab is for income between Rs 5 lakh and 10 lakh while a 30 per tax rate is applicable for income above Rs 10 lakh. In addition, the government also levies a surcharge in slabs on super rich for income above Rs 50 lakh.
The source said that though there is broad understanding on implementing a flat income tax rate for individuals, discussions is still going on its quantum and how it could fit a tax structure that has three to four different slabs.
Tax experts who did not want to be named on the issue told IANS that the government could look at a flat rate somewhere in between the 5 and 30 per cent income tax rates. The ideal would be around 15-18 per cent rate that would be lower than the peak rate of 30 per cent and the second rate of 20 per cent. Also, the new lower flat rate of tax may be applicable only for annual income of upto Rs 50 lakh.
Sources said that a higher flat rate is also being looked at for the super rich but discussions on this have remained inconclusive.
At present, an individual can save upto Rs 1.5 lakh per annum under Section 80C of the Income Tax Act by making investments in insurance plans and few other specified instruments including buying a pension plan run under the NPS. An additional self contribution (up to Rs 50,000) under section 80CCD (1B) is available as NPS tax benefit. In addition, there are deductions for contributing towards paying premium for health insurance and for paying installment for homes bought on loans.
While the flat rate of tax may be attractive to a certain category of taxpayers that want a higher share of their monthly earnings in hand, experts say the move could also dissuade people from increasing their contributions towards savings. India's household savings has dropped to 17.2 per cent level in 2017-18 from 23.6 per cent in 2011-12. Data for FY 19 is not available. Higher domestic savings is crucial to mobilise funds for investments in the economy.

Finance Commission chief N K Singh questions 'discriminatory' IMF scrutiny

N K Singh, chairman of the 15th FinanceCommission, accused the World Bank as well as the International Monetary Fund (IMF) of “developing rigidities” while encountering new challenges, and assigning higher weighting to developed regions such as the Europe and US. He went on to say that the “rules of the game” were applied in a discriminatory manner between the rich and poor nations.
Singh questioned the way the IMF scrutinises macroeconomic policies of the developing world, which he claimed is done differently than for the richer nations. He stressed on the need for Asia to have a bigger say in decision-making.

Addressing a gathering of The Indian Economic Association in Surat on Friday, he gave an example of Article IV of the IMF, where each member nation must subject themselves to a detailed scrutiny of their overall macroeconomic policies.
This comes days after IMF Chief Economist Gita Gopinath cautioned the Fund may revise India’s growth forecast “significant downward”.
“How is it that the IMF failed to spot the global financial crisis of 2007-08 when there was such a dramatic meltdown of the US economy, which impaired the financial systems so severely? How did the Fund not spot a crisis of this scale much less prompt the US to take timely corrective action. How is it also that the rule of the game in terms of conditionalities of both for structural loans and for financial accommodation have more stringent conditions for developing world than other countries in Europe like Greece or Spain where these rules are more flexibly applied. Such discriminatory approach cannot inspire long-term confidence, both in terms of their technical competence or in terms of an impartial approach,” he said.
“A disorderly international framework would not be in anyone’s interest," he said. “Over these decades both the World Bank and the IMF have developed many rigidities as they encounter new challenges. For one, in its decision-making process and quota rights, as they are called, notwithstanding recent changes they remain misaligned with the changing realities of the 21st Century.”

Govt refuses to share Swiss a/c details of Indians, cites confidentiality

The FinanceMinistry has declined to share Swiss bank accounts details of Indians saying it is covered under "confidentiality provisions" of a tax treaty signed between India and Switzerland.
In reply to an RTI query, the ministry also refused to disclose the details of black money received from other foreign countries.

"Information exchanged under such tax agreements is covered under confidentiality provisions of respective agreements. Thus, disclosure of tax related information and information sought/obtained from foreign governments is exempted under section 8 (1) (a) and 8 (1) (f) of the Right to Information (RTI) Act," it said in response to the RTI application filed by this PTI journalist.
The section 8 (1) (a) bars disclosure of information "which would prejudicially affect the sovereignty and integrity of India, the security, strategic, scientific or economic interests of the State, relation with foreign State or lead to incitement of an offence".
The other section exempts disclosure of "information received in confidence from foreign government".
The ministry was asked to provide the details of information received from Switzerland related to accounts of Indians in banks there. It was also asked to provide the details of information received from foreign countries on black money, including details of such cases shared with India.
India had in September got the first set of Swiss bank account details of its nationals under a new automatic information exchange pact.
India is among 75 countries with which Switzerland's Federal Tax Administration (FTA) has exchanged information on financial accounts within the framework of global standards on AEOI or Automatic Exchange of Information.
It is feared that many Indians might have closed their accounts after a global crackdown on black money led to Switzerland buckling under international pressure to open its banking sector for scrutiny to clear the long-held perception of Swiss banks being safe haven for undisclosed funds.
Switzerland agreed to AEOI with India after a long process, including review of necessary legal framework in India on data protection and confidentiality.
The National Council of Applied Economic Research (NCAER), that was one of the three institutes commissioned in 2011 by the then UPA government to conduct a study on black money, has estimated wealth accumulated outside India between USD 384 billion and USD 490 billion during the period 1980 to 2010.
Another institute -- National Institute of Financial Management (NIFM) -- had in its findings said the results of estimation suggest that total illicit outflow at the present value (including opportunity cost) from India in the reform period (1990-2008) is Rs 9,41,837 crore (USD 216.48 billion).
Importantly, illicit outflows from the country are estimated on average to 10 per cent of the estimated unaccounted income.
During the period 1997-2009, illicit financial flows out of the country have been in the range of 0.2% to 7.4% of GDP, according to the National Institute of Public Policy and Finance (NIPFP).
These study reports of the NIPFP, NCAER and NIFM were received by the government on December 30, 2013, July 18, 2014, and August 21, 2014, respectively.
The findings of these reports were made public by the Standing Committee on Finance in its preliminary report submitted in the Parliament in March this year.

Do not want businesses to shut, will help revive: Sitharaman to India Inc

FinanceMinister (FM) Nirmala Sitharaman on Friday assured India Inc that the government would help revive businesses as it did not want any company to shut down, and urged industry to come out of “self-doubt”. “This government does not want businesses to close. We want to help them to be revived by legislative and other administrative changes... we are with you. I want this mood of self-doubt to be completely removed from your minds,” the FM said at an event by industry body Assocham.
“Several steps (have been) taken post-Budget which were essentially responding to industry and some of them are probably showing some impact on the ground now.”

The FM said state-owned banks had been told to lend more instead of holding it in reverse repo with the Reserve Bank of India.
The most stressed NBFCs had been provided liquidity, as the government looks for ways to turn around a flagging economy, she added. The government has identified at least 10 projects so far as part of an infrastructure pipeline and these will get funds upfront. “I had announced during the Budget that Rs 1 trillion will be given for infrastructure and I also announced that this is front-loaded. At least 10 new infrastructure projects are ready for clearance in the coming year so that they get the money upfront,” she said.
After Sitharaman’s Budget announcement, the Centre had, in September, set up a high-level task force to identify infrastructure projects for Rs 100 trillion investment by 2024-25. Addressing industry representatives, Sitharaman said India’s macro-economic indicators were on a solid footing. Inflation had been kept under control, macro-economic fundamentals and foreign direct investment (FDI) inflows were strong, and foreign exchange reserves at record highs.
Highlighting some of the steps taken by the government after the Budget, she said liquidity crunch was addressed, capital was infused in public sector banks as well as the NBFC sector and professionalisation of Public sector undertaking (PSU) boards was done. The government’s decision to slash corporation tax rate in September has made a difference and a lot of new investments are expected to flow into India, she said.
The FM also emphasised that the government has brought in transparency and technology in tax collection and eliminate harassment. With the introduction of faceless assessment, tax harassment is going to be a thing of the past, she added.

Cabinet approves extension to 15th Finance Commission for one year

The union cabinet on Wednesday extended to the term of the Fifteenth FinanceCommission by a year, asking it to submit an interim report for fiscal year 2020-21 and a full report for fiscal years 2021-22 to 2025-26—a decision apparently taken to factor in Jammu and Kashmir’s new status.
“The extension of the term will enable the Commission to examine various comparable estimates for financial projections in view of reforms and the new realities to finalize its recommendations for the period 2020-2026,” said a government press release.

The cabinet decision means the Commission will recommend its award to six fiscal years, instead of the usual five. Sources said the cabinet decision does not fall foul of the Constitution.
Article 280 of the Constitution states that the President shall constitute a Finance Commission at the expiration of every fifth year or at such earlier time as the President considers necessary.
Simply put, this means that while the Commission can give recommendations for six years through two reports (2020-21 to 2025-26), when the Sixteenth Finance Commission is set up, it will consider devolution for 2025-26 to 2029-30, and not from 2026-27, an official explained. This will essentially keep the award period of the 15th Finance Commission at five years, since these are just recommendations which the government accepts.
“The Constitution just mandates that every five years a Finance Commission has to be set up. Today’s cabinet decision is not in contravention of that,” said an official.
Sources told Business Standard the commission was given more time, considering the creation of new union territories of Jammu and Kashmir and Ladakh.
The commission has sought time from President Ram Nath Kovind to submit an interim report on Saturday. The interim report will enable Finance Minister Nirmala Sitharaman and her bureaucrats to prepare the 2020-21 Budget. This course of action has precedence in at least three previous Finance Commissions.
Union territories usually get their resources from the central government’s share of the divisible pool, but the Jammu and Kashmir Reorganization Act mandates the commission to treat the two union territories as a state. Ladakh, on the other hand, is expected to get funds out of the centre’s share, like any other union territory.

RCEP offer 'was not as much as our aspirations', says FM Sitharaman

Union Finance Minister Nirmala Sitharaman said on Saturday that India did not join the Regional Comprehensive Economic Partnership (RCEP) as the offer “was not as much as our aspirations.”
The RCEP negotiations were launched by ASEAN leaders and six other countries during the 21st ASEAN Summit in Phnom Penh (Cambodia) in November 2012. The objective of launching RCEP negotiations was to achieve a modern, comprehensive, high-quality, and mutually beneficial economic partnership agreement among the ASEAN member-states and their FTA partners.

She also said that she held discussions with credit rating agencies on their methodology to assess risk, in the backdrop of the failure of firms which had been rated well by these agencies. Delivering the sixth G. Ramachandran Memorial Lecture, organised by the Southern India Chamber of Commerce and Industry, she said, “I met up with a few of the credit rating agencies to understand the way in which they rate are consistent with what is happening in the economy.”
“Without taking any name, I would only highlight that an AAA-rated institution collapsed in a week after the rating. So, do you really take the rating as just an indicator or just a broad advisory or do you take that as a holy book and say that their rating is really good and they can be offered loan as much as they want?” she said.
Many such decisions, where the rating was good, ended up with people wondering why the company failed.
Speaking about the non-performing asset (NPA) crisis, she said most banks are out of prompt corrective action (PCA) now. They are going through a churn on how to assess risk and how best they can rate asset quality so that their functioning will be smoother.
The government is also discussing the legislative changes or amendments the government needs to undertake to empower the RBI.
She also said banks should assess their strengths and weaknesses before planning to scale up of operations.
“I take the name of the Reserve Bank of India (RBI) here, particulalry in the context of the Punjab Maharashtra Cooperative Bank (PMC Bank). There had been several questions in the context of PMC Bank and earlier in the context of IL&FS collapse. The RBI is clearly looking at a lot, introspecting a lot, and making sure that there is a need for measures within the RBI to strengthen supervisory and regulatory roles,” she said.
She added, “Institutions like banks should understand their core strengths and offer benefits to people like providing value-added features like phone banking facilities or rolling out chat bots to serve customers and should not take up unnecessary scaling up of operations.”
“Scaling up (of operations in banks) is becoming like a disease. Today, I am in this state and in six states. I am planning to expand presence across the country. Whether it will add to my core or make it weak, that is the assessment the banks should do,” she said.

Will telcos get relief on AGR? PMO, Finance Ministry hold talks with DoT

The Prime Minister's Office and Finance Ministry have held separate meetings with Department of Telecom over working out a solution on the AGR decisions of the Supreme Court where the telecom operators have to pay a hefty amount of Rs 1.3 lakh crore overall to the government as dues.
AGR is Adjusted Gross Revenues which includes all licensed revenues of a telecom firm not necessarily originating only from mobile or landline services.

It now includes all incomes likes towers, ISP licenses, rentals as per the apex court order which has supported the DoT computation and this is now a 14-year-old dues amount which has jacked up the payout by telcos like Airtel and Vodafone Idea.
Highly placed sources said the PMO and Finance Ministry have held meetings with DoT but no possible way or solution for giving any relief to the telcos over the payment has emerged.
The Telecom Secretary attended the meeting with the PMO last week. Senior DoT officials were there in the Finance Ministry meeting. The newly appointed panel-led by Cabinet Secretary also met last week for the first time for looking at sectoral levies relief and they too discussed the AGR issue though its terms of reference is not on the AGR issue discussion.
Sources said as the Secretary panel starts meeting more, there is expected to be some direction which can be followed and only PMO will take that decision after inputs from the secretary panel, Finance Ministry, Law Ministry and Department of Telecom.
Telecom Ministry has, however, made it clear to these ministries, PMO that insistence on payment by these telcos could land them in NCLTs where recovery of government dues would drag again for years and these telcos have taken huge loans of over Rs 3 lakh crore from banks for previous spectrum auction which they would not be able to return to the banks and NPAs would rise as a result.
There would be extreme difficulties for 70 subscribers of these telcos if they shut down. Other than that, Indian telecom sector would get an extremely rough image in the global map.
Sources also added that telcos individually and represented by industry have met telecom secretary recently over this. In the industry meeting, Jio was not present.
As on possibilities of a direction, officials said waiving of penalties and interest is not easy as it directly intervenes the Supreme Court order and the whole court case was over that. So discussion have to be threadbare on what is realistically possible without touching the Supreme Court order and at the same time it is also true that these telcos would not survive such huge payments and there is only 3 months since October 24 when this order came.
A panel of secretaries led by Cabinet Secretary Rajiv Gauba will take stock of financial stress in the debt-laden telecom sector and suggest steps to provide relief to carriers such as Vodafone Idea and Bharti Airtel in subsequent meetings.
Since the AGR issue has cropped up due to the Supreme Court order where Airtel and Vodafone Idea are facing dues of up to Rs 1.3 lakh crore as additional statutory dues.
Airtel and Vodafone will have to pay about Rs 80,000 crore, under the order, making their operations unviable and if spectrum fees are added, the figure will touch Rs 1.35 lakh crore.
--IANS
ana/sn/in

RBI transfer: FM sizzles over Rahul's 'band aid for gunshot wound' barb

Finance minister Nirmala Sitharaman on Tuesday reacted strongly to the Congress’s allegation that the government was stealing the Reserve Bank of India’s (RBI’s) reserves. She said former Congress president Rahul Gandhi should have spoken to the leaders of his party who have earlier served as finance ministers before hurling such charges.
The RBI central board on Monday decided to transfer Rs 1.76 trillion to the central government. Rahul Gandhi on Tuesday hit out at the government over the record transfer. He said Prime Minister Narendra Modi and Finance Minister Sitharaman were “clueless” about solving the “self-created economic disaster”. He also accused them of stealing the RBI’s money.

“Stealing from the RBI won’t work — it’s like stealing a Band-Aid from the dispensary and sticking it on a gunshot wound,” he said, using the hashtag #RBILooted.
Sitharaman responded to this on the sidelines of a meeting on the goods and services tax in Pune.
“The Congress should have consulted its finance minister and seniors before making these allegations regarding the RBI. Yet, they have become consummate in making such allegations of stealing and I do not want to pay much heed to this,” she said.
Sitharaman also said questioning the credibility of the RBI, which had constituted the Bimal Jalan committee on determining the excess capital, was a “worrying” sign.
ALSO READ: On RBI, Congress asks Modi govt to learn from Argentina's experience
“The committee had eminent people on it and making any allegations like this is outlandish,” Sitharaman said, adding the government has not decided how to use the windfall from the RBI.
The Bharatiya Janata Party also hit back at Rahul Gandhi. “He is obsessed with stealing. That is where his expertise lies and this was visible during the tenure of the Congress-led UPA government. Therefore many Congress leaders are mired in corruption scandals and the Congress has become synonymous with corruption," BJP spokesperson G V L Narasimha Rao said.
According to some experts, government has accounted for Rs 90,000 crore surplus from the RBI in the Budget and the money can be used to prop up sagging growth.
At the time of the constitution of the Jalan panel, former chief economic advisor Arvind Subramanian had said the money should be used for specific purposes such as bank recapitalisation.
The excess capital was one of the key issues which had led to the resignation of former governor Urjit Patel in December, and his deputy Viral Acharya in last month, had voiced concerns on the government raiding the balance sheet of the central bank.
Constitution of the committee was the first major decision taken by Governor Shaktikanta Das on his appointment in December 2018 following Patel’s resignation.

Automakers welcome Govt sops but are divided on festival season impact

While the measures announced by Finance Minister Nirmala Sitharaman on Friday to revive the automobile industry are expected to help in the second half, industry is divided on their impact on the festival season, which accounts for nearly 25 per cent of overall automobile sales.
Passenger car sales declined 19 per cent during Q1 and and by almost 30 per ceny in July, due to the slowdown in the economy, poor sentiment, liquidity crunch, and confusion over the continuity of BS-IV vehicles, among other factors.
On Friday, Government announced a slew of measures, including improving liquidity, to boost the demand.
Shashank Srivastava, executive director, Marketing & Sales, Maruti Suzuki, said that the steps taken by the government are good in the long run and will positively boost sentiment in the short run, just ahead of the festival season.
Enquiry levels for the company's petrol range this year are good for the current festival season, better than last year, but this may not reflect on wholesale numbers, considering dealers already have inventory. Despite the floods in Kerala and Maharastra, sales would be good going forward as sentiment will improve. “By the second half, we will have a clearer picture,” he said.
The rural story is important for revival. Last year, the company reported an overall growth despite slowdown in the urban market, because the rural market grew by 10 per cent. This year, both rural and urban markets have reported 18 per cent de-growth in the first quarter. One of the reasons for this was poor monsoon till June 2019.
While the extensive flooding in states like Maharastra and Kerala may impact festival sales, sentiments are generally improving and will reflect in the overall year's sales, Srivastava added.
Vikas Jain, national sales head of Hyundai said the government's announcement should improve confidence and sentiment among consumers during the upcoming festival season and in the months following.
"We are optimistic that this move will boost customer sentiment in the current market scenario and encourage customers' acquisition of cars in the coming festival season, but to what extent, we need to wait and watch," Jain said.
He added that the move is definitely a booster, especially for tier-III and IV markets as the government's deferment of the proposed hike in registration, improvement in liquidity and rate of interest, will benefit the volume segment consisting of cars priced less than Rs 5 lakh. "We need to wait and watch how it reflects the festival season, but definitely it will improve sales from January, from the depreciation point of view," said Jain.
TVS Motor Chairman Venu Srinivasan said that sentiment and cashflow were majo
Auto slowdown r challenges and they are addressed.
"After the announcement, sentiment has improved," Srinivasan said. "The government is finding bottlenecks and removing them. That is the first and most important thing. The government is keen to listen to the stakeholders, that again is very positive and that also boosts the sentiment."
Srinivasan was confident that lending would increase significantly with money coming into the banking system, adding that the money flow is currently missing, which is impacting sales.
“Will it (revival) happen in 3-6 months? I wont be able to predict. But I do expect that by January, there would be a pick up. You can't do something close to September and think it will start improving things in October. I definitely believe that from January, there will be green sprouts of growth. I think 3-4 months is the time it will take,” said Srinivasan.
While the automakers are not able to put any numbers, Icra's Senior Group Vice President Subrata Ray says despite addressing liquidity and sentiment issues, passenger car and two-wheeler sales are expected to close 6-7 per cent lower, way below what was predicted earlier.
Ray asserted that the announcements came a bit late for the festival season, as the flow down of measures, especially those relating to liquidity, will take time.

Govt's reform push: FPI surcharge rolled back, banks get Rs 70,000 cr

The government rolled back an additional levy on foreign funds and announced a raft of measures to boost economic growth from a five-year low.
The enhanced surcharge on long and short-term capital gains has been withdrawn, Finance Minister Nirmala Sitharaman said in New Delhi Friday. She also announced an immediate infusion of Rs 7,000 crore set aside in the budget last month to boost capital of banks, and lifting on curbs on government departments to buy new vehicles.
“The enhanced surcharge on FPI goes, in simple words,” Sitharaman said, referring to a budget proposal pertaining to Foreign Portfolio Investors. “In other words, the pre-budget position is restored.”
The measures come after the government was criticised for failing to stem a rout in local equity markets and a slowdown in demand that has impacted industries ranging from automobiles to items of daily use like biscuits and hair oil. The withdrawal of the additional levy on Foreign Portfolio Investors should boost sentiment after overseas funds withdrew more than $3 billion since the measure was announce in July.
ALSO READ: Home, vehicle loans and consumption goods to get cheaper: FM Sitharaman
Other measures such as bank capitalization and government’s purchase of new vehicles will aid economic growth.
“The measures to boost demand, particularly in the auto sector will be positive for growth," said Teresa John, an economist at Nirmal Bang Equities Pvt. in Mumbai. "Higher government spending, and the release of payments by the government will also support business."
Financial markets cheered the move to withdraw the levy, first shared by a government official earlier Friday. The S&P BSE Sensex, India’s key equity index, erased declines and closed 0.6% higher. Rupee reversed losses to advance as much as 0.2%.

ALSO READ: Enhanced surcharge on FPIs removed, 'pre-Budget position' restored: FM
Sitharaman said banks will be required to link their loan products to the Reserve Bank of India’s benchmark rate, in order to accelerate transmission of the central bank’s policy easing.
While the RBI has cut rates by a total 110 basis points since February, the pass through has been less than desirable for Governor Shaktikanta Das, who’s sought help from all stakeholders to boost growth.
Data due next week will probably show India’s gross domestic product expanded 5.6% in the quarter ended June, slower than the 5.8% pace seen in the previous three months.
Weakening growth numbers won’t come as a surprise. Consumer spending has waned prompting automobile makers to shut factories temporarily to manage piling inventories. A shadow-banking crisis has also weighed on private consumption, which accounts for almost 60% of the gross domestic product.
“Reforms is a continuous process and the momentum of reforms will continue,” Sitharaman said.

FM Sitharaman rules out rethinking on overseas sovereign bonds: report

Finance Minister Nirmala Sitharaman has ruled out reconsidering a plan to issue foreign currency overseas sovereign bonds, she was quoted as saying in an interview published on Sunday, despite warnings of long-term risk for the economy.
On Thursday, Reuters reported that the Prime Minister's Office (PMO) wanted the finance ministry to reassess the idea of issuing foreign currency overseas sovereign bonds and seek wider consultation.

"I am not doing any review. I have not been asked by anybody to do a review," Sitharaman told the Economic Times.
This month, Sitharaman, presenting the budget for the fiscal year 2019/2020 that began on April 1, said India would look to issue overseas foreign currency sovereign bonds in addition to raising funds from the domestic market.
The proposal has been criticised by former heads of the Reserve Bank of India, economists and allies of the ruling Bharatiya Janata Party, who argue it could create long-term economic risks by exposing the government's liabilities to currency fluctuations.
"The government would start raising a part of its gross borrowing programme in external markets in external currencies. This will also have a beneficial impact on the demand situation for government securities in domestic market," Sitharaman told the Economic Times.
The government plans to borrow nearly $10 billion from the foreign overseas market, out of total planned borrowing of about $103 billion in 2019/20.
Sitharaman told the newspaper that details such as timing of the issue and the exact size had not been worked out.

Modi govt does not indulge in 'exchanging suitcases': FM Sitharaman

Finance Minister Nirmala Sitharaman on Saturday sought to highlight the “transparent” functioning of the Narendra Modi government, saying it did not indulge in “exchanging suitcases”.
“There is no necessity to carry a suitcase in the Modi government. Giving and taking are transparent via tenders. When we do our work, there are certain practices of our own,” she said while speaking at the International Business Conference of Nagarathars in Chennai.
Sitharaman had carried the Budget documents in a red-cloth bag on July 5 in reminiscence of the traditional bahi khata, instead of a leather briefcase, used by most of the past finance ministers.
“It became news that I had not carried a suitcase of the English for the Budget presentation… We have been keeping our account books. During navaratri or puja, we respect those books with a vermilion mark, flower and akshatha, and that is our culture. I did not put turmeric, vermillion or akshatha on the Budget copy; it is a secular government. But I did not carry a leather suitcase either,” she said.
On criticism about the increase in the ‘super-rich’ tax in the Budget, the finance minister said it was not robbery, but an effort to help everyone grow. She added that not more than 5,000 people were in the category.
Sitharaman has proposed to enhance the surcharge on individuals having taxable income of Rs 2-5 crore, and Rs 5 crore and above. The move will lead to a rise in effective tax rates by around 3 per cent and 7 per cent, respectively, for the two categories. “The tax on the super-rich is to say 'can you not share a little more of the burden of responsibility to take care of the poor?' Please don’t think that we just imposed the tax without any thought behind it,” she said.
“While I appreciate India Inc is the wealth creator and job creator, I still want to emphasise that in our country, in the first 60 years, we have heard speeches about rights and very little about duties. The Nagarathar community has always been at the forefront to do its duties even without being asked. We should speak about our duties as much as we speak about rights," she said.

Real estate developers at risk as stress in credit market dries up funding

The country’s developers are at risk of going belly-up as mounting stress in the nation’s credit market dries up funding even for those willing to pay decade-high rates.
“With the worsening shadow-banking crisis, borrowing rates for most developers have surged to the highest in more than a decade, in some cases about 20 per cent,” said Amit Goenka, managing director of Nisus Finance Services Co, which lends to developers. “Even at that cost, capital availability is limited.”

India’s year-old credit woes that began after a shock default by the IL&FS Group continue to linger, with many mortgage lenders struggling to roll over debt amid downgrades in their credit ratings. Shadow banks that lent heavily to developers in recent years are among the worst hit, as the recovery in housing sales remains tepid amid a slowdown in the nation’s economic growth.
Borrowing costs have increased by about four percentage points over the past year and the funds pool for developers is one-fifth of the previous year’s average, said Goenka. The cash crunch has raised questions around solvency of real-estate companies, and threatens to push 70 per cent of them out of business in the next two years, Goldman Sachs Group said in a note last week.
Challenges to paying debt obligations amid a slump in apartment sales might force developers to sell assets, wherein lenders may face haircuts and exposure losses, India Ratings analysts, said earlier this month in a note. The dim outlook is reflected in the bond market, where dollar notes of property tycoon Mangal Prabhat Lodha have slumped amid weak liquidity and refinancing risks.
“There are pre-sanctioned limits on our projects, but disbursal is not happening according to the committed amount,” said Parth Mehta, managing director at Paradigm Realty, a Mumbai-based mid-sized developer. Decision-making at lenders is taking long with negotiation time doubling to 90 days, he said.
There’s hope that measures proposed in the Budget on July 5, including lenders offering a partial credit guarantee for the purchase of high-rated pooled assets of sound non-bank finance companies, would help ease the cash crunch, Mehta said.

Budget 2019: Finance Bill seeks to address carry over of losses, MAT norms

To make stressed firms more attractive for bidders, the Finance Bill has allowed companies to carry forward losses even after a change in majority shareholding.
The Bill also seeks to amend the provision pertaining to minimum alternate tax (MAT), allowing companies to adjust depreciation and loss against profits after the resolution process. These two amendments were long-pending demands of industry and insolvency professionals.
“Hopefully, these changes will help create higher demands for companies facing insolvency, and improve resolution of such firms rather than letting them go into liquidation,” said Manoj Kumar, Partner at Corporate Professionals.
Section 79 of the Income-Tax Act, 1961, states that losses cannot be carried forward if the ownership by way of majority shareholding in a company changes hands. “Withdrawal of the advantage of carry-forward of losses, when a resolution applicant acquires a company during the insolvency process, is a big let-down for the acquirer,” Kumar added.
The adjustment of aggregate amount of accumulated losses and unabsorbed depreciation for calculating the MAT — similar to erstwhile sick industrial companies — will have substantial impact on MAT liabilities of firms admitted to insolvency, said industry experts.