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Wednesday,27-January-2021

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PM Narendra Modi to discuss economic roadmap with banks, NBFCs on Wednesday

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New Delhi: Prime Minister Narendra Modi addresses the nation, in New Delhi on June 30, 2020. (Photo: IANS)

Prime Minister Narendra Modi on Wednesday will discuss and deliberate the economic vision and roadmap for the future, in a brainstorming session with stakeholders from banks and non-banking financial companies (NBFCs).

The topics on the agenda include credit products and efficient models for delivery, financial empowerment through technology, and prudential practices for stability and sustainability of the financial sector, the Prime Minister’s Office said on Tuesday.

The session comes in view of banking sector’s role in contributing to India’s economic growth through financing infrastructure, agriculture, and local manufacturing, including Micro, Small and Medium Enterprises (MSMEs).

As per the PMO, financial inclusion can play a big role in financial empowerment through technology.

Senior officers from the government will also be a part of the interaction that will most likely be held through video conferencing in view of the novel coronavirus pandemic which has badly hit the country, due to the over 68-day nationwide lockdown.

On May 12, Modi announced a Rs 20 lakh crore economic package, equivalent to 10 per cent of India’s gross domestic product or Gross Domestic Product (GDP) to boost the economy.

The Central government has also pushed several key reforms in the “factor markets”, which roughly denote five economic determinants: land, labour, capital, technology and infrastructure.

The Prime Minister’s meeting with banks and NBFCs assumes significance in efforts to boost the economy which was already tumbling before Covid-19 struck on January 30. The GDP grew just 4.71 per cent in the October-December 2019 period, the slowest pace in six years.

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Cryptocurrency industry hopeful as RBI mulls over digital currency

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Bitcoin

With the Reserve Bank of India (RBI) now saying that it is exploring the need for a digital version of fiat currency, cryptocurrency stakeholders have called the move a step in the right direction towards strengthening the fintech ecosystem in the country.

The RBI made the remarks in a booklet titled “Payment and Settlement Systems in India” released this week.

“Private digital currencies (PDCs) / virtual currencies (VCs) / crypto currencies (CCs) have gained popularity in recent years. In India, the regulators and governments have been sceptical about these currencies and are apprehensive about the associated risks,” said the booklet.

“Nevertheless, the RBI is exploring the possibility as to whether there is a need for a digital version of fiat currency and in case there is, then how to operationalise it,” it added.

The cryptocurrency industry in India has welcomed the move.

“The fact that the RBI is mulling over introducing a central bank digital currency (CBDC) in the country is a step in the right direction,” Sumit Gupta, CEO and Co-Founder, CoinDCX, a cryptocurrency exchange, told IANS.

“Such moves will help India be on par with the emerging markets and be a key player in the fintech ecosystem. As we are witnessing an increase in the adoption of cryptocurrencies globally, many countries are considering issuing their own version of digital currency,” he added.

The apparent softening in RBI’s stand on cryptocurrency came after the Supreme Court last year set aside a circular issued by the RBI that barred any entity from providing banking services to anyone dealing with virtual or cryptocurrencies.

The RBI in its booklet on payment systems noted that central banks around the world are examining whether they could leverage on technology and issue fiat money in digital form.

The value of all cryptocurrencies earlier this year surpassed the $1 trillion mark and Bitcoin crossed the $40,000 mark before reaching $30,846.79 on Wednesday.

Cryptocurrency stakeholders are also expecting some clarifications in the forthcoming Union Budget.

“Just like any other financial markets that have matured in India owing to regulations, cryptocurrency investors have similar expectations from the government from this budget that will help this new financial market move towards certainty,” said Bitex Founder and CEO, Monark Modi.

“India has seen phenomenal growth in cryptocurrency trading volumes as well as the size of the community participating in this alternate investment class. But due to lack of clarity and in the absence of regulations, banks are still hesitant in providing services to the exchanges and have been blocking transactions related to cryptocurrencies, which is impacting the investors,” he added.

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Axis Bank’s Q3FY21 net profit falls 36%

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Axis-Bank

Lending major Axis Bank’s net profit for the third quarter of 2020-21 fell 36 per cent due to higher provisioning.

Accordingly, the bank’s net profit fell to Rs 1,116.6 crore from Rs 1,757 crore reported during the corresponding period of the previous fiscal.

The bank said profit after tax for the quarter was adversely impacted to the extent of Rs 1,050 crore on account of prudent expenses and provisioning charges.

However, the banking major’s net interest income grew by 14 per cent to Rs 7,373 crore from Rs 6,453 crore reported during the like period of the previous fiscal.

“Net interest margin (NIM) for Q3FY21 was 3.59 per cent as against 3.57 per cent for Q3FY20,” the bank said in a statement.

As per the statement, specific loan loss provisions for Q3FY21 were Rs 1,053 crore, compared to Rs 2,962 crore in Q3 last year.

“The bank has made provisions on “90+ DPD” accounts not classified as NPA pursuant to the Supreme Court judgment, at rates that would have applied to these accounts per extant provisioning rules for NPA in the banks, amounting to Rs 3,899 crore during the quarter.”

“The bank holds cumulative provisions of Rs 11,856 crore at the end of Q3FY21. It is pertinent to note that this is over and above the NPA provisioning included in our PCR calculations.”

Notably, these cumulative provisions translate to a standard asset coverage of 2.08 per cent as on December 31, 2020.

“As on 31st December 2020, the bank’s reported Gross NPA and Net NPA levels were 3.44 per cent and 0.74 per cent respectively as against 4.18 per cent and 0.98 per cent as on 30th September 2020.”

“Absent the standstill to asset classification post August 31, 2020 pursuant to the Supreme Court judgment, the bank would have been required to report GNPA per RBI’s extant IRAC norms for asset classification.”

Accordingly, the GNPA ratio as per said IRAC norms as on Dec 31 would have been 4.55 per cent and Net NPA ratio would have been 1.19 per cent.

“This reflects decline of 45 bps and 90 bps respectively on a YoY basis and an increase of 27 bps and 16 bps on GNPA and NNPA respectively on a sequential basis.”

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Government should eye better collections than raising taxes for funds: Survey

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Tax. (IANS Infographics)

A fund-starved government will be better off looking at increased collections fuelled by an economic recovery and improved technology driven enforcement rather than through the introduction of new taxes, a KPMG survey showed on Wednesday.

According to the pre-budget survey 2021-22, only 2 per cent of the respondents feel that raising taxes would be the solution to mobilise additional revenue for the government that sees an increase in its expenditure due to the pandemic.

A majority (20 per cent) held that the Government’s revenue needs can be met through increased collections fuelled by an economic recovery as well as improved technology driven enforcement (49 per cent).

The KPMG survey conducted in January 2021 has tried to capture the expectations of all important stakeholders on various tax aspects of the budget. In all, 250 respondents across sectors participated in the survey.

Despite the expectation that government may not raise taxes, the survey has brought out that a smaller number of respondents (29 per cent) expect that a new Covid-19 cess may be imposed in the Budget.

When it came to some of the measures the government could adopt to provide relief to the salaried class, some respondents (74 per cent) felt that an enhancement in the standard deduction on salary income from the existing Rs 50,000 should be considered.

As to what the government could do more to help resolve disputes, a whopping (77 per cent) of respondents felt that a mediation scheme should be introduced in the Budget to enable negotiated settlements of tax disputes.

AS many as 38 per cent respondents felt that the Advanced Pricing Agreement (APA) programme had been effective in pre-empting/resolving key transfer pricing controversies. About 40 per cent respondents felt that the introduction of the General Anti-Avoidance Rules (GAAR) and the implementation of the Multilateral Instrument (MLI) could lead to increase in tax disputes.

Given the financial impact of the pandemic, a majority of respondents (47 per cent) expect an increase in the deduction with respect to provisions made towards Non-Performing Assets (NPA) by banks and NBFCs. This would provide much needed relief to the banks and NBFCs, who are bracing for increased delinquencies, on account of the pandemic.

A toral of 43 per cent respondents felt that a specific carve out for unlisted shares and securities from tax collected at source (TCS) was also warranted.

Asked if respondents felt that the Goods and Services Tax (GST) regime was getting simplified over the last three years, the response was divided. While 45.97 per cent believed that it was simplified, 41.71 believed otherwise. This could be due to multiple reasons such as various notifications, circulars being issued on a regular basis, number of increased compliances for multiple registrations, stringent provisions for credits availment which, in turn, leads to additional costs and time investments in the business.

Nearly two-thirds respondents (62 per cent) were comfortable with the digital compliance system introduced for GST. A large percentage of respondents (64 per cent) believe that CBIC should introduce customs assisted assessment for Micro, Small and Medium Enterprises (MSMEs)

Lastly, in line with the need to provide a level playing field to provide a level playing fields for Indian companies to access overseas capital markets and facilitate a better valuation for equity shares, 70 per cent respondents said that the government should announce provisions to facilitate a regime for direct overseas listing of Indian companies.

Commenting on the findings of the survey, Sunil Badala, Partner and Head, Financial Services- Tax, KPMG in India, said: “Our Pre-Budget Survey indicates that relief for the salaried class by way of an enhancement in the standard deduction on salary income from existing limit of Rs 50,000 is highly awaited. Corporates are also hopeful that dispute resolution will continue to be a priority for the Government; and that negotiated settlements of tax disputes will be enabled. Overall, we notice that the respondents do not expect introduction of any new taxes including Covid-19 cess.”

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