Banking licence for corporate houses will be a retrograde step: AIBEA

Nearly two dozen corporate houses and business enterprises in the country have been waiting for more than six months to obtain permission from the Reserve Bank of India (RBI) to start their own banks. In turn, the RBI has approached the Election Commission to permit them to issue the new banking license.

Terming the present move of RBI as ‘unfair’ as the Parliamentary elections were on, the All India Bank Employees’ Association (AIBEA) general secretary C.H. Venkatachalam said allowing private sector to open banks would lead to ‘profiteering’ and there were chances of public money being diverted by the corporate and business houses to run their ventures without any hindrance.

Substantiating his statement, he said: “Any industry house with Rs.500 crore can open a bank. Thereafter they would become the absolute owner of the bank and can have access to huge cash deposits of public. The funds can be transferred between the bank and their firms swiftly. Accounts can be fudged easily. We don’t want such a thing to happen.”

As per the proposed list, Aditya Birla, IDFC Ltd, IFCI, India Bulls, India Post, India Infoline, LIC Housing Finance, L&T Finance Holding, Muthoot Finance, Reliance Capital, Religare Enterprises, Shriram Capital, SREI Infrastructure, Tourism Finance Corporation and UAE Exchange India others have applied for the banking license.

“Prior to nationalisation of the banks in 1969, most of the banks were owned by one or the other industrial or business house. Their mismanagement and abuse of people’s money resulted in nationalisation of banks. Hence, handing over banking licenses to the corporate and business house is a clear retrograde step. Particularly, when the country is moving towards general elections to elect a new Parliament, RBI’s hurry in this regard overlooking the political views of the Parliament would be unfair,” he said.On Monday, AIBEA sent a letter seeking the intervention of Chief Election Commissioner, V.S. Sampath not to approve such a move stating that would result in conflict of interest and banking institutions cannot be left to the corporate whims.

It may be recalled that AIBEA has been openly criticising corporate houses for being wilful defaulters that led to banks setting aside a large portion of its profits to write off bad debts.

Mr. Venkatachalam quoted the report of Parliamentary Standing Committee on Finance which said: “Banking being a highly leveraged business involving public money and public welfare, the Committee are of the considered opinion that it will be more in the fitness of things to keep banking and industry separate. The Committee therefore desires the Government and RBI to review the licensing guidelines accordingly.”

Microsoft says many ATMs in India yet to be upgraded from Windows XP

As Microsoft ends support for its Windows XP operating system next month, the software giant said a number of ATMs in India are yet to upgraded.

The number of ATMs using Windows XP is higher compared to 16 per cent PCs which need upgradation.

Last month, the US-based firm had said its PC install base for large enterprises in India is about 4 million units, of which around 84 per cent had migrated from Windows XP.

Windows XP, which was launched in October 2001, is three generations behind the latest operating system, Windows 8, which was launched in October 2012.

The current XP version is called Windows XP Service Pack 3 and Microsoft will stop support service to 'Windows XP' OS from April 8.

"The number of ATMs left on Windows XP are higher than PCs as a percentage. Many more ATMs, probably higher than the 35 per cent computers in banks and financial institutions that are still to be upgraded and these (ATMs) are not included in those 4 million computers," Microsoft India GM (Windows business) Amrish Goyal told PTI.

There are roughly about 100,000 ATMs in India and many of them are running Windows XP. They have the same support policy and will be out of support, something which the Reserve Bank of India (RBI) guidelines have also called out, he added.

Indian Banks Association (IBA) chief executive M V Tanksale, however, said only old ATMs may face some problem as all the newer machines run on newer platforms.

He said he does not have the data of such machines which are still running on Windows XP.

Asking banks to take immediate steps, the Reserve Bank of India (RBI) last week warned that banking operations, including ATM services, may be hit as support from Microsoft for Windows XP operating system will end from April 8.

"The probability of attacks on such a system may increase and it may be difficult to defend such attacks in the absence of Microsoft support," the apex bank had said in a circular to banks.

Banks and financial institutions are facing higher risk compared to other sectors, Mr Goyal of Microsoft said.

"Banks and financial institutions are slow in upgrading from Windows XP. Private banks a little bit better. They are more equal to the average of the industry that is around 84 per cent. It is public sector banks and financial institutions that are still lagging," he said.

Of the total computers in the banks and financial institutions that use Windows XP, only 65 per cent have so far upgraded from the OS, he added.

"Banks are definitely well prepared and the industry is seized of the matter. I am very sure that you will not see a problem where ATMs or bank counters are shut because of this," Mr Tanksale said.

According to IBA, there are over 1.40 lakh operational ATMs across the country at present and the number is only going up given the low penetration of the machines.

E-filing of returns: Taxpayers to get digital signatures

http://www.hindustantimes.com/business-news/e-filing-of-returns-taxpayers-to-get-digital-signatures/article1-1199134.aspx

In order to weed out the hassle of sending by post a hard copy of e-filed return, the Income Tax department has decided to bring in the facility of electronic signatures for taxpayers to endorse their bonafides.

The Central Board of Direct Taxes (CBDT), the apex office to formulate policies for the Income Tax department, has decided to implement the new mechanism by the end of the next financial year in March, 2015.

Official sources privy to the development told PTI that the CBDT will get in touch with the Union Ministries of Law and Communications and Information Technology to establish the legal position and technology requirements respectively before it operationalises the new protocols for the e-returns called 'ITRV'.

"It has to be seen what will be the procedure to obtain electronic or digital signature by the taxpayers. There should not be an additional cost or procedural burden for the taxpayer who opts to file his or her I-T return online," a senior official said.

In case of digital signatures (used by corporate entities as of now), a bonafide statement that verifies the identity of the sender, it is required to be created by paying a fee and this requires regular renewal, which is why this is being seen as a burden on salaried class and other categories of small taxpayers.

The department, within the same time-frame, is also desirous of enabling the e-filing of Tax Deducted at Source (TDS) statements through its official web portal which is used by taxpayers currently to file their electronic returns.

As per the norms in force at present, a taxpayer who files an e-return has to mandatorily send a copy of the same by post to the I-T department's Central Processing Centre (CPC) in Bengaluru.

However, in many cases the post would not reach the CPC and hence the tax department categorised the taxpayers return as null and void.

The department, sources said, wants to promote e-filing of I-T returns and it desires that e-filing should be "hassle free and sans any glitches", which will prompt more number of people to file their tax returns by this way.

The I-T department is also bolstered by the fact that more and more number of people are opting to file their returns online.

As per existing rules, the CPC, on receipt of the posted 'ITRV', sends an electronic acknowledgement to the tax return filer.

The problem arises when the document sent by post does not reach the CPC because of lapses on the part of the taxpayer or some other reason.

Banks told to remit TDS by month-end

http://www.thehindubusinessline.com/economy/deficit-worry-banks-told-to-remit-tds-by-monthend/article5801625.ece?homepage=true

In a controversial move, the Finance Ministry has advised banks to remit the tax deducted at source (TDS) on salary, rent and credit of interest on deposits to the Government account by March-end, almost a month ahead of the designated due date.

Bankers say this advisory contradicts Income Tax Rules, which allow banks time up to April 30 to deposit TDS when the income or amount liable for TDS is credited or paid during the month of March. Moreover, it could raise the hackles of bankers and minority shareholders.

Desperate move?

According to market experts, this could be a desperate move by the Ministry to ensure that the “red line” Finance Minister P Chidambaram has drawn on the fiscal deficit is not crossed. Chidambaram had said the deficit would not exceed 4.8 per cent of GDP.

The TDS advisory, coupled with the Finance Minister’s request to public sector bank chiefs in October to ensure that dividend payable to the Government in 2013-14 is not less than the ₹6,803 crore paid in 2012-13, could be aimed at shoring up Government finances.

State Bank of India, Bank of Baroda, Bank of India and Punjab National Bank had declared handsome interim dividends after announcing their third-quarter results. The Central Government, as the majority shareholder in these banks, is the main beneficiary of the dividends.

Late February, the Secretary to the Department of Financial Services had requested the Indian Banks’ Association to issue directions to all its member-banks to ensure that apart from remitting TDS on salary and rent within the current financial year, the TDS on credit of interest may be remitted to the Government account in March itself, ‘in accordance with the law.’

‘Not in line with tax rules’

Bankers point out that the Ministry’s advisory is not in accordance with Income Tax Rules.

Last week, IBA, at the Ministry’s behest, issued an advisory on TDS to its member banks for implementation.

TDS aims at collection of revenue at the very source of income. It is the amount deducted from payments of various kinds such as salary, interest, contract payment, commission, etc.

The tax amount deducted at source can be adjusted against the depositor’s tax due. The TDS rate varies from one per cent to 30 per cent depending on the nature of payment.

Float money

If banks remit TDS in March itself they will not be able to utilise the float money (which could run into a few thousand crore rupees) that is otherwise available to them (to earn returns) before actually remitting the TDS amount to the Government.

According to Shravan Sharma, Chartered Accountant: “This advisory short-changes minority shareholders of banks, especially public sector banks. Banks are losing an opportunity to earn returns and create value for their shareholders.

“One month has been given to TDS deductors such as banks under Income Tax rules to remit TDS to the Government so that they don’t make mistakes in calculation. If a bank makes excess TDS payment it will not get refund but in case of underpayment it is slapped with a penalty.”

A senior public sector bank official said that while Government-owned banks will implement the advisory, it remains to be seen if private sector and foreign banks will bite the bullet.

RBI may not hike rates in April policy review

The Reserve Bank is likely to hit the pause button in its next monetary policy review on April 1, as the decline in inflation may give the central Bank "room to pause monetary tightening," says a BNP Paribas report.

According to the financial services major, the recent decline in inflation, driven largely by food prices, gives the RBI room to pause monetary tightening.

"As per RBI guidance, we do not expect it to increase rates in April, and expect just one more 25 bps (0.25 per cent) rate hike from the RBI this policy cycle," BNP Paribas said in a research note.

Wholesale inflation eased to a seven-month low of 5.05 per cent in January, on decline in the rate of price rise in food articles, mainly vegetables.

This is the second straight month of decline in wholesale price based inflation. The WPI was at 6.16 per cent in December.

On Indian equity markets, the report said that "with external sectors looking much better and inflation under control, we believe that the next catalyst for the Indian market will be the election results (May 2014)".
According to the global brokerage firm, India's earnings environment has also improved and this coupled with a better macro outlook leads us to upgrade India to an "overweight" along with Hong Kong, Taiwan, Indonesia and Philippines.

The report further noted that actions of policymakers since September 2013 have helped the Indian currency regain investor credibility, and tight curbs on gold imports coupled with improved merchandise and service exports sharply reduced the current account deficit.

Moreover, RBI's mobilisation of forex reserves via non- resident deposits also had a salutary effect on India's external risk metrics, the report said.