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Banking News Dated 21 September 2017

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Banking News: September 21, 2017

AIBOC urges RBI Governor to rein in mis-selling of Insurance, MF Products in banks

AIBOC urges RBI Governor to rein in
mis-selling of Insurance, MF Products in banks

Vinson Kurian
The Business Line
Published on September 21, 2017


Thiruvananthapuram, September 20:  The All India Bank Officers’ Confederation has urged the Reserve Bank Governor to take urgent steps to stop the menace of forced cross-selling of third party products in public sector banks.

The regulator should go beyond the token gesture of issuing a circular and act decisively, according to DT Franco, General Secretary of the confederation.

Individual Incentives:

Business priorities have come to concentrate heavily on cross-selling of insurance and mutual fund products, ensuring greater individual incentives than core businesses that contribute most to banks’ profits.

With the passage of time, the system of incentivising has led to banks drifting away from their core businesses, Franco said in a letter to the Governor.

Aggressive cross-selling has led to forced selling and, in turn, to mis-selling. Hardly any interest is shown in renewal premiums anymore.

What seems to promote this unethical mis-selling business is the hefty commission paid to the banker who colludes with superiors to ‘close a particular deal,’ Franco said.

The commission received by the respective banks (by virtue of being institutional agents) is meagre as the major portion is taken by the bosses themselves.

Paid In Kind, Too:

In a sale made by a branch level officer, the commission is largely shared by him, his branch head, regional managers, deputy general managers and links to the very top.

Commissions are not only paid in cash, but also in kind in the form of foreign tours, gala parties and cocktail dinners.

However, mis-selling is not limited to public sector banks alone, it also exists in private sector banks, Franco said.

He recalled that cross-selling was introduced to accelerate profit by diversifying activities based on a bank’s network and customer base without associated risk.

The platform could be leveraged to ensure customer loyalty and inter-dependency with a sustained relationship to ensure sustained growth.

Thus, the concept was seen as an attempt to offer a one-point financial planning solution to customers and bind them to suitable products in line with their requirements and interest.

Brand Image Erodes:

But customers are coerced into buying insurance policies at the behest of bank staff, who are only complying with the diktats of their superiors.

Such a rat race to earn more and more incentives is actually taking a toll on the bank's reputation and eroding its brand image. More so when the economy needs more credit offtake in rural and semi-urban areas.

When customers were motivated to go for mutual fund products rather than bank fixed deposits, even personal accident policies have been renewed without the express consent of customers.

Insurance has been made compulsory for the sanction of every loan, just like Form 16s or IT returns. Being a corporate agent, a banker focuses on the sale of products, but with limited knowledge.

He hardly makes a full disclosure about the products and assesses the risk appetite of the customers.

'Conditional' Services:

Clauses in fine print are never explained to the customers. In many cases, it is seen that on maturity of in-force policies, the customer receives much less than what he had originally invested.

While the core businesses of the bank earns it more than 95 per cent of the total profits, the latter channelises almost 60 per cent of the workforce towards cross-selling for a paltry contribution of five per cent.

Many of the banks have even started making services conditional to their clientele; i.e. a savings bank account can be opened only if the customer agrees to purchase an insurance product.

Sanctioning of a personal loan without opting for a life insurance product has become rare. Even farmers are forced to subscribe to insurance policies as collateral for sanction of tractor loans in times of agrarian distress and farmer suicides.



SBI to hire merchant banker
for Sale of Non-core Assets

Alekh Archana, The Mint
Published on September 21, 2017


SBI, as part of its non-core asset sale, may pare stake in stock exchanges, depositories, credit rating agencies to grow its capital-base

Mumbai, September 20:  The State Bank of India (SBI) has started the process for selling some of its investments which are not critical to its core business in an attempt to shore up its capital base, two people aware of the development said.

SBI has stakes in stock exchanges, depositories, clearing and warehousing corporations, and credit rating agencies. As a first step, the bank plans to hire a merchant banker to assist in the process.

In June, SBI raised Rs15,000 crore through a qualified institutional placement (QIP or sales to financial institutions), nudging up its capital adequacy ratio (a measure that looks at a bank’s capital in proportion to its loans, accounting for risk) to 13.31% as on 30 June, from 12.85% as on 1 April.

“Once a merchant banker is on board, we will look at which assets we can monetise, whether fully or partially. Since these are not fire sales, we want to have some kind of a timetable. From November, we should be able to go to the market,” said the first person, an SBI executive, on condition of anonymity.

In the past, SBI executives have said that monetising non-core assets was one possible way of raising capital. This is in line with the government’s thinking that banks should sell non-core investments to improve capital adequacy ratio.

A spokesperson for SBI said that as mentioned by the bank’s chairman Arundhati Bhattacharya “on various platforms”, SBI would exit, wholly or partially, its investments in “non-core assets”. “There is a plan in place and we would do the transaction at an appropriate time. However we would not like to comment on an individual company or transaction,” the spokesperson added.

SBI is divesting 8% in joint venture SBI Life Insurance Co. Ltd’s initial public offering (IPO), which opened for subscription on Wednesday.

The lender has sought bids from merchant bankers who will help it identify interested parties to buy stakes in the identified strategic investments, a tender on the bank’s website said. While the names of these assets were not disclosed in the tender, SBI stated that it had invested in stock exchanges, depositories, clearing and warehousing corporations, and credit rating agencies.

“A number of such strategic investments have been made at the time of formation of these investee companies to help them raise capital and credibility required at the initial stage,” it said.

SBI held 5.19% in the National Stock Exchange Ltd and 3.52% in Metropolitan Stock Exchange of India Ltd at the end of June. In July 2016, SBI sold a 5% shareholding in NSE for Rs911 crore.

SBI is also a shareholder in Smera Ratings Ltd, which is promoted by the Small Industries Development Bank of India. The country’s largest lender also holds 21.20% in Clearing Corp. of India Ltd (CCIL), according to the latter’s fiscal 2017 annual report. Recently, IDBI Bank sold 2.5% stake in CCIL, a clearing and settlement platform, for an undisclosed amount.

While SBI is not keen on exiting its investment in Asset Reconstruction Company (India) Ltd and SBI Global Factors Ltd at this point of time, the stake sale in UTI Asset Management Co. Ltd will be contingent on the listing plans of the fund house, the second person said on condition of anonymity. SBI holds over 18% in UTI AMC.

UTI AMC is almost ready for an IPO, as per its managing director Leo Puri, Press Trust of India reported on 13 July. According to Udit Kariwala, senior analyst at India Ratings, while the current capital base of SBI is fairly adequate, the bank requires capital as it is poised to grow and also to meet provisioning requirements as some of its loans age.

“Since SBI has already done QIP and it may not go for another round of fundraising this year which may dilute government’s stake. Hence, sale of non-core assets is a viable option,” he added.



Investors should pay up for
inclusion efforts:  Arundhati Bhattacharya

Hannah Levitt (Bloomberg)
The Mint
Published on September 21, 2017


SBI Chairman Arundhati Bhattacharya says investors should pay a premium to own financial institutions that work toward stable and inclusive growth

New York, September 20 Bloomberg): Investors should pay a premium to own financial institutions that work toward stable, inclusive growth, State Bank of India chairman Arundhati Bhattacharya said.

“There needs to be a rethinking from the point of view of investors as to what they are going to give a premium on and what they’re going to discount,” Bhattacharya said Wednesday at the Bloomberg Global Business Forum in New York.

The Indian government owns 57% of SBI and requires it to pursue so-called inclusion initiatives that target poor or underserved communities. Some bank investors see those requirements as a profit drain. Yet the State Bank of India, India’s largest lender by assets, has developed platforms to meet those needs that reduced the cost of transactions to “probably the lowest anywhere in the world,” Bhattacharya said.

In one example, the bank offers a fingerprint-identification system that allows people without an address to gain access to the banking system. Those sorts of initiatives helped the State Bank of India open 107 million accounts that now hold $3 billion, and Bhattacharya expects they’ll be the source of transactions totalling $18 billion this year. About 97% of these accounts had no balance when they were opened, Bhattacharya said.



Package soon to boost economy;
no cuts in fuel rates: Arun Jaitley

The Economic Times
Published on September 21, 2017


New Delhi, September 20: Finance minister Arun Jaitley said steps to lift the slowing economy will be taken after these are endorsed by Prime Minister Narendra Modi.

“We have taken note of all the economic indicators available,” Jaitley told reporters in the Capital on Wednesday. “The government will take any additional moves which are necessary.”

He declined to provide details, saying the measures would be unveiled only after consultation with the prime minister.

The last quarter's dismal figures prompted economists to pare estimates for the fiscal year ending March 2018.

Experts have called for measures to stimulate the economy after GDP growth slumped to a three year low of 5.7% in the April-June quarter.

“We have taken note of all the indications which are coming and over the last two days I have had a series of discussions with some of my ministerial colleagues, secretaries and other experts within the government,” he said. Jaitley said the Modi government was a proactive one, indicating that measures could be coming soon.

“In terms of our own reforms agenda and reacting to situations as and when the situation demands we have been taking appropriate actions and we have been consistently moving on the reforms agenda,” he said.

While disruptions due to the rollout of the goods and services tax (GST) on July 1 and the lingering impact of demonetisation are seen as the main reasons for the economic dislocation, some experts said the decline had set in a year ago and is more structural in nature.

GDP growth has slowed from 7.9% in April-June 2016 to 7.5%, 7%, 6.1% in subsequent quarters on the way to 5.7% in the last one. Jaitley said inflation was still within the statutorily fixed monetary policy target of 4% (with a two percentage point window on either side).

Retail inflation hit a five-month high of 3.36% in August.

“During the monsoon period, vegetable prices generally go up. This is the spike period. When it is 3.36% in the spike period, it is under control as per the traditional Indian standard," he said. The Reserve Bank of India is set to make its next monetary policy announcement on October 4 amid calls for a cut in interest rates to help stimulate growth.

Spike in Fuel Prices

With regard to high fuel prices amid low global crude rates, Jaitley said the government needs revenue to support public spending without which growth will suffer. Those political parties seeking a cut in taxes on fuel should first ask their state governments to do so.

States levy a high amount of sales tax or value added tax (VAT) on fuel, he said, without referring to the Rs 11.77 per litre hike in excise duty on petrol and Rs 13.47 per litre increase on diesel between November 2014 and January 2016, which took away gains arising from plummeting international oil rates. The VAT rate on petroleum varies from 38% to 48%. Petroleum products aren’t covered by GST.

Jaitley, however, said that fuel prices will settle down soon.

“You should remember that the government needs revenue to run,” he said. “How will you build highways? The government has increased public spending on infrastructure...  Whatever (GDP) growth is there, it is fuelled by public spending and FDI (foreign direct investment). If public spending is slashed, it will mean cutting down expenditure on social sector scheme.”

That’s all the more important as there is hardly any private investment, he said, responding to questions from reporters after the weekly Cabinet meeting on whether the government would consider cutting excise duty on fuel. Petrol prices have risen by Rs 7.44 per litre since early July to Rs 70.52 a litre in Delhi, the highest in three years. Diesel rates have gone up by Rs 5.35 to Rs 58.79 a litre in Delhi.

“You have to consider many factors. (Due to) the hurricane in the US, the refining capacity has been impacted to a large extent. Due to this there is demand-supply mismatch, there is a temporary spike,” he said, explaining the recent price rise.

Of the tax that central government collects on petroleum products, 42% goes to the states, Jaitley said.

“Then Congress and CPM (state) governments should say they don't need taxes from that,” he said. “You should remember, when oil prices used to be reviewed on fortnightly basis two years ago, governments in Delhi, Haryana, Punjab and Himachal Pradesh used to increase the VAT with the same quantum with which petrol prices used to be reduced in the review.” The government abolished the 15-year-old practice of fortnightly price revision in June and moved to daily changes in petrol and diesel in line with international oil
movements.

GSTN Issues

Asked about issues besetting the GST Network (GSTN), Jaitley asked businesses to avoid a last-minute rush for tax filing. He said GSTN has the capacity to handle 1,00,000 returns per hour, which translates to 2.4 million returns a day. “Today is the last day to pay taxes for August. Till last night, about 25% people had filed the return and paid their taxes. So, 75% waited for the last day,” he said.

Jaitley said the GSTN worked smoothly until Tuesday night, but when 75% of businesses throng the portal on a single day, the system will get clogged.

“Therefore, I would appeal to everybody, it is in their interest (to file returns early),” he said. Since businesses have a broad idea about the taxes to be paid, they should start filing returns by the 14th or 15th of the next month, Jaitley added. To ease the compliance burden, the GST Council has allowed businesses to file initial tax returns with the GSTR-3B form for the first six months of GST rollout until December.



SBI Life Insurance raises
Rs 2,226 crore from 69 anchor investors

The Moneycontrol  News
Published on September 20, 2017


Mumbai, September 20:  SBI Life Insurance Company has garnered nearly 27 percent of IPO amount from anchor investors on Tuesday, the day before issue opening. The country's largest private life insurance company raised Rs 2,226 crore from 69 anchor investors, which include big PE firms and mutual fund houses like BlackRock Global, Axis Mutual Fund, HSBC Global, Monetary Authority of Singapore, Kuwait Investment Authority, Baron Emerging Markets Mauritius etc

The company through its merchant bankers informed exchanges that under anchor investors portion in the public issue of SBI Life Insurance Company, 3.18 crore equity shares have been subscribed on Tuesday by 69 anchor investors. The insurer raised this money at higher end of price band of Rs 685-700 per share. The USD 1.3 billion initial public offering of SBI Life has opened for subscription today.

India's largest private life insurer will close its public issue on September 22. The 12-crore shares IPO of SBI Life comprises of an offer for sale of up to 8 crore equity shares by country's largest lender State Bank of India and up to 4 crore shares by BNP Paribas Cardif SA.

The issue includes a reservation of up to 20 lakh shares for purchase by eligible employees who will get those shares at a discount of Rs 68 per share to final IPO price; and a reservation of up to 1.2 crore shares for purchase by shareholders of State Bank of India. The offer will constitute up to 12 percent of post-offer paid-up equity share capital.

The life insurer is looking to raise Rs 8,083-8,260 crore through the issue, at a price band of Rs 685-700 per share (after a discount of Rs 68 per share to eligible employees). Bids can be made for a minimum of 21 equity shares and in multiples of 21 shares thereafter. The IPO by size is expected to be the largest in life insurance space in India and it would be the second life insurance company to list on bourses. ICICI Prudential Life Insurance was the first to tap capital market, in September 2016.

Equity shares are proposed to be listed on BSE and National Stock Exchange of India. The book running lead managers to the offer are JM Financial Institutional Securities, Axis Capital, BNP Paribas, Citigroup Global Markets India, Deutsche Equities India, ICICI Securities, Kotak Mahindra Capital Company and SBI Capital Markets.



Cheque books, IFSC of 6 subsidiary banks of
SBI to be invalid; what you should do now

The Financial Express
Published on September 21, 2017


The country's largest lender in a tweet announced, "All the erstwhile associate banks of SBI and the Bharatiya Mahila Bank users need to upgrade their cheque books."

Mumbai, September 20:  The State Bank of India (SBI) on Wednesday has asked the customers of its subsidiary banks to apply for new SBI cheque books ‘as soon as possible’. Customers holding an account in the subsidiary banks of SBI will soon not only have to get a new cheque book, but also an Indian Financial System (IFS) code. The country’s largest lender in a tweet announced, “All the erstwhile associate banks of SBI and the Bharatiya Mahila Bank users need to upgrade their cheque books.” Apart from Bharatiya Mahila Bank, the accounts holders of State Bank of Patiala, State Bank of Raipur, State Bank of Travancore, State Bank of Bikaner and Jaipur, State Bank of Hyderabad will have upgrade their the new cheque books and IFS codes, reported NDTV.

The old cheque books and IFS codes of these six banks will not be valid after September 30, stated SBI. Users can avail the new cheque books via internet and mobile banking, ATM or by visiting the home branch, reported NDTV.

Rajnish Kumar, the bank’s managing director (national banking group) was quoted by PTI as saying, “We have received feedback from our customers on the issue and we are reviewing those,” he added, “The bank will take into account those and make an informed decision.” Kumar hinted there could be changes in the policy of minimum balance issue, especially for students and senior citizens with an account with the SBI. “We will internally debate whether any moderation for certain categories of customers like senior citizens and students needs to be done anywhere. The charges are never cast in iron,” he said.



What is P2P lending and why
RBI has decided to regulate it

Beena Parmar
The Moneycontrol News
Published on September 20, 2017


The government on Wednesday said that peer-to-peer lending (P2P) platforms would be treated as non-banking financial companies (NBFCs) and regulated by the Reserve Bank of India (RBI).

Mumbai, September 20:  Peer-to-peer lending (P2P) platforms would be treated as non-banking financial companies (NBFCs) and regulated by the Reserve Bank of India (RBI), the Government said in a notification on Wednesday.

The central bank will soon release the final guidelines for these platforms.

What is P2P lending?

P2P lending is a crowd-funding model (largely online) where people looking to invest their money with people who want to borrow can do so. The concept is centered around savers getting higher interest by lending their money instead of saving and borrowers get comparatively lower interest rates.

Borrowers are either individuals or small businesses. But unlike a traditional savings account, one can lose money if the borrower defaults.

Regulation in India

Till April 2016, there were around 30 start-up P2P lending companies in India. Although nascent in India and not significant in value yet, the potential benefits that P2P lending promises to various stakeholders (to the borrowers, lenders, agencies etc.) and its associated risks to the financial system are too important to be ignored, according to RBI.

Global cumulative lending through P2P platforms at the end of Q4 of 2015, had reached 4.4 billion GBP (approximately Rs 38,300 crore) from 2.2 million GBP (about Rs 19 crore) in 2012.

At present, it is partially or fully regulated in Australia, Argentina, Canada (Ontario), New Zealand, United Kingdom, France, Germany, Italy and USA while it is banned in Israel and Japan. China has the largest P2P market in the world, with hundreds of platforms offering diverse services, but the sector is not regulated currently.

How does it work?

Firstly, decide on how much you wish to lend, and for how long. The investors’ funds could be tied up for up to 5 years, so it’s important to be comfortable with this timescale. Remember, you are lending to those wishing to borrow, and 1-5 year loans are the norm.

Some companies offer the option to withdraw your funds during the loan term. There may be a cost for doing this and you'll have to wait until another lender comes in to replace you, but it is there should you need it. Ideally though, you want to avoid doing this, as you’ll lose out on the great rate of return.

Operation model in India

P2P lending platforms are largely tech companies registered under the Companies Act. Once the borrowers and lenders register themselves on the website, due diligence is carried out by the platform and those found acceptable are allowed to participate in lending/borrowing activity.

The companies often follow a reverse auction model in which the lenders bid for a borrower’s loan proposal and the borrower has the freedom to either accept or reject the offer.

Some platforms provide several additional services like credit assessment, recovery etc. In most cases, the platform moderates the interaction between the borrower and the lender.

Documentation and checks

P2P platforms leverage metrics such as credit scores and social media activity to link borrowers and lenders at favourable interest rates. At present, such platforms have very low regulatory restrictions because they merely act as intermediaries between borrower, lender, and partner bank.

The documentation for the lending and borrowing arrangement is facilitated by the P2P platform. The lender transfers money from his/her bank account to borrower’s bank account. The platform facilitates collection of post-dated cheques from the borrower in the name of the lender as a proxy for repayment of the loan.

The P2P forum, in general, also helps in the recovery process and as part of this, follows up for repayments and if need be, employs recovery agents too.

The regulatory concerns in such cases would relate to KYC (know-your-customer) and recovery practices. Since all payments are through bank accounts, the KYC exercise can be deemed to have been carried out by the banks concerned. Though these platforms claim to follow soft recovery practices, the possibility of use of coercive methods cannot be ruled out.



The new technology, of trust
Blockchain links directly with customer and supplier

Yuthika Bhargava, The Hindu
Published on September 21, 2017


What is blockchain?

Blockchain is the backbone technology on which bitcoins run. Simply put, it is a digital public ledger that records every transaction. Once a transaction is entered in the blockchain, it cannot be erased or modified. Blockchain removes the need for using a trusted third party such as a bank to make a transaction by directly connecting the customers and suppliers. Each transaction is recorded to the ledger after verification by the network participants, mainly a chain of computers, called nodes. Blockchain today may be compared to what the Internet was in the early 1990s. While we have witnessed how the ‘Internet of Information’ has changed our society over the past two decades, we are now entering a phase where blockchain may do the same by ushering in a new paradigm comprising ‘Internet of Trust’ and ‘Internet of Value’, as per a Deloitte and Assocham study.

Where did it originate?

While the origin of the technology is not clear, it is widely believed that a person or group of people by the pseudonym Satoshi Nakamoto, who invented bitcoins, released the technology to support cryptocurrency.

What are the use cases?

Bitcoin is just one of the applications for the technology, whose use is being tested across industries. It is witnessing a lot of traction within India, in sectors such as banking and insurance. In most of these industries, players are coming together to form a consortium to realise the benefits of blockchain at an industry level.

For example, in India, there is a consortium ‘BankChain’ which has about 27 banks from India (including State Bank of India or SBI and ICICI) and the Middle East as its members. The consortium is exploring using usage of Blockchain technology to make business safer, faster and cheaper.

The Institute for Development and Research in Banking Technology (IDRBT), an arm of the Reserve Bank of India (RBI), is developing a model platform for blockchain technology.

What are the benefits?

The benefits of using blockchain will vary from case to case. However, according to a Deloitte and Assocham report on the issue, blockchain becomes a good fit when there is a lot of data that is shared across multiple parties with no trust mechanism among the participants.

Financial players are the first movers to capitalise on this technology. As per a study by the World Economic Forum, “With over 90 central banks engaged in Blockchain discussion globally, over 2,500 patents filed over the last three years and 80% of the banks predicted to initiate Blockchain and distributed ledger technology (DLT) projects by 2017, the Blockchain technology is on its course to become the new normal in the world of financial services.” Non-financial players too have been paying attention to and looking for ways to leverage the opportunities that blockchain offers, the report adds, pointing out that the front runners among them are retail, travel, health care, telecommunications and public sector industries. “The major use cases applicable to these industries are focused on the decentralized data storage, data immutability, and distributed ownership features of Blockchain,” it says.

Blockchain is expected to improve the efficiency of a transaction by eliminating the middlemen, while also reducing the cost of all transactions. It is also likely to increase transparency. and bring down fraud as every transaction would be recorded and distributed on a public ledger.

What is happening in India?

A high-level committee, which consists of officials from the Ministries of Finance, Home Affairs and IT as well as SEBI, the RBI, SBI, and NITI Aayog, is currently deliberating on whether or not cryptocurrencies should be banned in India. However, the discussions till now are learnt to be in support of encouraging the use of blockchain technology.



Google Tez:
Here is all that it can do for you, from sending money
to friends to getting payment in your bank account

Sudhir Chowdhary
The Financial Express
Published on September 21, 2017


Send money to friends, get payments directly in your bank account, or pay the auto driver— Google’s new digital payment app does it all and much more.

The Internet is fast becoming part of daily life for many Indians, but when it comes to making payments in the real world, we still prefer to pay by cash. Google wants to change this through its new payments app, called Tez.

A simple and secure way to pay for online and offline purchases, Tez is a free payments and commerce app built on top of the Unified Payments Interface (UPI) standard.

The best part: It is multilingual. Let us take a look at some of its key features and what we can do with this new Google app.

Make cash-like payments: One of the most powerful aspects of cash is that it enables you to pay others without exchanging sensitive personal information. Cash Mode enables just that by letting you pay another Tez user nearby without having to share personal details like your bank account or phone number. This is ideal for paying the vegetable vendor or auto driver. Bring two phones near each other, hit pay or request, enter your UPI PIN and the payment goes instantly from one bank account to another. Cash Mode is built using Google’s proprietary AQR (Audio QR) technology, which is similar to QR codes but more convenient and more secure. And unlike NFC, it works on almost any smartphone in India, whether Android or iOS.

Phone number based: The payments app uses your phone’s contact list so there’s no need to add people as beneficiaries or remember bank account numbers. So sending money to your family across the country, paying your landlord, or splitting a bill with a friend is simple and fast. Further, your transaction history with each person or business is grouped together like a conversation—just as chat apps group your messages together. This experience feels natural and enables richer, more engaging interactions.

Money in your bank: Tez works with all 55 banks on UPI. Google’s multiple payment service provider partnership with NPCI and four top banks—Axis Bank, HDFC Bank, ICICI Bank and soon with State Bank of India—means you can use Tez to transact with other UPI apps like Bhim or even check out online using your Tez UPI ID. It doesn’t cost you anything to use Tez, and your money stays in your bank so you continue to earn interest.


Boon for small business owner: Small business owners can use Tez to accept payments directly into their individual savings or current accounts (subject to regulatory limits). Merchants with individual current accounts can receive up to `50,000 per month with UPI with no fees.

Your money is secure:  Tez Shield uses multiple signals to help detect spam, fraud, prevent hacking, and to verify and protect the identity of every user. Your account is safeguarded with security options including phone security method such as passcode or fingerprint and a Google PIN code.

Made for India first:  Tez works on most smartphones (with apps for both Android and iOS) and Android supports English, Hindi, Bengali, Gujarati, Kannada, Marathi, Tamil, and Telugu with more coming soon.

In the next few months, Google will work with its partners to add more ways to pay on Tez (for example, credit cards and wallets) and more places to pay. And select phones from manufacturer partners such as Lava, Micromax, Nokia Mobile and Panasonic will come with Tez, making it even easier to get started.



Demonetisation: Here is why note ban, as an
economic case, does not stand up to scrutiny

Basant Potnuru
The Financial Express
Published on September 21, 2017


Expected long-term benefits such as growth in tax revenue, decrease in corruption and digitisation are not convincing or foreseen as of now

Since 99% of demonetised currency is back with the banks, the government faces a difficult question, if the move was at all worth? To answer that, we have to revisit the objectives set and critically analyse the effects of demonetisation policy. The government’s articulation of demonetisation listed the following objectives:

•   To evict the fake currency notes of Rs 1,000 and Rs 500;
•   To get rid of black wealth held in cash;
•   To bring back all the money to banking accounting;
•   To identify undisclosed income through income tax (IT) raids;
•   To use the opportunity to promote digital payments.

Against these targets, only 7.62 lakh pieces of fake currency notes worth Rs 41 crore had returned to the banking system and Rs 16,000 crore (1% of Rs 15.44 lakh crore of demonetised currency) did not come to the banks. This ruled out any significant special dividend to the government and RBI, as was anticipated. As a positive consequence of demonetisation, the tax authorities discovered an undisclosed income of Rs 17,526 crore and seized Rs 1,003 crore through searches and surveys so far. This number, however, is not impressive compared to the identification of undisclosed income and seizure of gold and cash during the pre-demonetisation years. For example, in 2011-12, Rs 906 crore worth of cash and jewellery was seized and Rs 10,649 crore of undisclosed income identified. This can reasonably be projected to a possibility of what has been achieved in the year 2016-17, that is Rs 1,003 crore of cash and gold seizure and a detection of Rs 17,526 crore of undisclosed income.

The Pradhan Mantri Garib Kalyan Yojana (PMGKY), which provided an opportunity to unaccounted cash holders to come clean, too did not produce results as anticipated. Only Rs2,300 crore was collected against the IT department’s target of Rs1 lakh crore. Together, all these direct monetary benefits accrued from demonetisation accumulate to about Rs 35,000 crore only.

Although demonetisation has successfully mobilised all the money, including that of small savers such as housewives, traders and businessmen, into the banking system, these funds with banks are expected to be used for productive purposes by lending at cheaper rates of interest. Most of these funds, however, were short-term savings and were expected to be withdrawn quickly rather than of any use for long-term lending purposes by banks. The black money holders laundered money into deposits up to the limit of Rs 2.5 lakh in several bank accounts—either relatives or otherwise—and such deposits too were expected to be dried-up quickly.

The Economic Survey estimated that demonetisation added 5.4 lakh new taxpayers in the financial year 2016-17. However, the average income quoted by these new taxpayers is Rs 2.7 lakh, which would mean they were required to pay tax for an income of Rs 20,000 only, as income up to Rs 2.5 lakh is granted exemption. Also, most these new taxpayers may not continue to stay in the tax-net, as next year they are not required to deposit whole of their cash collected or accumulated through the year.

Demonetisation came as a big bonanza for digital payment platforms. In terms of total volume of digital transactions from all service providers, it rose from 671 million in November 2016 to 957 million in December 2016, but dropped to 862 million in July 2017. In terms of value, the transactions spiked to Rs 1,044,055 billion in December 2016, but dropped to the pre-demonetisation levels of `107,481 billion in July 2017.

Thus, if the slowdown in the economy post-demonetisation by 1-2% of GDP growth rate constituting a loss of income of Rs 1-2 lakh crore, plus the new currency printing (Rs 7,965 crore) and transportation (Rs 16,000 crore as on December 6, 2016) costs, caused inconvenience and loss of lives, etc, are considered, then demonetisation, as an economic case, does not stand the scrutiny. Clearly, the costs outweighed the benefits. Expected long-term benefits such as growth in tax revenue, digitisation and decrease in corruption are not convincing or foreseen now, as much as the dreams sold by the experts and the government in the beginning. What needs to be done to curtail black money is to fix the demand for black money that comes from political parties, real-estate business, government-private sector nexus, rather than stressing too much on to curtail the supply of black money through cash-less measures.

Basant Potnuru is Associate Professor of


Source: Internet News papers and Anupsen articles

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