South Indian Bank business set to touch Rs 75,000 cr

http://www.thehindubusinessline.com/industry-and-economy/banking/south-indian-bank-business-set-to-touch-rs-75000-cr/article4240757.ece

South Indian Bank is all set to achieve a business target of Rs 75,000 crore by March 2013 as envisaged in the Vision Document 2008.

SIB's five-year business plan — Vision 2013 — was drawn up in 2008 to achieve Rs 75,000 crore business, 750 branches, 750 ATMs and 7,500 employees.

V. A. Joseph, Managing Director and CEO, toldBusiness Line that the bank has been able to clock Rs 67,000 crore in total business as on date.

Its employee strength is at 6,800, the number of branches 740 and ATMs 775.

“We hope to achieve the target of Rs 75,000 crore and 7,000 people by the end of March 31. We might just exceed some of the targets,” he said.

Ten more branches are to be opened shortly in Gujarat, West Bengal and Maharashtra, he said. The bank hopes to open another 25 ATMs by March 2013 taking the total to 800.

Dishonouring a cancelled draft is no crime

http://www.thehindubusinessline.com/industry-and-economy/banking/dishonouring-a-cancelled-draft-is-no-crime/article4245592.ece

A payee cannot haul a bank under Section 138 of the Negotiable Instruments Act for not honouring a demand draft that is cancelled by the person who got the draft made before being presented to it, held the Delhi High Court in State Bank of Patiala v. Nascent Educational and Development Society. 

A demand draft, unlike a cheque, is issued by a bank for consideration already received and hence cannot possibly be dishonoured on the ground of lack of funds; but a bank cannot be compelled to honour the draft in the face of a cancellation instruction by the person who got it issued from the bank. 

The payee, therefore, has no recourse to the bank including proceeding against it under Section 138 of the Act for criminal liability in such circumstances. However, he can proceed against the debtor under the civil laws.

Three things Indian Americans should prepare for before the tax year ends

http://economictimes.indiatimes.com/news/nri/nri-tax/three-things-indian-americans-should-prepare-for-before-the-tax-year-ends/articleshow/17664844.cms

As tax year 2012 draws to a close, it's time for US taxpayers to make the most of current provisions and also prepare for the tax filing season ahead. We tell you the top 3 things that Indian Americans should keep in mind now. 

Be prepared for expiry of Bush Tax Cuts 

The Bush Era tax cuts that were introduced after the financial crisis are set to expire in 2012. Some of these include: 

> The standard deduction for married couples will fall and the ceiling of the 15% bracket for married couples will fall 

> The 10% tax bracket will expire, reverting to 15% 

> The child tax credit will fall from $1,000 to $500 

> The tax rate on long-term capital gains earned by middle- and upper-income people would rise from 15% to 20% 

> The tax rate on qualified dividends earned by middle- and upper-income people would rise from 15% to ordinary wage tax rates 

> Tax brackets would change: the 25% tax rate would rise to 28%; 28% to 31%; 33% to 36% and 35% to 39.6% 

These are some of the major cuts in the offing. You can get more details here. 

Unless the Congress votes for extension, the low tax regime will be replaced by higher rates. If the stakes are high, you may want to consult a tax planner to review your position and find ways to minimize taxes. 

For instance, most experts agree that the current rate of 15% for capital gains is as good as it can get. "If someone has shares which could be disposed off before the end of the year for a gain and buy them again early next year, that would allow the gains to be taxed at the 2012 tax rate. The wash rule is applicable only for capital losses and not gains," explains Roy Vargis, an Illinois based CPA and promoter of IndianCPA.com. This might be a good time to review your Indian portfolio. Long term capital gains are tax free in India but taxed in the US for US residents, green card holders and citizens. If you have a large portfolio of Indian securities, you may want to employ this strategy to minimize your tax bill. 

For those placed in the IT consulting space, Vargis says that it may be ideal to receive incentives and bonuses before the year ends. "In several IT consulting companies, employees are given control over when they can receive their bonuses," he adds. 

Of the few other things to do, conversion to the Roth IRA might be a good one right now. If you have been putting off conversion to the Roth IRA, now might be a good time to act. If tax rates go up, you will benefit from conversion. If rates don't change, you have nothing to lose. 

Banking Bill passed by Lok Sabha; allows foreign investment in sector

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking-bill-passed-by-lok-sabha-allows-foreign-investment-in-sector/articleshow/17666692.cms

The Banking Amendment Bill, a major reforms legislation, on Tuesday got approval of the Lok Sabha after the government dropped the controversial provisions relating to allowing banks to trade in futures and keeping the sector outside the purview of Competition Commission. 

"Since the bill is too important for me to pass, therefore I am bringing the Bill dropping the controversial clauses," Finance Minister P Chidambaram said, winding up the discussion on the Banking Laws (Amendment) Bill, 2011. 

The Bill, which seeks to strengthen banking regulation, was later passed by the voice vote after the amendments proposed by the Left Parties were rejected by the House. 

The Bill, along with proposed legislations on pension and insurance, was one of the five key reforms measures on the government's agenda during the current session of Parliament. 

The government dropped the controversial changes in the Bill in deference to the wishes of Opposition, the Minister said, adding it has accepted all major recommendations of the Standing Committee on Finance. 

On the proposal to allow banks to participate in the commodity futures trading, he said, it was based on the recommendations of the Standing Committee on Food and Consumer Affairs and report of the Reserve Bank's working group. 

As regards other issues, he said, while RBI would regulate the banking sector, the Competition Commission of India (CCI) would look into competition practices in the banking sector. 

The Minister also expressed the commitment of the government to infuse Rs 15,000 crore into public sector banks in the current financial year and retain their basic character. 

Expect RBI to soon relax norms for entry of foreign banks: Rao

http://www.indianexpress.com/news/expect-rbi-to-soon-relax-norms-for-entry-of-foreign-banks-rao/1046599/

The Reserve Bank is soon expected to relax norms for entry of foreign banks into the country, a top government official today said.

"RBI is very soon, I believe, is going to announce a very progressive policy for permitting opening of more foreign banks..." Commerce Secretary S R Rao said.

He was speaking at a CII function on 'Driving South Asia Economic Integration'.

"I do hope that with far more regional integration of economies and commerce, the market forces themselves will demand that each of the central banks of sovereign nations take similar calls and I am sure the time is propitious and it is going to happen sooner than later," he said.

Currently, expansion of foreign banks in India is on a reciprocal basis.

India and Pakistan are negotiating issues with regard to opening up of bank branches in each other territory to facilitate trade and commerce.

As per the World Trade Organisation agreement, India allows opening of 12 branches of foreign banks in a year.

Last year, the RBI in a discussion paper suggested that foreign banks should be incentivised to operate in India as wholly-owned subsidiaries, as against the current system of having presence through branch network.

"On balance, the subsidiary model has clear advantages over the branch model despite certain downside risks... There may be a need to incentivise the subsidiary form of presence of foreign banks," it had said.

At present, there are about 34 foreign banks operating in India, with five major banks, including StanChart, HSBC, Citibank and Deutsche, accounting for over 70 per cent of the total asset size of overseas lenders in the country.

In a first, SBI takes its officers' body to court

http://www.business-standard.com/india/news/infirst-sbi-takes-its-officers-body-to-court/495844/

For the first time in its 200-year history, State Bank of India has taken its officers’ association to court for resorting to a work-to-rule agitation and demonstrations in September that hit the business of the country’s largest bank.

In its interim injunction, the Bombay High Court on December 3 restrained the association from holding demonstrations, hunger strikes and relay fasts at the bank’s headquarters and branches until further orders.

The trigger for the agitation by the officers’ association was the SBI chairman’s August statement about his plan to introduce seven-day banking to meet the challenges of growing competition.

Though the members of the association did not go on strike, they protested through demonstrations and a call to officers not to cooperate with the proposed changes by the management.

While granting interim injunction, judge S J Kathawalla said the association had the liberty to write to the SBI management to refer disputes to a mediator. SBI, the order said, could refer the matter to a senior advocate specialising in labour matters for mediation.

The court will take up the matter again on Tuesday (December 18).

The officers’ association is in the process of filing a reply to the SBI petition. The association’s general-secretary, D S Rishab Das, declined to respond to queries on the issue.

The SBI brass has been in talks with officers’ representatives on service conditions, including working hours. SBI officials maintain an agreement signed in 2003 provides flexibility for changing the banking hours. “Seven-day banking does not mean the bank would ask employees to work on all seven days,” an official said.

The SBI chairman and top officials held negotiations with the office-bearer of the association on October 4 but the talks did not yield fruit. After officers in some circles held demonstrations on November 30, the management moved court for action. An office-bearer said the move for seven-day banking was at odds with unions fighting for introducing a five-day week for bank employees.

Meanwhile, SBI has sought an explanation from the association for allegedly instigating officers to protest against the management. It also issued chargesheets and showcause notices to some leaders. Some of these leaders have filed writ petitions, while others are in the process of filing petitions in high courts.

RBI extends deadline for new format cheques

http://www.thehindubusinessline.com/industry-and-economy/banking/rbi-extends-deadline-for-new-format-cheques/article4200535.ece

Bank account holders can continue to use their old format cheques for another three months as the Reserve Bank of India has extended the deadline for banks to issue new format cheques with uniform security features till March next year.

The RBI, in a notification today, said: “Taking into consideration representations, it has been decided to extend the time up to March 31, 2013 for banks to ensure withdrawal of non-CTS 2010 Standard cheques and replace them with CTS-2010 Standard cheques.”

While most of the banks have confirmed that they are issuing only multi-city or payable at par CTS-2010 standard cheques at present, representations have been received from various stakeholders requesting an extension beyond December 31, it said.

As per earlier direction to all banks, the RBI had fixed December 31 as the last date for phasing out non-CTS (Cheque Truncation System) 2010 Standard.

Issue only online debit cards, RBI tells banks

http://www.thehindubusinessline.com/industry-and-economy/banking/issue-only-online-debit-cards-rbi-tells-banks/article4195195.ece

In a bid to hasten the process of penetration of pre-paid instruments, the Reserve Bank of India said that banks may issue debit cards, including co-branded debit cards, without seeking prior approval from it.

The RBI also prohibited banks from issuing offline-debit cards.

“Banks which are issuing offline debit cards may conduct a review of their offline debit card operations and discontinue operations of such cards within a period of six months.

“Banks may issue only online debit cards, including co-branded debit cards, where there is an immediate debit to the customers’ account, and where straight-through processing is involved,” RBI said.

In a move that will put an end to the practice of banks’ pestering customers with their credit card offers, the central bank ordered that banks should not dispatch a card to a customer, unless solicited.

In the case of loss of card, the customer must inform the bank immediately.

To encourage quick blocking of the card in case of loss, the RBI said, “The cardholder shall bear the loss sustained up to the time of notification to the bank of any loss, theft or copying of the card but only up to a certain limit (of fixed amount or a percentage of the transaction agreed upon in advance between the cardholder and the bank), except where the cardholder acted fraudulently, knowingly or with extreme negligence.”

RBI allows Aadhaar as banking address proof

http://www.indianexpress.com/news/rbi-allows-aadhaar-as-banking-address-proof/1044000/

As the UPA gears up to launch direct cash transfers from January 1, 2013, the Reserve Bank of India has expanded the know-your-customer (KYC) norms for opening an account.

Accordingly, it has advised banks to use Aadhaar cards as well as job cards issued under Mahatma Gandhi National Employment Rural Employment Guarantee Scheme as a valid address proof for opening of accounts.

“If the address provided by the account holder is the same as that on Aadhaar letter, it may be accepted as a proof of both identity and address,” the RBI has advised banks in a recent notification, adding that banks “may now accept NREGA Job Card as an ‘officially valid document’ for opening of bank accounts without the limitations applicable to ‘Small Accounts’.”

The RBI has also scrapped the requirement of introduction from an existing account holder in a bank for opening new accounts.

NRI bank deposits double to $10.14 bn in Apr-Oct

http://www.financialexpress.com/news/nri-bank-deposits-double-to-10.14-bn-in-aproct/1043264

Dollar inflows from non-resident Indians into bank deposits have doubled during April-October this year to $10.14 billion as NRIs took advantage of higher returns and a weak rupee. During the corresponding period last year, inflows were at $4.88 billion.

During the period, non resident (external) rupee accounts saw an inflow of $11.61 billion, almost five times that of last year, data from the Reserve Bank of India showed.

Non-resident (ordinary) rupee accounts and Foreign currency non-resident accounts saw an outflow this year as against an inflow last year. Inflows had surged in April and May after the rupee depreciated sharply. The currency hit an all-time low of 57.32/$ in June. 

Non-resident (ordinary) rupee accounts saw an outflow of $255 million in October.

“Not only interest rates were higher than other countries, but even on the currency difference the return went up substantially,” said the treasury head of a public sector bank.

Bank scandals since the Financial Crisis

A look at bank scandals since the financial crisis:

1. Swiss bank UBS blames a rogue trader at its London office for a $2.3 billion loss that is Britain's biggest-ever fraud at a bank. Kweku Adoboli, the 32 year old trader, is sentenced to seven years in prison. Britain's financial regulator fines UBS after finding its internal controls were inadequate and allowed Adoboli, a relatively inexperienced trader, to make vast and risky bets. The case has echoes of Societe Generale trader Jerome Kerviel who hid 5 billion euros of losses. Kerviel said SocGen turned a blind eye to his colossal positions in late 2007 and early 2008 as long as they made money for the bank.

2. Wells Fargo Bank agrees to pay at least $175 million to settle US Department of Justice accusations that it discriminated against qualified African-American and Hispanic borrowers from 2004 through 2009. The department said the bank's discriminatory lending practices resulted in more than 34,000 African-American and Hispanic borrowers in 36 states and the District of Columbia payingigher rates for loans solely because of the color of their skin.

3. JPMorgan Chase announces a loss of $2 billion from a trade that was meant to protect the bank if the global economy sharply deteriorated. Later, losses from the bad trade swell to nearly $6 billion and shave much more from the company's stock market value. The episode heightens concerns that the biggest banks still pose risks to the US financial system, less than four years after the financial crisis.

4. Barclays agrees to pay more than $450 million to US and British regulators to settle charges that it attempted to manipulate a global benchmark interest rate known as LIBOR. The rate indirectly affect the costs of hundreds of trillions of dollars in loans that people pay when they get loans to go to college, purchase a car or buy a house. Numerous other banks are under investigation for similar violations.

5. An independent review finds Kabul Bank spirited some $861 million out of war-torn Afghanistan in a massive fraud based on fake loans to 19 individuals and companies. A bailout of the bank costs the equivalent of 5 percent of Afghanistan's gross domestic product, making it one of world's largest banking failures ever.

6. HSBC, Europe's largest bank, says it's paying $1.9 billion in penalties to settle a US money laundering probe. The investigation into HSBC focused on the transfer of billions of dollars on behalf of nations such as Iran and the transfer of money from Mexican drug cartels. The bank said its anti-laundering measures were inadequate and said it was "profoundly sorry".

http://www.financialexpress.com/news/banks-behaving-badly-glance/1043669/0

Bumpy road ahead for Banking Bill in Lok Sabha

http://www.thehindubusinessline.com/industry-and-economy/banking/bumpy-road-ahead-for-banking-bill-in-lok-sabha/article4188249.ece

The Banking Laws (Amendment) Bill, which hit the Opposition wall on Monday, was not taken up on Tuesday either despite it being on the list of business to be transacted in the Lok Sabha.

Instead, most part of the Lok Sabha session on Tuesday focused on the Walmart row, with the Opposition parties cutting across party lines demanding a joint parliamentary committee probe.

But the crucial issue that came in for some talk in the corridors of power was the way in which the Banking Laws (Amendment) Bill was stopped in its tracks by the Opposition.

The point of contention is whether a new clause, considered far-reaching, can be introduced by the Government without it being referred to the Standing Committee.

The Finance Minister had sought to introduce a clause that would eventually allow banks to deal in forward contracts of commodities. Currently, banks are allowed to deal in forward contracts only for currencies and not in any goods.

The proposed clause will amend the Banking Regulation Act to enable the Reserve Bank of India to issue directions that will permit banks to participate in forward contracts, subject to certain conditions.

The BJP wanted the new clauses to be sent to the Standing Committee on Finance before being introduced as part of the amendments, the reason being that the Bill was earlier referred to the Standing Committee and the new clauses would tantamount to bringing a completely new Bill.

However, Finance Minister P. Chidambaram thought otherwise. He pointed out that most of the Standing Committee’s recommendations have been accepted. It did not make sense to send the Bill back, he said on Monday, just for the addition of one clause.

While the jury is still out on the right procedure, the new clause that has triggered this controversy definitely needs some thought before being implemented.

An explanation is proposed to be added to specify that forward contracts would take the definition as spelt out in Forward Contracts Regulation Act — implying that forwards can be entered on commodities and other goods.

“The proposed clause on permitting banks to do forward contracts will divert public money into risky areas of speculative banking. Forward contracts are inherently risky and speculative. This is not desirable when banks are dealing with public money,” said C.H. Venkatachalam, General Secretary, All India Bank Employees Association.

He said the new clause should be referred to the Standing Committee for further scrutiny.

Single document having identity, address proofs enough to open bank account: RBI

http://www.thehindubusinessline.com/industry-and-economy/banking/single-document-having-identity-address-proofs-enough-to-open-bank-account-rbi/article4187181.ece

Banks can accept documents such as Passport, PAN Card, Drivers’ Licence, Aadhaar letter, and NREGA Job Card as proof of identity as well as address, according to the Reserve Bank of India.

However, this is subject to the address on the document submitted for identity proof by the prospective customer is the same as that declared by him/her in the account opening form.

The single document submission for proof of identity and address is aimed at easing the burden on the prospective customers in complying with know-your-customer requirements for opening new accounts, the RBI said in a notification.

So far, banks have been calling for separate documents for verification of identity and address even though the documents for identity proof (Passport, PAN Card, Drivers’ Licence etc.) also carry the address of the individual concerned. This was to comply with their obligation under the Prevention of Money Laundering (PML) Act, 2002.

The RBI has also done away with the requirement of introduction from an existing customer of the bank for opening of bank accounts.

Since introduction is not necessary for opening of accounts under PML Act and Rules or Reserve Bank’s extant KYC instructions, banks should not insist on introduction for opening bank accounts of customers, the central bank said.

RBI may hike NPA provision ratio if needed: K C Chakrabarty

http://www.indianexpress.com/news/rbi-may-hike-npa-provision-ratio-if-needed-k-c-chakrabarty/1042638/0

RBI Deputy Governor K C Chakrabarty has come down heavily on banks showing higher profits without providing adequately for bad loans, and said if need be, the central bank may hike provision coverage ratio (PCR) levels.

"Why banks need to show profits as high as 25 per cent? They can show 5 per cent growth in their profits. If they are not doing (providing more), I will increase it (PCR)," he said.

The RBI had done away with its earlier requirement of forcing banks to maintain the PCR, or the ratio of provision to gross non-performing assets (NPAs), at 70 per cent.

The apex bank had increased the PCR to 70 per cent after the Lehman crisis in 2008 and this was applicable till September, 2011. While almost all private banks have higher PCR, majority of the state-run lenders could not meet this deadline.

A number of public sector banks, especially the smaller ones, have shown a drop in PCR in the second quarter earnings and posted a good jump in profits as a result.

Speaking about NPAs of banks, Chakrabarty attributed a majority of them to poor administration and risk management practices of lenders and went to the extent of terming it as 'non-performing administration.'

"I call NPA as non-performing administration. We have to make the administration functioning," Chakrabarty, who oversees banking supervision at RBI, said.

Lending rates would have been far lower if banks had got their NPAs down, Chakrabarty said.

"It is a burden on the people who are paying the money. People forget that if NPAs would have been 1 per cent, banks' lending rates would have been 4 per cent lower with the same inflation, and same repo rate.

"That's why we should tackle NPAs -- not only for the survival of the system, but also for the survival of the customer," Chakrabarty said.

According to RBI data, the gross NPA ratios of the public sector banks stood at 3.3 per cent for the fiscal ended March 2012, up from 2.4 per cent a year ago, while the same for private lenders dropped to 2.1 per cent from 2.5 per cent.

A recent report by rating agency Icra warned the bad assets book of banks are set to cross Rs 2 lakh crore mark, or about 3.8 per cent of the total asset book, this fiscal.

Similarly, the report said the uncovered NPAs or net NPAs, despite the higher credit provisioning, increased from 1.1 per cent at end March 2011 to 1.5 per cent at end June 2012.

This led to an increase in net NPAs in relation to net worth from 10.5 per cent at the end of March 2011 to 14.4 per cent at the end of June 2012.

Chakrabarty said although the RBI is not worried about NPAs at present, "that does not mean we should be complacent."

"Banks should improve their credit management, the follow-up skills, recovery skills, and their systems which must help them in recovery," Chakrabarty said.

On the rising cases of corporate debt restructuring (CDR) in the current round of economic gloom, he said there is nothing bad with the method "if CDR can give life to the borrower".

"If the banks do an appraisal, re-appraisal and they are happy that the unit can come out then only restructure. Otherwise, (its) better for the account to die," he added.

"CDR is not a concern, CDR converted into an NPA is a concern," Chakrabarty said.

Syndicate Bank preparing for Centre's direct fund transfer

http://www.thehindubusinessline.com/industry-and-economy/banking/syndicate-bank-preparing-for-centres-direct-fund-transfer/article4181328.ece

Transferring funds directly to the bank accounts of beneficiaries is an ambitious project of the Central Government and Syndicate Bank is working towards implementing it.

M.G. Sanghvi, Chairman and Managing Director of the bank said, “The bank will join hands with the government to make the project successful. We are preparing a blueprint as to how to implement in all out 2,738 branches across the country.”

“Since inception of the bank has been offering banking services in rural areas and don’t see any difficulties in implementing it. Now we are to ensure that every family living in rural areas has an account by December-end,” he added.

This mechanism would help beneficiaries of government schemes to get funds directly to their accounts. Syndicate Bank on its part has set up 1,553 branches and nine lakh accounts were opened in 1,219 villages by March 31, 2012, under the Financial Inclusion (FI) scheme.

NRIs in US: Things to remember while giving gifts in India

Understand tax impact for Indian Americans who make gifts to persons in India.

Tax in India

Prior to 1998, gifts used to be taxed in the hands of the giver in the form of Gift Tax. However, in 1998, this Gift Tax was abolished. Subsequently in 2004, a new tax on gifts was introduced in the Income Tax Actaccording to which, tax would be levied, in certain cases, in the hands of the receiver.

According to this provision, any gifts in excess of Rs 50,000 received by an individual will be taxed in the hands of the receiver. The value of the gift would be added to the receiver's total income and tax would be calculated thereon. This includes cash gifts as well as gifts in kind. For gifts in kind, such as property, jewellery etc., the asset must necessarily arise in India and for valuation purposes, certain rules would apply:

In case of immovable property, the value will be based on the stamp duty value of the property 

In case of any other property such as shares and securities, jewellery, paintings, work of art etc., value would be based on the fair market value of such property

However, there are some exemptions to the tax on gifts:

Any gift received from a blood 'relative' is exempt even beyond the limit of Rs 50,000 ('relative' in this case is defined as spouse, brother or sister, spouse's brother or sister, parents and lineal ascendants of individual or his spouse, siblings of parents of individual or his spouse)

Gifts received on occasion of marriage are also exempt beyond the limit of Rs 50,000

Gifts received under Will or inheritance are exempt beyond the limit of Rs 50,000

In a nutshell, as an NRI, if you make gifts to people in India, the onus of paying tax in India would be on the recipients. Recipients in India who are 'relatives' would not have to pay any tax while non-relatives would have to pay tax on gifts in excess of Rs 50,000.

Tax in the US

In the US, tax on gifts is levied in the hands of the donor, so an Indian American making a gift to someone in India may attract tax in the US depending on the amount gifted. This includes cash gifts as well as property, irrespective of where the property is located. It also includes cash transfers made from the NRE or NRO account. Currently, gift tax exemption limits are fairly liberal and are as follows:

You can make gifts of up to $13,000 per gift to as many people as you like in a year without paying any gift tax. The only things to remember is that each recipient must not get more than $13,000 in the year. Also, this is an individual limit. So a couple can make gifts up to $26,000.

Example 1: You gift your mother $13,000 and your brother $13,000 in 2012. You pay no gift tax in the US.

Example 2: You gift your mother $50,000 and your brother $13,000 in 2012. $26,000 will be exempt from gift tax.

In case of gifts in excess of the $13,000 limit, you can still pay zero tax as long as you do not exceed the lifetime exemption limit. Currently, that is for 2012, up to $5,120,000 is allowed to be gifted/ bequeathed by a person during his lifetime without any tax implication. Any gifts made in excess of the $13,000 limit will be reduced from the $5,120,000 exemption limit. Anything in excess of this limit will be taxed at 35%.

http://economictimes.indiatimes.com/news/nri/nri-tax/nris-in-us-things-to-remember-while-gifting-persons-in-india/articleshow/17524098.cms

Cheque bounce cases: FinMin mulls ‘Lok Adalat type’ redress mechanism

http://www.thehindubusinessline.com/industry-and-economy/banking/cheque-bounce-cases-finmin-mulls-lok-adalat-type-redress-mechanism/article4171561.ece

To cut down the number of cheque-dishonour cases, the Finance Ministry is looking at an alternative dispute resolution mechanism, such as a Lok Adalat.

The idea is to consider prosecution under Section 138 of the Negotiable Instruments (NI) Act only if the alternative mechanism too fails. Section 138 deals with penalties in case of dishonour of cheques due to insufficient funds in the bank account of the drawer.

Further, cheques taken as security without stating the amount of debt may be excluded from the purview of the Section.

These measures were suggested to the Finance Ministry by a committee constituted by the Ministry of Law and Justice.

Under Section138, the drawer of the cheque, which has been returned unpaid by a bank because money in the account is insufficient, is deemed to have committed an offence that is punishable with imprisonment up to two years, or with fine that may be up to twice the amount of the cheque, or both.

COUNTERPOINT

Bankers, however, feel that Section 138 has served them well and there is no need to amend it.

“The existing provisions which make cheque bouncing an offence is facilitating recovery of loans and helping reduce bad loans of banks,” said a banker in the know of the development.

Most cases under Section 138 relate to recovery of loan defaults that are less than Rs 10 lakh. For the purpose of recovery of such loans civil suits have to be filed by banks.

Since the judicial proceedings take a long time, initiating action and proceedings under the Section is facilitating speedy recovery, said the banker.

Banking stocks one of the best performers in 2012

http://economictimes.indiatimes.com/markets/analysis/banking-stocks-one-of-the-best-performers-in-2012/articleshow/17508051.cms

The banking sector has been one of the best performing sectors on the bourses through 2012. The BSE Bankex Index has risen 55% since January 2012 compared with a 26% rise in the Sensex. Not only has the index beaten the Sensex, it has also given the highest returns among sectoral indices.

Stocks of Dena Ban, Jammu & Kashmir Bank and Karnataka Bankhave doubled in market value since January 2012. Though the management has denied it, speculation of a likely merger of Karnataka Bank with a larger private sector bank was one of the key triggers behind the rally in Karnataka Bank in recent weeks.

Operationally, all three banks have reported good earnings growth in the past three quarters. Asset quality of these three banks is also relatively stronger than many other banks.

And while most banking stocks have outperformed there are a few than have not. The stock of Lakshmi Vilas Bankfor instance is down 9% year-to-date. Indian Bank has gained a mere 4% and Punjab National Bankand Bank of India have risen 6% and 8%, respectively. Not only have these banks disappointed on the earnings growth, their non-performing assets as a percentage of total advances have also been rising over the past few quarters.

With the exception of Punjab National Bank, which trades at a price to book value of 1.01 times, Lakshmi Vilas Bank, Indian Bank and Bank of India are all trading below their book value. The BSE Bankex Index trades at a price to book value multiple of 2.06 times.

No cartelisation in fixing savings deposit rates: SBI

http://www.thehindubusinessline.com/industry-and-economy/banking/no-cartelisation-in-fixing-savings-deposit-rates-sbi/article4166993.ece

The nation’s largest bank SBI today dismissed allegations of cartelisation by big banks in keeping savings deposit rate unchanged despite the RBI deregulating this over a year ago.

Disputing the charges, SBI Managing Director and Chief Financial Officer Diwakar Gupta said the bank’s decision not to raise interest rates on savings deposits is a purely commercial one and does not amount to cartelisation.

“I said it is not cartelisation,” Gupta told reporters on the sidelines of a conference organised by consulting and accounting major PwC here.

SBI and its five subsidiaries, which nearly control 25 per cent of the banking system, have not increased their savings account deposit rates. They offer 4 per cent.

Gupta said he has been reading reports over the past few days about a possible action by the competition watchdog on banks for allegedly acting as a cartel by not increasing the rate on saving deposits, which was deregulated by the Reserve Bank in the October 2011 credit policy.

The interest rate on savings accounts was the only regulated product in banking till the RBI deregulated it.

Following this, only two commercial banks — Kotak Mahindra and Yes Bank — raised the deposit rates to 6 and 7 per cent respectively. These banks, which were facing problems in raising the low-cost CASA (Current Account, Savings Account) deposits in the past, claim the move has been immensely beneficial.

From the cooperatives space, city-based Saraswat Bank had also increased the rate to 7 per cent.

Other banks currently offer just 4 per cent on an annualised basis to savings bank account holders, which was even lower at 3.5 per cent till April 2011.

Kingfisher loans: Banks hope for ‘amicable solution’

http://www.thehindubusinessline.com/industry-and-economy/banking/kingfisher-loans-banks-hope-for-amicable-solution/article4167725.ece

State Bank of India, the leader of the consortium of banks that have lent to the grounded Kingfisher Airlines, on Wednesday said the banks are trying to do everything possible to find an amicable solution to the carrier’s financial troubles.

“They (KFA) have created a brand value, they are a good company and we are trying to do everything so that an amicable solution to the problem is found,” said Diwakar Gupta, Managing Director and Chief Financial Officer, SBI, on the sidelines of a PwC event.

The Bangalore-based airline owes about Rs 7,000 crore to a consortium of 17 banks. KFA owes about Rs 1,500 crore to SBI. The cash-strapped airline has accumulated losses of nearly Rs 10,000 crore.

SBI Chairman Pratip Chaudhuri had asked the airline management to infuse at least $1 billion by November 30 for reviving the airline. If this had come through, banks would have considered lending afresh or recasting their existing loans to KFA. However, the airline promoter has not brought in his equity contribution so far.

Since its inception in 2005, the airline has not reported any profit. The losses of Kingfisher Airlines widened to Rs 754 crore for the September quarter this fiscal as compared with Rs 469 crore in the year ago period.

The airline has been grounded since October 1, following a strike by its pilots and engineers over non-payment of salary. Consequently, the Director General of Civil Aviation suspended the airline’s flying licence on October 19. The airline officials have not been able to sort out regulatory issues that are imperative for it to resume operations.

In a further blow to the beleaguered airline, the cash-strapped carrier may have to vacate the space it occupies at Mumbai Airport. The Mumbai airport authorities may issue an eviction notice after the grounded carrier failed to respond to an earlier notice asking it to clear the Rs 22 crore dues towards parking and navigation charges.

Govt may infuse Rs 4,000-cr capital into SBI this fiscal

http://www.thehindubusinessline.com/industry-and-economy/banking/govt-may-infuse-rs-4000cr-capital-into-sbi-this-fiscal/article4166894.ece

The Government is expected to infuse Rs 4,000 crore into State Bank of India this fiscal. This will boost the bank’s capital adequacy ratio to over 13 per cent, according to a top bank official.

“The mode (of infusing capital) is being discussed and we have given various options. It is the government’s call to decide on how to infuse that equity,” said Diwakar Gupta, Managing Director, SBI.

The country’s largest bank’s has been awaiting the Government’s nod for the rights issue for more than two years.

When asked if the rights issue would be appropriate in the current volatile market conditions, Gupta emphasised that issue size is only Rs 4,000 crore. On a rights basis, it would work out to about 1 share for every 19 or 20 shares.

“So, it is a very small issue…But the rights issue is a very fair way of offering capital. There are pros and cons of every mode (of capital raising) and that is being evaluated,” Gupta said.

The Rs 4,000-crore capital infusion is adequate for the bank and will take its capital base above 13 per cent, Gupta added.

As on September 30, 2012, SBI’s capital adequacy ratio stood at 12.63 per cent, against 11.40 per cent in the year-ago period. CAR is a key indicator of a bank’s financial strength expressed as a ratio of capital to risk-weighted assets.

The government earlier this week had said it would finalise the capital infusion plans for public sector banks this week. The budget has earmarked nearly Rs 15,800 crore for shoring up the core capital base of the state-run lenders hit by bad loans and poor asset growth.

On the revival of the economic conditions, Gupta said the effect of the reforms announced will take time to impact the real economy. “We see some revival in 2-3 months,” Gupta added.

PSU banks under lens for ‘fixing’ savings account rate

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/psu-banks-under-lens-for-fixing-savings-account-rate/articleshow/17459814.cms

Competition Commission of India, the fair play watchdog, has decided to look into the common, 4% interest rate being paid by all public sector banks on savings bank deposits despite the Reserve Bank of India moving to an unregulated regime in October 2011.

"They seem to be acting in tandem and it needs to be investigated. Because of this policy, small depositors are losing out and banks are also losing business," said a CCI official, who did not wish to be identified. 

The official also said that banks such as Kotak Mahindra and Yes Bank, which had started paying up to 7% on savings bank deposits, had seen a surge in inflows. 

According RBI data, five private players, 10 foreign banks and a cooperative bank have increased their savings deposit rate by one to five percentage points. 

For banks, current accounts (CA) and savings accounts (SA) are the steadiest and cheapest source of funds. Banks usually target at least 30% of their total deposits from CASA. 

While they resort to periodically increasing or decreasing term deposit rates, savings account rates were only raised in May 2011 after RBI mandated an increase from 3.5% to 4%. The RBI's move to an unregulated regime a few months later was opposed by most public sector banks. 

By keeping interest rates on savings bank deposits unchanged at 4%, banks have managed to ensure a healthy net interest margin, which is the difference between the cost of funds and the rate at which they lend. This comes at a time when deposit rates have been rising. 

While public sector banks said that they are yet to receive any communication from CCI, the chairman of a top public sector bank dismissed the suggestion of a cartel at work. "Who is paying more? Even ICICI Bank and HDFC Bank are paying the same rate. RBI has deregulated the rate which will not result in an overnight increase or decrease," the chairman said. 

A senior SBI executive added that it was only banks with a small network of branches that are offering higher rates. "It is not class-wise, but size-wise," the banker added. 

Another bank chief said that each bank has its own resource-raising strategy and takes its own decision. "Every bank has its own policy and no one exchanges notes," he said. 

Some public sector players were contemplating an increase in savings bank deposit rates around the time RBI began discussions on deregulating the only remaining regulated rate. But all of them chose against increasing the rate after SBI, the country's largest lender with around a quarter of the business, decided to maintain status quo. 

In fact, in the run up to the deregulation, the Indian Banks' Association, the banking industry lobby group, had opposed the move with some bankers citing the example of other countries which had seen a decline in term deposits after the savings bank rate was de-regulated. 

During a resource management meeting at the RBI headquarters, most banks had opposed the move but the central bank went ahead with the move only to see two banks raise rates on funds lying idle in savings bank accounts.

Know why import of Gold hurts Indian Economy

http://www.assocham.org/arb/general/Indias_Gold_Rush_Its_Impact_and_Sustainability.pdf

India imports most of its gold requirement. Gold as a commodity on its own does not add much to the productive capacity of the economy. 

Moreover, the foreign exchange reserve that is used to import gold reduces the availability of this resource to finance the import of other commodities. Such high value of gold imports has now started hurting India’s current account position.

Gold’s share in total import bill of the country has gone up from 8.1 per cent in 2001-02 to 9.6 per cent in 2010-11.

Annual Rate of Gold Imports growth in the last three years was very high. In 2008-09 the growth was 23.0 percent, in 2009-10 it was 38.1 per cent and in 2010-11 the recorded growth stood at 18.3 per cent. Thus the average rate of growth during this period was 26.8 percent. Although the global financial conditions prevailing during this period were volatile yet such high levels of gold imports indicates India’s obsession with gold.

ASSOCHAM projections for gold imports suggest that:

The projected Gold Import figures under two different conditions would be:

Scenario 1- Gold import bill would be US $ 100 billion by 2015-16 Scenario 2 - Gold import should reach US $ 65.4 billion in 2015-16

• In terms of percentage share of gold and silver combined were the 2nd most imported commodity in 2010-11. Whereas comparatively the import share of other key industrial raw materials such as Coal, Coke, Iron and Steel is much lower in the total import bill of the country.

• India accounts for nearly one-third of the total world demand for gold.

• Indian consumer demand for gold is 37.6 per cent more than that of China.

• Whereas in terms of GDP, India’s GDP is just 27.7 percent of China and a meager 11.0 percent of USA.

• India’s forex reserves are 8.81 percent of China’s forex reserves yet its gold demand is more than that of China by 37.6 percent.

• India’s gold imports were higher than the twelve states GSDP in the year 2010-11.

• Gold import value for the year 2010-11 was higher than the budget estimated expenditure on Urban Development, Housing, Family Welfare for the year 2010-11

Thus there is an urgent need to encourage the substitution of gold purchases with alternatives in the formal financial sector which shall also help in increasing the productive capacity of the economy.

Rs 1.33 lakh crore tax non-recoverable: Fin Min to Par panel

http://www.indianexpress.com/news/rs-1.33-lakh-crore-tax-nonrecoverable-fin-min-to-par-panel/1039317/

A Parliamentary committee has come down heavily on the Finance Ministry for writing off over Rs 1.33 lakh crore as non-recoverable direct tax saying it owes an explanation on how the situation was allowed to reach "irretrievable" levels.

The Parliamentary Standing Committee on Finance has expressed surprise that out of a total demand of Rs 2,48,927 crore as direct tax arrear, Rs 1,33,665 crore is not "realisable".

It said a tax demand of Rs 61,846 crore falls under the category of "difficult to recover", leaving a balance of mere Rs 7,348 crore as collectible arrears.

"The Committee are alarmed at such a huge amount of tax due to government, which cannot be collected at all. The Department of Revenue thus owes an explanation to the Committee as to how such an irretrievable situation arose," the panel has said in its draft report.

The Department of Revenue told the Committee that recovery of tax arrears from Pune businessman Hassan Ali Khan, an accused in cases of money laundering, is not possible despite attaching his known movable and immovable assets.

It said as per the existing guidelines, recovery through sale of attached properties can be made only after the decision of appeal filed before the Income Tax Appellate Tribunal.

"Further, the attached assets are inadequate to recover the entire dues," it said.

In cases related to the security scam also, the recovery is not possible as it pertains to persons notified under the Special Court (TORT Act, 1992), and no recovery can be made directly from these persons, the department said.