Uniform provisioning pertaining to Fraud Accounts

Reserve Bank of India vide its :-

Notification No RBI/2014-15/535 DBR.No.BP.BC.83/21.04.048/2014-15 dt.April 1, 2015, addressed to All Scheduled Commercial Banks (Excluding Regional Rural Banks), has laid down  uniform provisioning rules for fraud accounts.

          The basic guidelines are compiled in paragraph 4.2.9 of Master Circular on Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances dated July 1, 2014, in terms of which, in accounts where there are potential threats for recovery on account of erosion in the value of security or non­-availability of security and existence of other factors such as frauds committed by borrowers, the asset classification, and consequent provisioning, depends upon the realisable value of security.

          The uniform provisioning norm in respect of all cases of fraud, are as under:

01) The entire amount due to the bank (irrespective of the quantum of security held against such assets), or for which the bank is liable (including in case of deposit accounts), is to be provided for over a period not exceeding four quarters commencing with the quarter in which the fraud has been detected;

02)                  However, where there has been delay, beyond the prescribed period, in reporting the fraud to the Reserve Bank, the entire provisioning is required to be made at once. In addition, Reserve Bank of India may also initiate appropriate supervisory action where there has been a delay by the bank in reporting a fraud, or provisioning there against.

At the same time,  banks must scrupulously adhere to the guidelines contained in circular DBS.CO.CFMC.BC.No.1/23.04.001/2014-15 dated July 1, 2014 on ‘Frauds – Classification and Reporting’.

Income Tax Deduction-The sure shot way to ensure Indian LPG Consumers give up LPG subsidy

The inspiration for today’s blog post is Prime Minister’s Narendra Modiji’s remarks at the inaugural session of RBI Conference on Financial Inclusion

Quote

“I believe that our banks should take all their employees in confidence. Every bank should resolve that their employees would give up the subsidy. All industrial houses should decide that their employees would give up subsidy,” Mr. Modi said.

The Prime Minister said that the government’s intention behind the campaign is not to add to its coffers by saving on subsidy bill, but to provide LPG cylinders, a clean energy, to poor households who use firewood for cooking.

“Give up voluntarily. If one crore people give up this gas cylinder subsidy... one crore poor families who burn firewood, which leads to deforestation, carbon emission (and) their children, grow up in smoke... The cylinder (subsidy) you give up should reach to the house of that poor,” he said.

Unquote

          As a responsible citizen, I am willing to give up LPG subsidy if I am assured that a deprived family will benefit.  The question is how that assurance can be visible and also be economically tracked.

          One option is to ensure tax deductions as equivalent to the LPG Subsidy foregone.

          The deduction model as for the Professional Taxes can be adopted here.   

Section 16(iii) : As per section 16(iii) of Income tax act ,Professional tax on employment or tax on employment levied by state under article 276(2) of the Constitution is allowed as a deduction from the Salary income.

Feedback welcome.

India’s High Value Payment System RTGS is closed 03/04/2015

          At the last moment, Good Friday holiday for 03/04/2015 was declared in Delhi State. This led to Northern State CTS Grid also declaring a holiday. The chain effect spill over to RTGS too and RTGS System too is shut down on 03/04/2015.

          This last minute decision led to lots of juggling in the financial institutions back offices all over India.

          NEFT too will be closed as RTGS and NEFT share similar holidays. However, the other digital payment channel i.e IMPS is open. IMPS is open 24*7 and is largely customer driven. This will be one more big opportunity for IMPS to show cases its prowess.

          Heavy volumes in the RTGS/NEFT channel can be expected on 04/04/2015-Saturday. However, as all banks have high processing capabilities, the customers need not be much worried. The pressure might be on bank customers who prefer the branch mode for execution of their Electronic Transactions.

         

          

The Wait is over-RBI approves ING Vysya Bank Ltd.- Kotak Mahindra Bank Ltd. Amalgamation

The first Press Release by Reserve Bank of India in the new financial year 2015-16 was on the Scheme of Amalgamation of ING Vysya Bank Ltd. with Kotak Mahindra Bank Ltd.

The Scheme has been sanctioned in exercise of the powers contained in Sub-section (4) of Section 44A of the Banking Regulation Act, 1949.

The Scheme will come into force with effect from April 1, 2015. All the branches of ING Vysya Bank Ltd. will function as branches of Kotak Mahindra Bank Ltd. with effect from April 1, 2015.

The branding migration will begin very shortly. As the weeks unfold the contours of the complete migration plan will be clear.

The merger was announced to the public at large on November 20, 2014 and all the legal points were covered with RBI announcing the approval of the merger.

RTGS and NEFT open on April 2nd /3rd 2015

          India large value payment system i.e RTGS is open for business as usual on 02/04/2015 and 03/04/2015, though bank branches in many Indian states are closed on 02/04/2015 and 03/04/2015.

          Northern and West Cheque Truncation Grids are also open as usual.

          The Southern CTS Grid is closed on account of Good Friday.

          This means customers can do normal banking transactions if not at branches but though online banking channels