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After $32 Billion Bailout the Govt has Planned on Lending Reforms as Bankers Fear New Bad Debt Crisis

The finance ministry officials and the bankers will have a meeting to talk about the lending reforms drafted to prevent bad loan crisis after the $32 billion bailout of state-run banks that has been disclosed by the government recently.After the announcement of capital injection in the previous month, the policymakers and the bankers fear that India would throw all the good cash after bad, and this can be reduced if the lending rules are reinforced and the government reforms need to protect banks from the political pressure."After bailing out the banks with taxpayer money, the government wants to ensure that such a problem doesn't happen again," said a senior finance ministry official having direct knowledge of the matter, who refused to share details.The Finance Minister Arun Jaitley has affirmed that the recapitalisation will not only go along with bank reforms but will also take steps to merge weak banks with stronger rivals. According to bankers, one of the biggest issues is government's reticence in dealing political interference in lending.India is close to $147 billion pile of unpleasant loans backed by powerful and politically provided to businesses which are defaulting on loans. One of the high-profile cases of conspiracy and fraud in relation to loans by the owner of Kingfisher Airlines is one of the best examples."There's a risk of a rise in stressed assets unless bank corporate governance improves," said N. Bhanumurthy, an economist at the National Institute of Public Finance and Policy, a think-tank funded by the finance ministry.A spokesman for the finance ministry mentioned that, there is a bulk of bad loans made by the corporate defaults which is developing stress in loans worth about 4 trillion rupees extended to more than 70 million small enterprises under the Modi’s programme to generate jobs from the last 3 years."We are scared about these risky loans, 50 percent of which may become stressed assets soon," said D. Franco, a manager at State Bank of India's branch in Chennai and general secretary of the All India Bank Officers' Confederation.
After $32 Billion Bailout the Govt has Planned on Lending Reforms as Bankers Fear New Bad Debt Crisis
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After $32 Billion Bailout the Govt has Planned on Lending Reforms as Bankers Fear New Bad Debt Crisis 35 After $32 Billion Bailout the Govt has Planned on Lending Reforms as Bankers Fear New Bad Debt Crisis News Article
Saravana Bhaskar Nov 28, 2017
The finance ministry officials and the bankers will have a meeting to talk about the lending reforms drafted to prevent bad loan crisis after the $32 billion bailout of state-run banks that has been disclosed by the government recently.After the anno...
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Markdown in Bank Restructure Corporate Loans to 2.04 Lakhs in the Fy 2017

Finance Minister Arun Jaitley in Rajya Sabha today, announced that in accordance to the data tabulated by him, there has been a decline in the amount of corporate loans restructured in the past three years. The Finance Minister, on responding to questions on whose loans have been restructured and at what terms stated- "Any restructuring is to be carried out in accordance with detailed guidelines issued by RBI on restructuring like Joint Lenders' Forum (JLF), Strategic Debt Restructuring (SDR) and Scheme for Sustainable Structuring of Stressed Assets (S4A).” The bank-restructured loans approved to corporations were worth Rs3,70,279 crore and Rs2,99,111 crore in the financial years 2014-2015 and 2015-2016 respectively. There has been a depreciation in restructured corporate loans to Rs 2,04,884 crore during the last financial year. The finance minister further stated that "the names and details of borrowers are covered under section 45E of RBI Act, 1934 and banking laws which (the Act and banking laws) oblige financial institutions to maintain secrecy about the affairs of their constituents." Jaitley said that banks can promote restructuring, including short-term debts to term loans and re-schedulement or repayment time-frame for borrowers who are subjected to provisions for restructuring of farm loans in the event of natural calamities, to avail the benefit of retention of asset classification. "For agricultural accounts that became impaired on account of reasons other than natural calamities, restructuring is allowed in terms of RBI guidelines on Income Recognition and Asset Classification (IRAC)," Jaitley said.
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Markdown in Bank Restructure Corporate Loans to 2.04 Lakhs in the Fy 2017

Markdown in Bank Restructure Corporate Loans to 2.04 Lakhs in the Fy 2017

Saravana Bhaskar
Finance Minister Arun Jaitley in Rajya Sabha today, announced that in accordance to the data tabulated by him, there has been a decline in the amount of corporate loans restructured in the past...
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Reasons Why Payments Are at Lurch

Are you delayed with your payments? Yes? Then you have to know a few elementary reasons as to why there is a setback in your payments that can let you down to work further. Reasons may vary with situations. With our evolving electronic age, everything is done within an eye wink. But even then, there can be issues in your transactions due to multiple reasons.One of the prime reasons can be holidays or weekends, especially during international transfers, you need to consider holidays in your country and the sending country. During holidays, banks can work few hours or they can be completely inoperative. Meanwhile, if your payment transfer is made on a Friday evening, it is likely to be received after your broke weekend. In some countries, Saturday is working day, while in others it can be a relaxing day. Eg: in Brunei, Saturday is a working day but Fridays and Sundays are considered as weekends. So examine how banks operate before you opt to transfer. In addition, significant difference in time zone can be one of the reasons for late processing of our transactions.    Bosco Tan, the co-founder of the personal finance app “Pocketbook” explains that grounds of delay can be technical issues. International transfers can be compound. In such cases, if the clearing house receives orders in bulk, this might slow down the overall payment process.Suppose, you have entered even one incorrect routing, SWIFT or IBAN numbers etc, on your SpringBoard, time is consumed by banks to scrutinize where the money needs to go or it can simply be rejected.Tightened bank rules to transact internationally that requires inquiry and confirmation to be verified, add to the trauma of delayed payments. Sometimes, if the selected intermediary banks have switched without notice and if the domestic country requires an intermediary bank, cross check if the bank listed in the Spring Board and the intermediary bank are the same. You might want to consider regulatory time frames of the receiving country, most countries transfers funds within a standard time frame of 3-5 business days.Most of all the delay caused depends on the approach of your transaction (wire transfer, electronic payment, etc) as they rely on the federal or state law of respective countries.These can be accounted as the most common reasons for receiving late payments. It is recommended that you communicate with your bank provider and the payer for further queries.
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Reasons Why Payments Are at Lurch

Reasons Why Payments Are at Lurch

Piuesh Daga
Are you delayed with your payments? Yes? Then you have to know a few elementary reasons as to why there is a setback in your payments that can let you down to work further. Reasons may vary with situa...
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How do Banks Make Money and Ways to Save It

Have you ever wondered why banks pamper you with great infrastructure, amazing service support, dedicated Relationship Managers, Treasury managers, Trade managers and so on and so forth. Do you think banks provide these personalized services free of cost or at nominal cost? How much are you paying for these services?  To make it easy for understanding, the revenues that banks generate from clients like you are broadly categorized as Net interest income (NII), Net Fee Income (NFI) or both together. Income from current account balances, cash credit /over draft utilization interests are generally categorized as NII. Charges related to Import/Export transactions, Foreign Exchange margins, Guarantee Issuance commission/LC issuance commission, processing fees, etc. will form a  part of NFI. Do you know, banks in India have garnered overall revenue of $172Bn last year and these numbers are growing to the least by 8-10% YoY.  For instance, a client having a lending facility, typically pay anywhere between 9-14% in today’s scenario upon utilization. This basically means, there is a base rate or MCLR which is nothing but the cost of funds for the bank, added with a margin of 1-4%(NII), depending on risk assessment of the client. The way pricing is done by banks are driven by various factors like cash flows, financial strength of company, collateral offered to the bank, external ratings if any and above all, it depends on your understanding of your working capital requirement, structuring relevant working capital limit, understanding cost associated specific to each of the facility and transactions out of it. You typically tend to pay 1-4% as margins and there is always room to negotiate and reduce it by 20-30%. Now about NFI, Corporates who are into international trade (Export/Import of Goods/services) are vulnerable to pay up to 3.5% only as exchange margins if Foreign Exchange is not meticulously managed. Complex hedging products attract even higher costs and you can possibly pay 5-6% of your transaction value as premiums/commissions or exchange margins. In other terms, for exporters, you may not have received the right premium which are available and receive 3-5% lesser which otherwise you should have received .Other transaction specific costs apart from exchange margins such as processing fees ,import commission, SWIFT charges, Export handling Charges, Collection charges, Guarantee commission, LC issuance, Retirement charges etc. are classified as NFI.  The moment we hear about bank charges, you may think that we don’t pay much for our operations and we would refer to our reconciled statements which clearly shows all the charges that are directly debited to your statement. These are far lesser than your actual charges. Do you know that some of the above charges do not get reflected in your statements or are hidden in nature? Why do you think you should know about the direct/hidden banking costs? With our experience, we analyzed many financials and their facilities associated with their transactional level banking cost. It was well established that these corporates could save some of these charges which could add 5-7% on their bottom line numbers. First things first, “what gets measured gets managed well”. Understand what you are currently paying your bank for every transactions that you do with them. Be vigilant and understand the current market dynamics when it comes to foreign exchange transactions. This is an area you could always save on. Ask your bankers as to what margins you are paying and monitor it when there is an exchange involved. To give you a perspective on absolute numbers, if you are buying/selling $100,000, you could save anywhere between 25k to 180k depending on the bank you deal with. In case you have any specific question relating your company’s banking cost (Interest, Foreign Exchange) optimization, please write to Bhaskar@savedesk.co to unravel your overall banking cost. Author understands & writes about Foreign Exchange, International Trade Finance, Liquidity management for corporates.
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How do Banks Make Money and Ways to Save It

How do Banks Make Money and Ways to Save It

Saravana Bhaskar
Have you ever wondered why banks pamper you with great infrastructure, amazing service support, dedicated Relationship Managers, Treasury managers, Trade managers and so on and so forth. Do you thi...
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Banking Services Insurance Credit Card Bills Get Expensive Due Gst Impacts

With the introduction of Goods and Services Tax(GST) impacts have been widespread and financial services are not an exception. Under this new tax regime, consumers will have to pay additional charges for opting banking services, insurance premium payments and credit card bills. Under the new indirect tax regime, higher tax of  18 percent is attracted against the previous 15 percent on almost all the financial services. The same applies to life non-life premiums.“Dear policyholder, revision of service tax on account of GST will come to effect from July 1, 2017,” said a Life Insurance Corporation of India (LIC) message.Punjab National Bank (PNB) informed its customers that “with effect from July 1, 2017, the existing service tax of 15 per cent levied on all the banking services will be replaced by a GST of 18 per cent.” Meanwhile, HDFC said, “GST is being implemented from 1 July 17. In accordance, Service Tax of 15% will change to 18%. Provide GSTIN for your a/c @ customercare@hdfcsec.com.”The new tax rates are kept informed to the customers through mails and messages by almost all banks and insurances companies. Among the banking services that will attract increased service tax are- debit cards, cash handling charges, collection of bills, issuance of cheque, ATM withdrawal beyond the number of free services, locker rentals, issuance of cheque/ books/ drafts/ duplicate passbooks, home loan processing fee, collection of outstation cheques and SMS alerts.Reflecting on the implementation of GST, Chanda Kochhar, MD & CEO, ICICI Bank said, “The Goods & Services Tax is a transformational structural reform which will have multiple benefits – the creation of a national market; enhanced ease of doing business; greater productivity & efficiency; and improved tax compliance. All stakeholders are working together for a seamless transition to this new paradigm. This reform will result in benefits for all participants in the Indian economy, including both businesses & consumers.”On June 30, midnight, India witnessed the inauguration of GST in Central Hall of Parliament at a special midnight ceremony. GST was addressed as “Good and Simple tax” by Prime Minister Narendra Modi. He added that GST will  “not only be a tax reform but an economic and social reform as well” that will unify the nation, “check corruption and end harassment at hands of officers”.President Pranab Mukherjee, Vice-President Hamid Ansari, Union Finance Minister Arun Jaitley, Speaker Sumitra Mahajan, former Prime Minister H D Deve Gowda, MPs and other VIPs were present during the grand event.
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Banking Services Insurance Credit Card Bills Get Expensive Due Gst Impacts

Banking Services Insurance Credit Card Bills Get Expensive Due Gst Impacts

Saravana Bhaskar
With the introduction of Goods and Services Tax(GST) impacts have been widespread and financial services are not an exception. Under this new tax regime, consumers will have to pay additional charges ...
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Bank Consolidation Proposal by Arun Jaitley

Union Finance Minister, Arun Jaitley and the RBI Deputy Governor SS Mundra were present at the 2nd Annual meeting of board of governors of the Asian Infrastructure Investment Bank(AIIB)  held at South Korea. The idea was to actively participate in speedy resolution of bad assets of Indian banks."Consolidation of banks was not on the agenda as far as this present meeting is concerned. But I can tell you, we are actively working in that direction,"  said Jaitley. "We have to plan a model for consolidation which will be region-based so that we have a few strong banks in the west, north, south and east," Vinod Rai said. "That will also avoid branch-based redundancies." Consolidation may happen for three different reasons with three different domains- state, private, and old private sector community dominated banks. The system will work more efficiently if the banks are consolidated to fewer but robust banks. India can witness economic growth rapidly by consolidation of India’s public sector banks.Spotting job creation investment and credit growth, aids in rebuilding the existing financial system and ranking India as Asia’s third largest economy. 700 billion rupees ($ 10.5 billion) has been earmarked in bank for capital injections from budgets by the Finance Minister, Arun Jaitley, covering 4 years ending March 2019. The focus should be more on state-run banks than private peers who are better structured financially.At the end of 2016-2017, with the turnover of 6lakh crores, public banks are left overburdened with bad loans. Jaitley has assured that the solution for the same is arriving soon. As we can see, that 54% of Indian banks are nationalised, 24% is occupied by State bank of India and its associates. 17% by private banks indicating growth and financial stability. 5% of foreign banks have started operating in India
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Bank Consolidation Proposal by Arun Jaitley

Bank Consolidation Proposal by Arun Jaitley

Saravana Bhaskar
Union Finance Minister, Arun Jaitley and the RBI Deputy Governor SS Mundra were present at the 2nd Annual meeting of board of governors of the Asian Infrastructure Investment Bank(AIIB)  held at Sout...
Continue reading

Ways To Eliminate Additional Costs In Your Company

There isn’t an idiom which is more relevant today than “A penny saved is a penny earned “ that is claimed to be quoted by Benjamin Franklin, a wise man! This sounds simple & benefits of implementing this are obvious, but studies have shown that a large number of businesses operating today are nowhere near maximising their cost saving opportunities.  Why is cost cutting important? This may seem like a fairly obvious question, however, there have been countless successful businesses that have failed because they let the costs of operating their business spiral out of control.  In fact, some of the biggest global corporate collapses have occurred due to this very reason. So, if it can happen to billion dollar corporate giants, it can also happen to small & medium business operations. It’s one of the main reasons why 80% of all businesses fail. Cost cutting can be a very quick way to boost your bottom line.Where do you start?Banking See if your banking & related costs are optimised.  It’s imperative to know if your bank is charging you right. Your interest rates on CC/Overdraft, FX, & trade fees- are they at par with what your industry peers pay?  Try identifying if your product mix is on the money & in line with what your business needs that could save you lots of money, adding to your bottom line. If possible, hire professional consultants who could handle this efficiently and stream line costs.Paying staff the right wayIs there a better way you can be rewarding your staff? A lot of business owners are now looking at restructuring the way they pay their staffs in order to reduce costs and provide greater incentive for greater output.  It’s a well known fact that sales staffs have been paid increased commissions based on increased sales for many years, but there are a growing number of astute business owners who are now starting to pay their other non-sales people based on the level of sales an organisation generates.  This has the effect of having everyone focused on increasing sales so it becomes a far greater team effort across the board.  Companies that have started to do this have noticed an increase in customer satisfaction levels, faster delivery times, more efficient debt collection procedures, greater efficiency in communications, a higher level of office morale and countless other benefits.Are you getting the best from your vendors When was the last time you sat down with them and attempted to negotiate better payment terms or an improved volume discount?  You should sit down on a regular basis and analyse all your suppliers.  Make sure you competitively quote your suppliers for everything your business needs.  You will be amazed how quickly people will negotiate with you.  Remember, it costs at least six times more to find a new client than it does to do business with an existing one.  Your suppliers know this and simply asking them for better terms or cheaper rates can save you a lot of money.Working Hours There are countless businesses that open too early or stay up too late just because that’s what everyone else is doing.  Have a closer look when you’re making the majority of your sales or when you receive most of your customer enquiries, (the daily journal in the Time Management section will help you to track this).  Once you have done this for a few weeks, it will become apparent that there are certain time periods that are costing you money simply to be open.  For a lot of retail stores this can be between 9 and 10 on a Monday or Tuesday morning.  Even if you reduced your work week by these two hours, that can result in significant savingsChoose the right business premisesWhere you choose to locate your business will have a major impact on your operating costs.  It is one of the most important things to consider, even if your business is well established.  When looking at locating or relocating your business it’s important to ask the following questions:Will customers be coming to the business or will I be going to them?If customers are visiting me, what impression do I want to create?Where do my customers come from?Do they need easy parking facilities?Do I need to be highly visible?Will I be employing staff?Is it easy for staff to find car parking or public transportation?How far away are your business premises from where you live?Does your business require partitioning? Offices? Storage space?Can you access your business premises after hours?What is your budget?How long is the lease for?What happens if I break the lease?Is it better to buy the business premises?When you’re thinking of locating your business you need to be very clear on all of the above questions.Small can be cumulatively big !Once you have had a close look at some of the major expenses in your business, it’s then time to have a very close look at minor expenses.  These are the incidentals you may be spending money on which your customers or people are indifferent to.  A lot of business owners spend money on incidental items that don’t really add any value to the business.  Have a look at the following list of items and ask yourself if they would really be missed if they disappeared from your business tomorrow.Magazines and newspapersExpensive tea and coffeeCouriers and express post servicesExpensive packagingWhat are some of the items in your business you could be living without?Similarly, have a closer look at various other operational costs that could be avoided without affecting the productivity or efficiency of the company. Always remember “A penny saved is a penny earned”.
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Ways To Eliminate Additional Costs In Your Company

Ways To Eliminate Additional Costs In Your Company

Kranthi Tilak Reddy
There isn’t an idiom which is more relevant today than “A penny saved is a penny earned “ that is claimed to be quoted by Benjamin Franklin, a wise man! This sounds simple & benefits of implemen...
Continue reading

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