Fino Payments to Enroll Fresh Customers After RBI Lifts Ban

Fino Payments Bank in a statement released on Tuesday said that it could enroll new customers and open accounts after the regulator lifted a 5-month old ban. “RBI has lifted the prohibition on Fino Payments Bank to open new accounts,” said an official statement from Fino.

“It may be noted that RBI had prohibited Fino Payments Bank from opening any new accounts on account of violations of certain licensing conditions and operating guidelines. However, no restrictions were placed by RBI on the bank for servicing existing customers,” the statement added.

Five months ago, the Reserve Bank banned Fino from enrolling new customers owing to non-compliance with operational guidelines. The RBI’s operating guidelines for payments banks suggests that customers can make deposits of up to Rs 1 lakh per account in a year. Payment banks such as Fino cannot accept deposits beyond this limit.

According to the RBI’s latest data, 31 payment banks including Paytm, Airtel Payments bank cannot onboard new customers. After an observation on June 20, Paytm Payments Bank cannot on-board newer customers.

Fino Payments Bank, started as a remittance service provider and received a nod from the regulator to start a payments bank in March 2017. Operations had begun in September after launch in July last year.

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Fiscal & Revenue Deficit

What is fiscal deficit?

The difference between total revenue and total expenditure of the government is termed as fiscal deficit. It is an indication of the total borrowings needed by the government. While calculating the total revenue, borrowings are not included.

Generally fiscal deficit takes place due to either revenue deficit or a major hike in capital expenditure. Capital expenditure is incurred to create long-term assets such as factories, buildings and other development. A deficit is usually financed through borrowing from either the central bank of the country or raising money from capital markets by issuing different instruments like treasury bills and bonds.

What is the difference between fiscal deficit and primary deficit?
Primary deficit is one of the parts of fiscal deficit. While fiscal deficit is the difference between total revenue and expenditure, primary deficit can be arrived by deducting interest payment from fiscal deficit. Interest payment is the payment that a government makes on its borrowings to the creditors.

What are the views of different experts on fiscal deficit?
Economists differ widely on their views on fiscal deficit. According to John Maynard Keynes, a deficit prevents an economy from falling into recession, while another school of thought is that a country should not have fiscal deficit.

Many economists think that if the deficit is financed by raising debt from the central bank it may lead to an inflationary scenario. Higher fiscal deficit is one of the reasons for the Indian economy to have relatively higher inflation.

What is revenue deficit?
A mismatch in the expected revenue and expenditure can result in revenue deficit. Revenue deficit arises when the governments actual net receipts is lower than the projected receipts. On the contrary, if the actual receipts are higher than expected one, it is termed as revenue surplus. A revenue deficit does not mean actual loss of revenue.

Lets take an hypothetical example, if a country expects a revenue receipt of Rs 100 and expenditure worth Rs 75, it can result in net revenue of Rs 25. But the actual revenue of Rs 90 is realised and an expenditure is Rs 70. This translates into net revenue of Rs 20, which is Rs 5 lesser than the budgeted net revenue and called as revenue deficit.

What is the current scenario in India?
To revive the economy, the government has announced several stimulus packages. This has led to a hike in the fiscal deficit. The interim budget has also proposed an expenditure of Rs 953,231 crore. The Reserve Bank of India recently said that the fiscal deficit might touch 5.9% against earlier estimates of 2.5%.

This turns into a deficit of Rs 3,54,731crore from an initial expectation of Rs 1,50,310 crore. The government is expected to lose Rs 36,074 crore due to a cut in taxes.

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What is Special Economic Zone ?

The Special Economic Zone (SEZ) policy in India first came into inception on April 1, 2000. The prime objective was to enhance foreign investment and provide an internationally competitive and hassle free environment for exports. The idea was to promote exports from the country and realising the need that level playing field must be made available to the domestic enterprises and manufacturers to be competitive globally.

A legislation has been passed permitting SEZs to offer tax breaks to foreign investors. Over half a decade has passed since its inception, but the SEZ Bill has certain drawbacks due to the omission of key provisions that would have relaxed rigid labour rules. This has lessened India’s chance of emulating the success of the Chinese SEZ model, through foreign direct investment (FDI) in export-oriented manufacturing.

The policy relating to SEZs, so far contained in the foreign trade policy, was originally implemented through piecemeal and ad hoc amendments to different laws, besides executive orders. In order to avoid these pitfalls and to give a long-term and stable policy framework with minimum regulation, the SEZ Act, ’05, was enacted. The Act provides the umbrella legal framework, covering all important legal and regulatory aspects of SEZ development as well as for units operating in SEZs.

Since the rules will take care of many issues, the Special Economic Zone Act is likely to take some more time and the government is unlikely to notify them before September 1. The commerce and industry ministry is examining the domestic industry’s comments on draft SEZ rules. A meeting of development commissioners of all SEZs will be convened soon to discuss the changes that need to be incorporated before they are notified to be placed before the parliament for final approval.The objective of the SEZ Act was to create a hassle-free regime and the rules would be formulated keeping this in mind. The ministry is also holding talks with state governments as they have to play an important role in the development of SEZs.

What is a Special Economic Zone(SEZ)?
Special Economic Zone (SEZ) is a specifically delineated duty-free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs. In order words, SEZ is a geographical region that has economic laws different from a country’s typical economic laws. Usually the goal is to increase foreign investments. SEZs have been established in several countries, including China, India, Jordan, Poland, Kazakhstan, Philippines and Russia.

Where are SEZs located in India ?
At present there are eight functional SEZs located at Santa Cruz (Maharashtra), Cochin (Kerala), Kandla and Surat (Gujarat), Chennai (Tamil Nadu), Visakhapatnam (Andhra Pradesh), Falta (West Bengal) and Noida (Uttar Pradesh) in India. Further an SEZ in Indore (Madhya Pradesh) is now ready for operation.

What is the role of state governments in establishing SEZs ?
State governments will have a very important role to play in the establishment of SEZs. Representative of the state government, who is a member of the inter-ministerial committee on private SEZ, is consulted while considering the proposal. Before recommending any proposals to the ministry of commerce and industry (department of commerce), the states must satisfy themselves that they are in a position to supply basic inputs like water, electricity, etc.

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Fake Rs 50, Rs 100 notes Detection Record High in 2017-18: RBI

Speaking of the Indian economy, the annual report said that there are upside risks to inflation which requires vigilance. The detection of counterfeit notes in the Rs 50 and Rs 100 denomination witnessed a record high in 2017-18 compared with two preceding fiscals, the RBI announced on Wednesday.

According to the Reserve Bank of India’s (RBI) annual report for 2017-18, the number of fake Rs 50 notes detected shot up 154.3 per cent to 23,447 pieces, as against 9,222 notes detected in 2016-17 and 6,453 in 2015-16. The RBI said that the detection of counterfeit Rs 100 notes increased 35 per cent to 239,182 pieces during the said period, compared with 177,195 notes in 2016-17 and 221,447 in 2015-16.

However, the detection of counterfeit notes was 31.4 per cent lower in 2017-18 compared with the previous year. “Counterfeit notes in denominations of Rs 500 and Rs 1,000 detected in SBNs (specified banknotes) decreased by 59.7 and 59.6 per cent respectively, as the same comprised only the residual part of SBN deposits processed during 2017-18,” the report said. This “residual” currency refers to the high-value notes scrapped by demonetisation in November 2016. “During 2017-18, as many as 522,783 pieces of counterfeit notes were detected in the banking system, of which 63.9 per cent were detected by banks other than the Reserve Bank,” the RBI said.

Moreover, out of the total fake notes detected at the RBI, their share during 2017-18 was higher at 36.1 per cent, compared with 4.3 per cent during the previous year. This was because of processing of a large volume of SBNs withdrawn from circulation by demonetisation, the report said. Speaking of the Indian economy, the annual report said that there are upside risks to inflation which requires vigilance. Pointing out that while headline inflation is likely to face upside risks over the remaining period of the current fiscal, the RBI projected the country’s real Gross Domestic Product for the same period to grow to 7.4 per cent from 6.7 per cent in the previous year. India’s central bank also said that credit growth is likely to be supported by the progress in resolving the most pressing problem of non-performing assets, or bad loans, under the Insolvency and Bankruptcy Code, 2016.

RBI issues guidelines on loan system for delivery of bank credit


The Reserve Bank of India (RBI) on Monday, in “draft guidelines on loan system for delivery of bank credit”, said that borrowers who have a total working capital limit of Rs 150 crore and above should have at least 40% of it as working capital loans from October 1, 2018.


The Reserve Bank of India (RBI) on Monday, in “draft guidelines on loan system for delivery of bank credit”, said that borrowers who have a total working capital limit of Rs 150 crore and above should have at least 40% of it as working capital loans from October 1, 2018. It will be revised to 60% from April 1, 2019.

Banks provide working capital finance by way of cash creditor overdraft, working capital demand loan, purchase or discount of bills, bank guarantee, letter of credit, factoring, of which cash credit (CC) is by far the most popular mode of working capital financing. While CC has its benefits, RBI said, it also poses several regulatory challenges such as perpetual roll overs, transmission of liquidity management from the borrowers to banks or RBI, hampering of smooth transmission of monetary policy.

“In respect of borrowers having aggregate fund based working capital limit of Rs 150 crore and above from the banking system, a minimum level of ‘loan component’ of 40% shall be effective from October 1, 2018,” the central bank said.

The central bank said that for such borrowers, availing up to 40% of the total fund-based working capital limits will be allowed from the loan component. “Drawings in excess of the minimum loan component threshold may be allowed in the form of cash credit facility,” it said.

In its bi-monthly monetary policy in April, RBI had proposed to stipulate a minimum level of ‘loan component’ in fund based working capital finance for larger borrowers “with a view to promoting greater credit discipline among working capital borrowers”.


Prompt Corrective Action (PCA)

Bank of Maharashtra has become the sixth bank in the last one year to fall under the Reserve Bank of India’s Prompt Corrective Action (PCA). The triggering of PCA means there will be several restrictions imposed on the banks from lending to the distribution of dividends etc. These banks are Central Bank of India, IDBI Bank, UCO Bank, Dena Bank, Bank of Maharashtra and Indian Overseas Bank.

What is PCA?

PCA norms allow the regulator to place certain restrictions such as halting branch expansion and stopping dividend payment. It can even cap a bank’s lending limit to one entity or sector. Other corrective actions that can be imposed on banks include special audit, restructuring operations and activation of the recovery plan. Banks’ promoters can be asked to bring in new management, too. The RBI can also supersede the bank’s board, under PCA. The provisions of the revised PCA framework effective April 1, 2017, based on the financials of the banks for the year ended March 31, 2017. The framework will be reviewed after three years.

When is PCA invoked?

The PCA is invoked when certain risk thresholds are breached. There are three risk thresholds which are based on certain levels of asset quality, profitability, capital and the like. The third such threshold, which is maximum tolerance limit, sets net NPA at over 12 per cent and negative return on assets for four consecutive years.

More banks to follow

Clearly, the rising NPAs, lower credit offtake and falling profitability have put PSBs in a tight spot. There are half a dozen PSBs that fall under the PAC. These banks will have to very restricted lending to conserve capital, which is fast drying up because of NPA provisioning. Many will focus on fee-based income or transaction banking where capital is not required. It is not a good news as PSBs control two third of the banking in terms of advances and deposits.

Pressure on government to pump in more capital

The act of RBI invoking PAC will impact these PSBs credit rating and also affect their ability to raise capital from the market. The government has limited resources to provide capital from the budget. In the last two years, the government had allocated Rs 25 crore each and the capital for the next two year is pegged at Rs 10,000 crore each. Though finance minister Arun Jaitley has said the government will infuse more if required, there is no announcement so far. The divestment route is also not the option as the valuations of PSBs is at rock bottom.

Merger and acquisitions

Most of the PSBs that are falling under PAC are small and mid -sized banks with the exception of IDBI Bank. These banks are now a good candidate for the merger as they government is very keen on pushing consolidation amongst the PSBs. There has been resistance in the past the current NDA government looks more serious. The SBI merger with associate banks was a bold one as five banks of the size of private sector ICICI Bank were merged with the parent.

Private sector to gain market share

The current stalemate at the PSBs is offering a big opportunity for private sector to gain market share in retail as well as corporate lending. The private sector banks have a very comfortable capital adequacy ratio, which offers a big opportunity to them to lend. In fact, the market share of private banks remained at 14-15 per cent in the advances and deposits for a long time, but now many of these banks have the scale and also the products to expand in both retail and corporate lending.

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How do credit-risk funds work?

Credit-risk funds that invest in securities with lower ratings are gaining popularity among investors as there is a potential for investors to earn double-digit returns.

What are credit-risk funds ?
Credit-risk funds are debt funds which have at least 65% of their investments in less than AA-rated paper. They generate high returns by taking higher credit risk and by investing in lower-rated papers. Such companies offer higher interest rates and as and when their ratings move up, they offer a benefit of capital gains. The interest risk in these funds is low as most of them have a lower duration. These funds typically have the potential to give.

How do these funds work ?
Credit-risk funds make returns in two ways: one, they earn interest income on the securities they hold. Secondly, since they invest in lower-rated securities, if the rating of a security is upgraded, they have the potential to make capital gains.

What is the tax treatment of these funds ?
Dividends are exempt from tax, but the scheme has to pay a dividend-distribution tax of 28.84%. Returns you earn within three years of investment are subject to short-term capital gains tax. This will be as per your income-tax slab. After three years, you are eligible for longterm capital gains tax at 20% with the benefit of indexation.

How should investors choose a credit-risk fund ?
Credit-risk funds have a higher liquidity risk. If a bond with a lower rating in the portfolio defaults or faces a further downgrade, it may be difficult for the fund manager to exit this holding. Financial planners advise investors to choose large-sized funds in this category. Higher assets give the fund manager better scope to diversify and spread risks. Investors should also look at a fund with a lower expense ratio and make .

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New NPA Resolution Framework Long-Term Positive

The Reserve Bank’s revised framework for quicker and time-bound resolution of stressed assets is a long-term positive for banks, says a report. The report states that the new framework has the potential to bring about a big change in the approach of banks to monitor their exposures and resolution of non-performing assets (NPAs).

“The streamlining of the NPA resolution process affords simplicity, timeliness and credibility, and is long- term positive for the banking sector,” Krishnan Sitaraman, a senior director at Crisil, said in the report today.

The apex bank in a dramatic move on Monday had discontinued programmes for banks to restructure their defaulted loans such as corporate debt restructuring (CDR), sustainable structuring of stressed assets (S4A), strategic debt restructuring (SDR), among others, and made the Insolvency and Bankruptcy Code as the main tool to deal with defaulters. Lenders will now have to work out a resolution plan for defaults within 180 days, failing which the account would be referred to the bankruptcy courts.

The agency feels that the upshot of the strong statement of intent by RBI will be structural streamlining, standardising and harmonising of the resolution process leading to greater transparency, credibility and efficiency.

The central bank has also asked lenders to report credit information, including classification of an account as special mention account (SMA) to the Central Repository of Information on Large Credits (CRILC) on all borrowers having an aggregate exposure of Rs 5 crore and above.The lenders will have to report to CRILC, all borrower entities in default on a weekly basis, at the close of business on every Friday, or the preceding working day if Friday happens to be a holiday.

The first such weekly report shall be submitted for the week ending February 23, 2018. The central bank has also asked all lenders to put in place board-approved policies, with timeliness, for resolution of stressed assets under the new framework.

“By mandating weekly information on large delinquent accounts, by directing that a resolution plan be scripted immediately after default, and by setting stringent timelines for referring an account to the Insolvency and Bankruptcy Code process, the RBI is establishing an ecosystem where NPAs would get recognised on time and their resolutions are structurally quicker than before,” the report said.

The RBI also said under the new framework the resolution plan which may involve restructuring, change in ownership in respect of ‘large’ accounts, will require independent credit evaluation of the residual debt by credit rating agencies (CRAs) authorised by it

Independent credit evaluation of the residual debt in resolution plans, and minimum investment grade rating for any upgrade of NPAs, will improve investor and other stakeholder confidence over the long term, said Crisil.

According to the agency, in recent years, several steps such as CDR SDR, S4A were conceived to resolve the stressed assets situation but to limited success. “The RBI move has come at the right hour because the asset quality pressures are near their peak and it will improve the ability of banks to transit to the new regime,” the report said.

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Advantages of a Fixed Deposit Account

Many times you may have heard people advising you to invest your money in a FD account. So what is FD? Fixed Deposit or FD is a type of term deposit that gives you a fixed rate of interest until maturity. By investing in FDs you can save and earn money at the same time. It also offers a higher rate of interest compared to a regular savings account. Apart from this, there are other advantages of having a FD account.

KAIJS Bank – Fixed Deposit

Mentioned below are a few advantages of having a FD account:

Assured Return – If you invest your money in a fixed deposit account, you are assured a return. You will earn interest on your deposited amount, but the rate of interest depends on the tenure you have chosen. Banks in India are offering around 7% to 8% interest on Fixed Deposits at present.

Flexible Payment – FDs allow you to choose how you wish to receive interest. You can choose to be paid annually, monthly or during maturity.

Flexible Tenures – Fixed Deposits have flexible tenures. You can open a FD account for as less as 7 days. The tenure options are not the same for every bank. Also, it is not mandatory for you to have an account with a particular bank to open a FD account with it.

Helps during Emergency – During emergencies when you are in need of money, a FD can help you a lot. Many banks offer loans against Fixed Deposits. Up to 90% of the deposit can be availed as loan. Some banks allow partial withdrawals of FDs as well.

KAIJS Bank – Recurring Deposit

Risk Management – Financial instruments such as mutual funds, gold, etc., may provide high returns, but are also very risky. To adjust this market risk, it becomes important to invest in debt instruments. FDs will help you manage this risk as the returns are fixed.

Easy to Withdraw – You can withdraw the amount you have deposited in your FD account at any time. For premature withdrawals, banks may charge you a small penalty.

KAIJS Bank – Special Fixed Deposit

Saving Habit – Fixed Deposits help people in developing a habit of saving money. When you invest a certain amount in FD, that amount cannot be used until you withdraw it or maturity.

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Tips to Use Internet Banking Safely

Consumers aren’t the only ones at risk of online fraud. From recent data breaches at major retailers to increasing incidents of fraudulent emails, businesses are increasingly at risk of email and online fraud.  Many online safety precautions that apply to consumers can also protect businesses.

At the same time, it’s important for businesses to have a company-wide security plan in place to ensure employees help protect sensitive company data. Companies with dedicated IT departments work hard to protect their sensitive data and have probably taken all the necessary precautions.  If you own or manage a small business without the safety net of IT personnel, here are five best practices that will help protect your information.

1. Keep Financial Data Separate
For business users in particular, use a dedicated work station to perform all company banking activity. Use other computers to access the Internet and conduct non-banking business. When it’s time to retire the computer that was used to access company banking, be sure to back up all sensitive information  and erase the hard drive before recycling it.

2. Know Who’s Asking
As a general rule of thumb, banks don’t send emails or text messages that ask for personal information such as account and/or social security numbers.  Banks will also not require you to verify account information in this manner.  Never share any personal information, especially social security or tax ID numbers, account numbers, or login and password information via email or text. Should you need to communicate sensitive information with your bank via email, be sure to use secure mail within the bank’s secure online banking platform.
Also on the rise are emails to businesses that appear to be from suppliers. Like fraudulent banking emails, these emails may look legitimate but will ask for sensitive financial information. If you see an email asking you to provide sensitive financial information – even one that may look like it’s from your bank or supplier – call to verify before responding.

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3. Keep Your Passwords Secret
Do not share passwords and do not leave any documents that contain access to financial data in an unsecured area.  Change your passwords regularly for better protection, using a combination of letters, numbers and special characters when possible. Change your wireless network default password as well as the default SSID (name used to identify your network). Don’t broadcast your SSID and consider using encryption on your network.

4. No Phishing Allowed
Beware of phishing emails. These emails are designed to prompt you to click links provided within the email to verify or change your account in some way.  Often, the links included in the email are ways for fraudsters to install malicious software (also called Malware) onto the computer or device you use to access your email.  This Malware can be used to obtain personal information.

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5. Protect Your Computer
With cyber attacks on the rise, it’s more important than ever to install antivirus software on your computer or network. Equally important is ensuring you are regularly running and updating this software to prevent viruses from infecting your computer. In addition, installing and enabling the following software programs will help you combat malicious cyber activity:Anti-spam software: Helps prevent spam and junk email from entering your inbox, which helps guard against phishing emails

  • Anti-spam software: Helps prevent spam and junk email from entering your inbox, which helps guard against phishing emails
  • Firewall: Helps prevent unauthorized access to your computer through viruses and malware
  • Anti-spyware software: Blocks the installation of spyware on your computer, which can monitor or control your computer use and send you pop-ups or redirect you to malicious websites

Keep your computer operating system and Internet browser current; this provides additional protection against fraud and theft.

Kallapanna Awade Ichalkaranji Janata Sahakari Bank