THE INSTITUTE OF CHARTERED

ACCOUNTANTS OF INDIA

Bhopal Branch of CIRC of ICAI

Your monthly guide to CA news, information and events

March 2020 edition

This Ediition special :

"NPA: A hole in the heart

of Indian Economy"
Table of Contents
Message Chairman CICASA Bhopal

Hot Topic :RBI uses its weapons to fight COVID-

19

Edition Special :NPA's, a Hole in the Heart of

Indian Economy

Improve your knowledge:

-Vivad se Vishwas

-New Income Tax, need of the hour?

The Poet in you!

Ignite the Fire within you

Art speaks what words can't say

Memories Captured

Big Brain time : Quizzes & Winners

Invitation

Disclaimer
 HOT

TOPIC

RBI'S WEAPONS TO FIGHT

COVID-19
Imposition of lockdown in the Indian territory was the need of the hour to tackle the outbreak

caused by COVID-19 pandemic.

In fighting battle against this global pandemic Indian economy slipped into recession bringing

severe cash crunch in the economy.

To maintain stability in the Indian economy RBI governor  Mr.Shaktikanta Das  announced a

series of economic reforms which are as follows along with its implications :-

1) RBI lowered the reverse repo

rate by 25 basis points from 4% to 3.75 %.

Reverse repo rate is the rate at which RBI borrows funds from the banks

and financial institutions. Reduction in reverse repo rate will discourage the banks and financial

institutions to lend their funds to the Central bank which in turn will result in more availability

of funds to lend to the public.

2) Booster package for NABARD, SIDBI and National Housing Bank.

RBI announced a special refinance facility of Rs.50,000 Crore

each for NABARD, SIDBI and National housing bank enabling them to meet their sectoral

credit needs efficiently.

3)Banks and Financial institutions allowed to provide Moratorium on loans.

All lending institutions are to provide moratorium on all term loans including credit card dues

of the borrowers. The moratorium is for payment of all instalments falling due between March

1, 2020 and May 31, 2020.

However, it is also stated that Interest shall continue to accrue on the outstanding portion of the

term loans during the moratorium.  This move of RBI will release the hardships faced by

borrowers to some extent to pay their EMIs during this pandemic period.

4)Liquidity coverage ratio requirement of banks brought down to 80% from 100%

LCR is essentially a generic stress test that aims to anticipate market-wide shocks and make

sure that financial institutions possess suitable capital preservation, to ride out any short-term

liquidity disruptions. Reduction in LCR will enable banks to extend more credit to public and

corporates.
5) Banks not to make any further dividend pay-out for the

F.Y

2019-20This decision was taken so that banks conserve capital

to retain their capacity to support the economy.

It is estimated that this pandemic will lead to

cumulative loss to global GDP over 2020-21 at around 9 trillion

US dollars which is greater than the economies of Japan and

Germany together. It is expected that RBI will come with more

such financial packages. RBI even rescued the mutual fund

industry by providing Rs.50,000 credit line in response to the

Franklin Templeton crisis. Deficit Financing is the only option

left with the Central bank of India to tackle with this pandemic.

BY: Mridul Kumar Gupta

SRN: CRO0628542
 EDITION
SPECIAL
NPA: A hole in the Heart of Indian

Economy

Banks are the engines of a country which keeps the wheels of

the country moving. Banks fail and economy of country collapse

The biggest ever challenge that Indian banking industry is

currently facing is the management of Non Performing Assets

(NPA's) which is not only affecting the banks but the whole

economy. In fact level of NPA's in Indian banking sector is

nothing but a reflection of state of health of industry and trade.

Let’s go on main content now.

What are Non performing Assets (NPA's) ?

An NPA is a loan or advance for which

the principle or interest payment

remained overdue for a period of 90 days.

 Banks are further required to classify NPA into:

The current scenario:  

Indian banks' gross non-performing assets (NPAs) stood at

Rs 9.4 lakh crore as on March 31,2019. This is a HUGE

amount.

The gross NPA ratio of banks stood at 9.3 percent in March

2019, this means that about 10% of loans are never paid

back, resulting in substantial loss of money to the banks.

The gross percentage of non-performing assets in Indian

public sector banks accounts for 80 to 85% of the total NPA,

while private sector banks accounts for the remaining.

Also, the NPA problem in India is worst when comparing

with other emerging economies of the world.

However a ray of hope came when Gross NPA ratio improved

to 9.1% as of Sept 2019 end but banking sector is by no means

out of the woods.

 
“The failure of a loan usually represents miscalculations on

both sides of the transaction or distortions in the lending

process itself.” This quote captures one of the fundamental

reasons for India’s non- performing assets (NPA) problem as

more debts provided by the banks, particularly by the state-

owned public sector banks (PSBs), turn into risky category

credits. The accumulation of bad loans happened over an

extended period of time, and today it threatens to hamper the

revival of economic growth by choking the credit

supply channel of the economy.

The origin of Crisis !

The answer lies partly in the credit boom of the years 2004-05

to 2008-09.

In that period, commercial credit (or what is called ‘non-food

credit’) doubled. It was a period in which the world economy

as well as the Indian economy were booming. Indian firms

borrowed furiously in order to avail of the growth

opportunities they

saw coming.

§  Most of the investment went into infrastructure and related

areas - telecom, power, roads, aviation, steel.

§  Businessmen were overcome with exuberance and they

believed, as many others did, that India had entered an era of

9% growth.
But   soon  after,   as the   Economic  Survey   of 2016-17

notes, many things began to go wrong.

§  There were problems in acquiring land and getting

environmental clearances and several projects got stalled.

Project costs soared.

§  At the same time, with the onset of the global financial crisis

in 2007-08 and the slowdown in

growth after 2011-12, revenues fell well short of forecasts.

§  As a result, financing costs rose as policy rates were

tightened in India in response to the crisis.

§  Further, the depreciation of the rupee meant higher outflows

for companies that had borrowed in

foreign currency.

This combination of adverse factors made it difficult for

companies to service (i.e maintain and repay) their loans to

Indian banks.(Reference taken from-The Hindu)

And thus, This has lead to Twin Balance sheet problem in

India!
Twin Balance Sheet Problem

Twin Balance Sheet problem is the stress on Balance Sheets

of both; the Lenders (Banks) and the Borrowers

(Corporates). Banks suffer the sting of stressed assets which

have very less probability of full revival and Corporates have

loan and interest obligations which are beyond their current

financial standings.

Yes Bank and PNB Bank Crisis!

You all have heard of Yes bank and PNB bank crisis, right?

One problem was common in both the banks ,not just the

presence of HUGE amount of Nonperforming assets but also

under-reporting them.

Perpetrated by Nirav Modi, the PNB scam was one of the

biggest banking fraud in India’s history. Nirav Modi had

allegedly acquired fraudulent Letters of Undertaking from one

of PNB’s Mumbai branches to secure overseas credit from

other Indian lenders, which ultimately proved to be A BIG

NPA!

Also, Yes Bank’s financial crisis has largely been attributed

to growing NPAs and poor management. As per YES Bank’s

financial results, YES Bank’s gross NPAs have pole-vaulted

to 18.87 per cent – the highest in the private banking space.

Further, A major crisis may be brewing for Indian banks in

near future!
ALERT of a bad loan surge after lockdown is over! Indian

banks sitting on cluster of NPA cluster bombs:

The lockdown has disrupted businesses and hit sales,

incomes and revenues, increasing cash flow pressure.

To provide relief and stave off bankruptcies, RBI has

announced measures for increased flow of credit via banks

to companies and allowed banks and non-bank financial

institutions to grant borrowers a three-month moratorium on

loan repayments and reclassification of stressed loans as

NPAs.

The relief given by RBI can offset liquidity constraints to an

extent in the interim, but revenue-related challenges will

continue due to the massive unprecedented shock to the

economy.

The moratorium and forbearance in terms of classification of

stressed loans will prevent a spike in NPA levels at banks

and non-banks for the next couple of months. But a few

months after the moratorium is over, bad loans may rise

sharply.

With the lockdown in place, growth forecasts have been

revised downwards to 0% for FY20 by Moody’s. As a result

the NPA ratio could go way over 12% by next March.

What should be theWay Ahead?

The need of the hour to tackle NPAs is some urgent

remedial measures. This should include:

Mechanism to identify the hidden NPAs.

In case of wilful defaulters, legal action should be

taken without any delay.

Improving credit risk management- This includes

credit appraisal, credit monitoring.

By: Yash Nandwani

SRN: WRO0635223
IMPROVE YOUR
KNOWLEDGE
VIVAD SE VISHWAS

 SCHEME

Introduction :-

Bill was introduced in the Parliament on 5 th January 2020.

Amendment were proposed in the Parliament on 14th

February 2020 .

Bill was passed in lower house on 4 th March 2020 and in

upper house on 20 March 2020.

Certain clauses have been proposed to widen scope of Bill

and ease burden of tax.

It offers  completewaiver of interest and penalty to taxpayers

who pay their  disputed  tax on or before

31st December2020.

HER READS IN THIS ISSUE:

Objective

• Reduce income tax pending litigation.

• Generate timely revenue for government.

• Help taxpayers and their tax dispute with Income Tax

Department by paying disputed tax and get waiver from interest

and penalty also get immunity from prosecution.

Eligibility

Scheme shall be applicable to all appeals and petition filed by

taxpayers or income tax department which are pending on 31st

January 2020 with following forums

(A)   Commissioner of Income tax (Appeals)

(B)    Income Tax Appellate Tribunal

(C)    High Court

(D)    Supreme Court

How to compute Disputed Tax Liability:-

General Provision : Amount of tax on total income as per

provision of Income tax Act 1961 less amount of tax on total

income as per general provision reduced by amount in

respect of which appeal has been filed by Appellant .

MAT /AMT : Amount of tax on total income as provision

under Section 115JB and Section 115 JC of Income Tax Act

1961 less amount of tax on income as computed for which

appeal has been filed by Appellant.

Assessment by Tax officer Loss has been reduced or convert

into profit then amount of tax on such income in respect of

Timeline and Tax Liability

Appeal filed by Appellant

Appeal filed by Department

 Time and Manner of Payment
DESIGNATED

AUTHORITY

Designated Authority receive Declarant receive certificate

a receipt of declaration & from designated authority

within 15 days gives order & within 15 days declarant

prescribing amount of tax needs to pay amount

liability to be paid by + Intimate to designated

declarant and grant a authority in prescribed form

certificate to declarant + Designated authority pass

prescribing tax payable to be order stating that amount has

paid . been paid

Declarant

Power of Designated Authority

Order of designated Authority is final and shall not be

reopened under any proceeding of Income Tax Act ,1961.

Any amount paid under such scheme will not be eligible for

refund.

If any false statement and violates any condition of scheme

by Appellant then such statement will be deemed to be

never made by him and pending dispute shall stand revived .

Filing of declaration and conditions to be fulfilled

Appeal before Income Tax Appellate

Tribunal/Commissioner of Income Tax shall be deemed to

have been withdraw from date when such certificate is

issued by Designated Authority.

 Dispute pending before High court/Supreme

Court/Arbitrator shall be deemed to be withdraw when

Appellant provide proof /writ declaration filed with

Designated Authority.

Appellant needs to waive his rightunder any law for time

being in force.

Cases not covered under scheme

Tax arrears arising out of search (above 5 crores) / seizure

proceedings / undisclosed income/asset from sources outside

India.

Cases in respect of assessment years in respect of which

prosecution has been launched before filing of declaration.

Cases in respect  of of information received from foreign

country as part of exchange of information under tax

treatise.

Any person who has been detained under Foreign exchange

and prevention of smuggling Act ,1974 / prosecution under

Indian Penal Code/Special Court (related to securities) Act

,1992 before filing of declaration.

By: Rishabh Agrawal

SRN: CRO0621185
 THE POET IN

YOU

A STEP
We all are here , chasing our dream ,

Trimming it as no one can,

But we take many problem with us.

A second is enough to teach you ,

A second is enough to destroy you.

How we should go against the present bad condition,

And to those problems which are hurting you?

What is in your hand ?

May be nothing , times make everything good or bad ,

You just remain with your mind to make a "STEP"!

A step that is good to you,

No one knows what is better for you.

Make your every step as the first step in your life, which will be

A dedicated one ,

Full of excitement, full of concentration and you will be careful

As you haven't done it earlier.

Make  "A STEP" !

Keep shining and keep inspiring.

 THE POET IN

YOU
A Dedication to

Parents

Every drop of your sweat will be paid off

With love and sacrifice, as of yours.

I will take up your burden,

Taking off your worries all of a sudden.

You could give and I will take, 

The responsibilities that didn't let you rest.

The sacrifices you made taught me up, 

There is no option as giving up.

Your hardwork had given a lesson, 

Being strong is the only option.

Your love has protected me from all evils,

Has given me strength to fight with all devil's.

What are you to me i cant express,

My life starts and ends with you is the only thing I can
confess...
 IGNITE THE

FIRE WITHIN

YOU

ISOLATION
Perspective, plays a major role in people's life*, which

takes me to , how usually people see, ISOLATION  as:-

Isolation makes people, question themselves, It makes

them feel, how lonely and left out, they are, 

It makes them think :- "Where others might have been

filling their life with almost every possible color of

joy,love  and achievements and here I am, stuck , in my

own hell of depression, four walls , not mingling up and

keep myself away and making my life worthless".

How I see ISOLATION:-

When you are isolated , you get time to dig deep inside

you , to discover your depth , to find, all the lost answers

of questions about yourself, it doesn't create any self doubt

instead makes you even more sure about WHO YOU

ARE, it helps you, to not just figure out, what you actually

want but also enables you to have the proper way to

achieve it , 
Considering , loneliness and left out, I feel , isolation

also , works as a medium of judgement, as, those who

would be really concern about you, will definitely show

up to enquire about your well-being and rest will let it

pass like an ordinary thing,

All in all , isolation make you win ,

It makes you win , as it turns you into a better version of

yourself and it makes you win real gem of your life!

By: Meeral Ali

SRN: CRO0585646
 IGNITE THE

FIRE WITHIN

YOU

The Heroes of the 21st Century

With given this month’s catastrophe we as

generation had to first time in our life had to experience such a

malignant event which lead us to leave out our daily routine of

work. But not everyone had to leave their job.

There are people who had to stick with their jobs to ensure the

survival of humanity.

They are doctors, nurses, medical staff, medical researchers ,

policemen , policewomen, bankers, and many other legends.

Who decided to take huge risk for themselves and continued to

do their work for the common good they abandoned their

families ,their needs to ensure humanity lives on . They are

legends who shall be remembered for their selfless efforts.

Most valuable souls are of those who were

lost in line of duty. The Martyr shall be welcomed by angels in

heavens singing song of their welcome.

For their act of benevolence in return they asked only for one

thing , they asked the rest of us to stay at home. They urged us

for social distancing . Which most of us complied with , we

stayed safe in our homes.

But not everyone is fortunate enough to own a house not

everyone is fortunate enough to afford a day’s meal .Not

everyone can afford to stay at home. This malignant event has

rendered restaurant workers all around the globe jobless and

hopeless.

During this catastrophe the world united and helped the needy,

those who lacked homes were provided with one roof to stay

safe those who couldn’t afford a day's meal where fed by the

hands of honest selfless volunteers, those who could not afford

to stay at home were reimbursed to stay at home.

Together we stopped the catastrophe that would have

lead to end of the world.

We are the heroes of 21st Century.

By: Jeetendra Gurwani

SRN: CRO0649316
Art speaks what
words can't say

BY: PALAK

MITTLA
Memories Captured
 BIG
BRAIN
TIME!

ACROSS

1. SA 530 deals with __

2. __is an auditor’s opinion. The auditor, having

obtained sufficient appropriate audit evidence

,concludes that misstatements are material and not

pervasive.

3.A partner who takes no share in the activity of

business but entitled to profit is__

4.A sampling method where population is divided into

subgroups(strata)

5. __Assessment tax means any balance tax paid by the

assessee on the assessed income after taking TDS and

advance tax into account before filing the return of

income

6. The concept of OPC was first recommended by__

7. __  is the process of running a virtual instance of a

computer system in a layer abstracted form from the

actual hardware

8. During audit when for a special purpose an inquiry

is made it is called__

9.Those matters that in auditor’s professional

judgment were of most significant and communicated

with those charged with governance.

10.Managment is responsible for proper

implementation of __control and auditor is responsible

to check the effectiveness of the controls.

DOWN

11. Is an independent auditor’s judgment that a company’s financial statements are fairly and

appropriately presented.

12. __ Sets the direction, timing, and scope of an audit. The strategy document usually

includes a statement of the key decisions needed to properly plan the audit.

13. Auditor’s duty is to form an opinion and express it in audit ….

14.__ is an auditing softer and it also supports forensic audit.

15. As per SA570 Management is responsible to ensure…

concern of business.

16. Confirmation where the party responds directly to auditor if the confirming party disagree

with the information provided in the request.

17. Thousand Part of the yen.

18.__ Software group is a premier provider of global investment technology to support the

front ,middle and back office.

19. Model used for cost estimation

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