बैंक ऑफ इं डिया /BANK OF INDIA

प्रधान कायाालय / Head Office

आयोजना, कायानीडि एवं आडथाक आसू चना डवभाग
Planning, Strategy & Economic Intelligence Dept

समाचार सारांश /NEWS SUMMARY–03.02.2020

राष्ट्रीय (NATIONAL)

BANK OF INDIA

Higher allotment for rural, education and infra pipeline will improve demand. Feel-good elements include sizeable
increase in DICGC insurance, subordinate debt facility and extension of rejigging MSME windows, said A K Das,
Managing Director & CEO, Bank of India.

https://www.pressreader.com/india/business-standard/20200202/page/25

बैंडकंग (BANKING)

FM says will reduce tax incidence for individual progressively (Financial Express)

Amid criticism that the new personal income tax (PIT) regime may be less attractive than the existing one, finance
minister Nirmala Sitharaman on Sunday asserted that taxpayers in certain brackets will definitely benefit from the
proposed structure, and the government would issue more clarifications on this issue if required. “If the new scheme
will eventually result in people paying more tax than in the old scheme, why would I come with such a system?” she
asked. In any case, people have a choice not to switch to the new regime if they think the current one won’t help
them, the FM added.

https://www.financialexpress.com/budget/budget-2020-fm-sitharaman-says-will-reduce-tax-incidence-for-individuals-progressively/1853385/

Budget hints at PSB turnaround (Financial Express)

At a time when public sector banks (PSBs) continue to accrue bad loans on their books, the Budget for FY21 and
the Economic Survey for FY20 have offered hope for their turnaround. While the finance minister said the
government would consider providing capital to PSBs as and when required, for now they are being considered fit
to stand on their own. Finance secretary Rajeev Kumar explained that PSBs are now in control of the legacy bad-
loan situation. Further, the plan to amalgamate 10 PSBs into four will help achieve cost optimization.”

https://www.financialexpress.com/budget/budget-2020-offers-hope-for-the-turnaround-of-psu-banks/1853346/

Deposit insurance premium to be flat (Business Standard)

The premiums charged to banks to cover deposit insurance of customers may hike to 12-13 paise per deposit of
Rs 100 every year, Finance Secretary Rajiv Kumar said on Sunday, asserting that the government is not in favour
of a risk-based premium regime. “The banks cannot pass on the hike in premiums to its customers, according to
the norms. The premium won’t go up substantially in any case and may be hiked to 12-13 paise (per deposit of Rs
100 a year),” Kumar said in a media interaction.

https://www.business-standard.com/article/finance/it-s-not-the-right-stage-to-put-differential-premium-on-banks-finance-secy-120020200841_1.html

Pension funds cap to hurt (Economic Times)

In a move that will make saving in pension funds less lucrative for high-salaried individuals, the government has
proposed a cap of Rs. 7.5 lakh for the annual tax-free contribution an employer can make on behalf of an employee
in all such instruments combined. Under the existing provision, employer contribution exceeding Rs. 1.5 lakh in a
year under recognised provident funds like EPF or funds of exempted establishments is taxable. However, there is
no such ceiling on employers’ contribution to the National Pension Scheme or other superannuation funds.

https://economictimes.indiatimes.com/news/company/corporate-trends/employers-contribution-to-pf-over-rs-7-5-lakh-set-to-be-
taxed/articleshow/73886282.cms

Hike in deposit insurance to pinch banks (Economic Times)

Indian banks may have to contend with slightly higher operating costs after the budget raised five-fold the cover on
fixed deposits held by savers, with proposals to include the profitability risks of individual lenders in their premium
liabilities to make the process more equitable and fair. The budget Saturday raised the cover guaranteed by the
Deposit Insurance and Credit Guarantee Corp (DICGC) to Rs 5 lakh from Rs 1 lakh. Bankers are hoping that along
with the amendment to increase the amount of insured deposits, the government will also move toward a risk- based
assessment of premium payable so that the high-risk lenders with profitability issues pay most of the premium.

https://economictimes.indiatimes.com/markets/stocks/news/hike-in-deposit-insurance-to-pinch-banks/articleshow/73888275.cms

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Fin Cos feel IT changes will hit industry, tax payers (Economic Times)

Top insurers and financial sector stakeholders have raised concerns that the proposed direct tax regime could lead
to reduced household savings in the economy, likely affecting fund flows to financial instruments traditionally
undergirded by tax-break cash pools. They believe that in the absence of tax benefits on savings and risk products
such as ULIPs and ELSS, policyholders may withdraw from these schemes that have traditionally been seen as the
source of financing for larger cash pools, many of which underpin infrastructure projects.

https://economictimes.indiatimes.com/markets/stocks/news/fin-cos-feel-i-t-changes-will-hit-industry-taxpayers/articleshow/73888287.cms

Shadow banks keep faith in FMs liquidity support hint (Economic Times)

Finance minister Nirmala Sitharaman did not make any provision for an immediate liquidity support for non-bank
lenders in the Union budget, but the industry’s hopes haven’t dimmed yet as the FM hinted at a mechanism to
provide sovereign guarantee to their securities. “As far as liquidity support is concerned, looks like work is in
progress and support is expected soon,” said Raman Agarwal, co-chairman at Finance Industry Development
Council (FIDC), an industry body for non-banking financial companies.

https://economictimes.indiatimes.com/markets/stocks/news/shadow-banks-keep-faith-in-fms-liquidity-support-hint/articleshow/73891893.cms

‘No Bang’ Budget spooks markets (Business Line)

Stock markets crashed on Saturday as Finance Minister Nirmala Sitharaman failed to offer any effective fiscal
stimulus to revive economic growth. Immediately, the focus shifted to global markets and negative sentiment due
to fears over coronavirus, experts told BusinessLine. The Sensex crashed by 2.43 per cent or 987 points to close
at 39,735. Nifty fell by 2.5 per cent or 300 points at 11,661. Share prices of most banks that promote insurance
companies were hit as the Budget announced a new tax regime for individual tax payers, without exemptions on
investments. Nearly 50 per cent of earnings for the benchmark Nifty index come from the banking sector.

https://www.thehindubusinessline.com/markets/stock-markets/markets-spooked-on-lack-of-measures-to-revive-growth/article30713615.ece

With Rs 5 lakh cover, bank depositors can breathe easy (Business Line)

In a bid to restore the confidence of depositors, the Budget has increased the deposit insurance cover to Rs 5 lakh
from the existing Rs 1 lakh. Given that the coverage under the Deposit Insurance and Credit Guarantee Corporation
of India (DICGC) was last raised in 1993, from Rs 30,000 to Rs 1 lakh, the revision was long overdue. And given
that India has the lowest deposit cover vis-à-vis other countries, the move is surely welcome. But a higher deposit
cover would imply that the stronger banks will have to pay a higher premium, mostly for the benefit of weaker banks.

https://www.thehindubusinessline.com/economy/budget/bank-depositors-can-breathe-easy-with-5-lakh-cover/article30712905.ece

NBFCs to get liquidity boost; norms for debt recovery relaxed under SARFAESI Act (Business Line)

The non-banking finance sector, which has been down in the dumps since September 2018, has heaved a sigh of
relief with the Union Budget offering a slew of measures to boost their liquidity and asset recovery. The Budget
stated that the limit for NBFCs to be eligible for debt recovery under the Securitization and Reconstruction of
Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, is proposed to be reduced from Rs
500 crore to asset size of Rs 100 crore or loan size from the existing Rs 1 crore to Rs 50 lakh.

https://www.business-standard.com/article/pti-stories/nbfc-players-say-budget-offers-some-hope-finally-120020101716_1.html

Government plans to sell 46.46% holding in IDBI Bank (Business Line)

After ceding 51 per cent controlling stake in IDBI Bank to LIC last financial year, the government now plans to sell
the balance holding of 46.46 per cent in the bank. “In the last few years, the government has taken concrete steps
to bring our banking system to be robust. However, there is a need for greater private capital. “Accordingly, it is
proposed to sell the balance holding of Government of India in IDBI Bank to private, retail and institutional investors
through the stock exchange,” said Union Finance Minister Nirmala Sitharama in her Budget speech.

https://www.thehindubusinessline.com/money-and-banking/govt-plans-to-sell-4646-holding-in-idbi-bank/article30714674.ece

In relief to MSMEs, banks to provide subordianted debt (Business Line)

Hoping to allay the working capital concerns of micro, small and medium enterprises (MSMEs), Finance Minister
Nirmala Sitharaman has proposed a scheme to provide subordianted debt to such entrepreneurs. “This subordinate
debt to be provided by banks would count as quasi-equity and would be fully guaranteed through the Credit
Guarantee Trust for Medium and Small Entrepreneurs (CGTMSE). The corpus of the CGTMSE would, accordingly,
be augmented by the government,” she said in her speech on Saturday.

https://www.thehindubusinessline.com/money-and-banking/in-relief-to-msmes-banks-to-provide-subordianted-debt/article30714651.ece

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Now, PSBs can approach the capital market to raise funds (Business Line)

Union Finance Nirmala Sitharaman, on Saturday, said a few public sector banks (PSBs) will be encouraged to
approach the capital market to raise additional capital. In her Budget speech, she emphasized that the Government
has infused about Rs 3.50 lakh crore by way of capital into PSBs for regulatory and growth purposes.

https://www.thehindubusinessline.com/money-and-banking/now-psbs-can-approach-thecapital-market-to-raise-funds/article30714671.ece

Interest rate re-setting on small savings to get improvised mechanism; new rates from Q1 (Business Line)

Those putting money into small savings schemes are getting ready for a new interest setting arrangement from the
quarter beginning April 1. The government also hopes that the new operational tax regime will not dent collection
from savings. The small savings scheme basket comprises 12 instruments including National Saving Certificate
(NSC), Public Provident Fund (PPF), Kisan Vikas Patra (KVP) and Sukanya Samridihi Scheme. The government
resets the interest rate in the beginning of every quarter.

https://www.thehindubusinessline.com/economy/interest-rate-re-setting-on-small-savings-to-get-improvised-mechanism-new-rates-from-
q1/article30720494.ece

Bank strike: Unions seethe as IBA dubs them ‘irresponsible’ (Business Line)

The United Forum of Bank Unions (UFBU), which went on a two-day strike from Friday to press its demands, has
taken grave exception to the Indian Banks' Association (IBA) branding it as 'irresponsible.' This is demeaning of the
IBA's stature and condemnable and such an advertisement from a public body is unprecedented, the UFBU said in
response to a public notice put out by the IBA.

https://www.thehindubusinessline.com/money-and-banking/bank-strike-unions-seethe-as-iba-dubs-them-irresponsible/article30718772.ece

Easier credit payment and compliance spell relief for MSMEs (Business Standard)

Finance Minister Nirmala Sitharaman announced a bunch of measures to give further impetus to micro, small and
medium enterprises (MSMEs) that are struggling to meet stringent compliance norms and secure payments.
Lowering the threshold for availing of invoice credit, extending easier compliance norms to majority of the micro and
small firms, and waiving dividend distribution tax (DDT) will help the entities from the next fiscal year. To reduce the
crunch in working capital for MSMEs, the minister proposed to amend the Factoring Regulation Act, 2011. The new
rules will allow non-banking financial companies (NBFCs) to offer invoice credits to MSMEs against their supplies
to larger firms. The move will enhance “their economic and financial sustainability,” Sitharaman said.

https://www.business-standard.com/budget/article/budget-2020-easier-credit-payment-and-compliance-spell-relief-for-msmes-120020101766_1.html

Fighting the slowdown (Business Standard)

Pain points: While overall credit growth has weakened as companies hold back fresh investments, the pain is
concentrated in manufacturing. To make matters worse, asset quality in banks has started wornening after a few
quarters of improvement. Bad loans could rise to nearly 10% by September 2020.
Whats on offer: Finance Minister Nirmala Sitharaman hinted at recapitalizing PSBs during the year, in her post
budget press conference. Some PSBs will be encouraged to approach capital markets to raise additional capital,
which could help deal with additional bad loans. Governance reforms are also expected to help banks become more
competitive; co-operative banks to be strengthened. Additional stept to bring in ‘transparency and greater
professionalism’ in PSBs planned.

Government to borrow Rs 8.1 trillion in FY21, bank big on small savings (Business Standard)

The government will be borrowing Rs 8.1 trillion from the market in fiscal year 2020-21 (FY21). Contrary to market
expectations, it will not engage in extra borrowings in the current financial year. Instead, it will mobilise higher
resources from small savings, Budget documents show.However, not everybody in the market is ready to buy the
math. The extra borrowings may not happen even as the fiscal deficit widened to 3.8 per cent of the gross domestic
product (GDP) for FY20 from 3.3 per cent budgeted earlier, as the government leaned on the trigger clause of the
Fiscal Responsibility and Budget Management Act (FRBM).

https://www.business-standard.com/budget/article/budget-2020-govt-to-borrow-rs-8-1-trillion-from-the-market-in-fy21-120020101574_1.html

Government to take steps for more robust financial sector (Business Standard)

The Budget has a slew of steps for the financial sector, including listing on the stock exchanges of Life Insurance
Corporation (LIC). And, a fivefold increase in insurance cover for bank depositors, to Rs 500,000 each. The finance
minister said the government now proposed to sell part of its 100 per cent holding in LIC, via Initial Public Offer. The
overall disinvestment target that was specified would essentially come from this listing of LIC and stake sale in IDBI
Bank, said Rajiv Kumar, finance secretary, at a post-speech press conference. There are three listed life insurance
companies — HDFC Life, SBI Life and ICICI Prudential Life Insurance — and three listed non-life insurance entities.

https://www.business-standard.com/budget/article/budget-2020-lic-listing-idbi-bank-stake-sale-tops-fm-sitharaman-s-agenda-120020200007_1.html

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Six tax slabs in, 70 exemptions out (Economic Times)

The Budget 2020 has made the tax structure more complicated by adding three income tax slabs. The removal of
tax exemptions and deductions certainly makes compliance less tedious, but avid tax planners who maximised their
tax deductions will probably pay more tax under the new tax regime. The budget has tried to put more money in the
hands of taxpayers by curtailing the incentives to save. Even the claim that taxpayers will save tax under the new
regime raises questions. Finance Minister Nirmala Sitharaman said in her budget speech that a taxpayer earning
Rs 15 lakh will save Rs 78,000 in tax under the new regime.

https://economictimes.indiatimes.com/wealth/tax/six-income-tax-slabs-in-70-exemptions-out-impact-on-taxpayers/articleshow/73861843.cms?from=mdr

Affordable homes get tax holiday boost (Economic Times)

Affordable housing received a boost as the government extended the tax holiday for new projects by another year.
This is likely to lead to more project launches in the segment. The government has also extended the deadline for
first time homebuyers' to avail additional Rs 1.5 lakh interest deduction on home loans by a year till 31 March 2021.
At present, home loan interest payment of up to Rs 2 lakh is allowed as deduction across segments, along with loan
principal repayment up to Rs 1.5 lakh. The move is expected to boost demand from first-time home buyers.

https://economictimes.indiatimes.com/industry/services/property-/-cstruction/budget-2020-affordable-homes-get-tax-holiday-
boost/articleshow/73861125.cms?from=mdr

A new chapter on glocal education (Economic Times)

The government has proposed to open doors for foreign universities to partner Indian institutes through external
borrowing and the foreign direct investment route, but stopped short of allowing them to set up full-fledged campuses
in the country. “We have begun drafting a scheme in line with the budget announcement. The idea is to allow
institutes to raise funding from outside,” human resource development secretary Amit Khare told ET. “Under the
scheme, a partnering foreign institute will be able to bring in funds and set up a centre at the Indian institute. This
will lower the cost of higher education significantly,” he said.

https://economictimes.indiatimes.com/industry/services/education/a-new-chapter-on-glocal-education/articleshow/73861882.cms?from=mdr

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