RBI’S GO AHEAD TO NEW BANKING LICENCES

RBI GRANTS IN-PRINCIPLE BANKING LICENSE TO IDFC AND BANDHAN FINANCIAL SERVICES 

The Reserve Bank of India (RBI) in its latest policy announcement has stated the issuance of new banking license is more of regulatory process and hence one can soon expect the banking licenses to be issued to the deserving candidates. Reserve Bank of India (RBI) on Wednesday (April 2, 2014) announced that it has given in-principle approval to IDFC and Bandhan Financial Services to set up new banks in the country.

Financial inclusion was the main motto behind granting such licenses as in India about half of the households do not have access to formal banking services. Standing true to its motto, RBI announced that it has given in-principle approval to Bandhan Financial Services (a microfinance player in Eastern India). IDFC, a Mumbai-based non-bank financial company specialises in infrastructure lending. The RBI said the approval would be valid for 18 months during which the two financial firms will have to comply with the requirements laid down by the central bank, according to a statement. The central bank said it will also consider the application of India Post, but under a separate process to be carried out in consultation with the  government. The central bank said 25 applicants had been considered, and judged under various criteria including analysis of their financial statements, track record of running their business over the past 10 years and potential to run a bank.

DIRECT TAX CODE BILL BATS FOR SPECIAL TAX ON SUPER RICH

Draft of Direct Tax Code Bill was again revised by the standing committee of finance which is headed by BJP leader Yashwant Sinha. The committee has again batted for special tax on the super rich. In its decision the committee has recommended a special slab of 35 per cent for super rich whose income crosses the `10 crore mark annually. On the other hand, though the committee has recommended retaining the exemption limit of `3 lakh, the Finance Minister has rejected it on the point that it will lead to a loss of more that `60000 crore to the exchequer and the draft retained the exemption limit of `2 lakh. The committee had also proposed the abolition of Securities Transaction Tax (STT), which clearly was a very big positive for the markets but government was not keen on that front as well.

As far as other recommendations of the committee are concerned, it has proposed the following slab for the income tax:

• 10 per cent tax on income of  Rs 3-10 lakh 
• 20 per cent tax on income of Rs 10-20 lakh 
• 30 per cent tax on annual income beyond Rs 20 lakh.

Currently the structure clearly says that there is no tax on income of up to Rs 2 lakh, while 10 per cent tax is there on Rs 2-5 lakh, 20 per cent on Rs 5-10 lakh and 30 per cent on income beyond Rs 10 lakh.

EXTERNAL DEBT INCREASES BY 5.2 PER CENT IN FIRST 9 MONTHS

India’s external debt has touched USD 426 billion as of December 2013, which is USD 21.1 billion more than the figure ending March 2013, showing an increase of 5.2 per cent. At the same time ratio of external debt to GDP stood at 23.3 per cent, while it was at 21.8 per cent during March 2013.

As per the figures released by Department of Economic Affairs, rise in external debt during the period was due to long-term debt particularly NRI deposits. A sharp increase in NRI deposits clearly reflected the success of fresh FCNR (B) deposits mobilised under the swap scheme during September November 2013.

The long-term debt stood at USD 333.3 billion at the end of December 2013, showing an
 increase of 8.1 per cent over the end-March 2013 level, while short-term debt decreased by 4.1 per cent to USD 92.7 billion. At the same time short-term debt accounted for 21.8 per cent of India’s total external debt, while the remaining was long-term debt. Government (Sovereign) external debt stood at USD 76.4 billion ending December 2013 as against USD 81.7 billion at the end of March 2013.

REC SIGNS MOU WITH REC POWER DISTRIBUTION COMPANY

REC Power Distribution Company (RECPDCL), which is a wholly owned subsidiary of REC, has signed a Memorandum of Understanding (MoU) with Rural Electrification Corporation (REC) for the FY15. P J Thakkar, Director (Technical), REC and S K Lohani, IAS, CEO, RECPDCL signed the MoU. During the event Rajeev Sharma, CMD, REC and Chairman RECPDCL Ajeet Kumar Agarwal were also present. RECPDCL commenced its operations in 2007 to promote, develop, construct, own, operate, distribute and maintain electricity distribution network of 33 kV and below voltages, to set up Decentralised Distributed Generation (DDG) systems and to provide various consultancy services.