Money & Banking
Bankruptcy code coming for finance sector, IDBI Bank to privatise
New Delhi : Declaring financial sector reforms as being one of the "nine pillars" of Budget 2016-17, Finance Minister Arun Jaitley on Monday said a comprehensive bankruptcy code will be enacted and legislation brought in to deal with illicit deposit taking schemes.
 
"A systemic vacuum exists with regard to bankruptcy situations in financial firms. A comprehensive Code on Resolution of Financial Firms will be introduced as a bill in parliament during 2016-17," Jaitley said while presenting next fiscal's budget in parliament.
 
"This Code will provide a specialised resolution mechanism to deal with bankruptcy situations in banks, insurance companies and financial sector entities. This Code, together with the Insolvency and Bankruptcy Code 2015, when enacted, will provide a comprehensive resolution mechanism for our economy," he added. 
 
The Insolvency and Bankruptcy Bill, 2015, proposes to enact a single bankruptcy code and set deadlines for processing insolvency cases.
 
The proposed law aims to reduce delays in resolution of insolvency cases and improve recoveries of amount lent to companies. The draft bill has proposed a timeline of 180 days, extendable by another 90 days, to resolve cases of bankruptcy.
 
A major proposal in the budget to tackle the problem of stressed assets in the banking sector concerns the Asset Reconstruction Companies (ARCs).
 
Jaitley on Friday proposed "to make necessary amendments in the SARFAESI Act 2002, to enable the sponsor of an ARC to hold up to 10 percent stake in the ARC and permit non-instituional investors to invest in Securitsation Receipts." 
 
Besides, announcing that the Reserve Bank of India (RBI) would facilitate retail participation in government securities, he also said state-run general insurance companies would now be listed in the stock exchanges.
 
Continuing government efforts to deal with the high levels of non-performing assets (NPAs), or bad debts, of state-run banks, Jaitley also allocated Rs.25,000 crore towards their recapitalisation in the next fiscal.
 
Jaitley plans to provide Rs.25,000 crore capital each in the current and next fiscal years, while Rs.20,000 crore would be provided during 2017-18 and 2018-19. 
 
In July last, the government had presented to parliament a supplementary demand for grants to provide for Rs.12,000 crore towards recapitalisation of public sector banks (PSBs).
 
The Rs.25,000 crore this year is being provided through three tranches.
 
The finance minister also announced that the government proposes reduction of its equity in IDBI Bank to below 50 percent.
 
"The process of transformation of IDBI Bank has already started. Government will take it forward and also consider the option of reducing its stake to below 50 percent," Jaitley told parliament.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

User

COMMENTS

Meenal Mamdani

1 year ago

High time that the govt is reducing its stake in IDBI.

Now watch how the bank removed from interference of pols, reduces its NPA and bounces to health.

Cars, cigarettes to become dearer, pension plans cheaper
New Delhi : Finance Minister Arun Jaitley on Monday in his budget proposal made a few products and services cheaper while others have become more expensive for the common people.
 
Things which will become dearer:
 
** Various tobacco products other than beedi by about 10 to 15 percent 
 
** Luxury cars above Rs.10 lakh
 
** Jewellery articles, excluding silver jewellery, other than studded with diamonds and some other precious stones
 
** Imported imitation jewellery
 
** Gold bars (countervailing and excise duties increased to 8.75 and 9.5 percent respectively from 8 and 9 percent respectively)
 
** Branded readymade garments and made up textile articles with a retail sale price of Rs.1,000 and above
 
** Bill payments and eating out (due to additional levy of Krishi Kalyan cess on all services)
 
** Air travel 
 
** Ropeway, cable car rides
 
** Lottery tickets
 
** Legal services
 
** Electronic reading devices
 
** Goods and services above Rs.2 lakh in cash
 
Things which will become cheaper:
 
** Service Tax on service of life insurance business provided by way of annuity under the National Pension System 
 
** Service Tax on low cost houses up to a carpet area of 60 square metres in a housing project of a government scheme 
 
** Braille paper
 
** Solar lamps
 
** Router, broadband modems
 
** Digital video recorders
 
** Set top boxes, CCTV cameras
 
** Microwave ovens
 
** Sanitary pads
 
** Footwear
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

User

Will RBI cut rates soon?
Given the government's commitment to fiscal consolidation, Nomura believes that the RBI will perceive the budget as a positive event and may go for a 25bp repo rate cut in April with a greater chance of an inter-meeting cut  
 
In the union budget presented on Monday, the Indian government chose macro stability over growth, delivering a positive surprise by sticking to its fiscal consolidation roadmap, says Nomura in a report.
 
"Overall, the budget is a positive surprise, relative to our expectations. The commitment to adhere to the stated fiscal deficit targets suggests that the government has chosen to prioritise macro stability over growth. Given the government's commitment to fiscal consolidation, we believe that the Reserve Bank of India (RBI) will perceive the budget as a positive event. Hence, we continue to expect a 25 basis points (bps) repo rate cut in April with a greater chance of an inter-meeting cut," the report said.
 
According to Nomura, much of the funding is coming via asset sales like disinvestment, strategic stake sales, and telecom spectrum where market conditions and balance sheet capacity (telecom) will play a key role, but lower tax assumptions suggest that the overall revenue collections are achievable. However, it said, expenditure on account of the seventh pay commission seems to have been under-budgeted, which could lead to higher spending later.
 
Here are Nomura's key takeaways from the Budget:
  1. Credibility of the fiscal arithmetic: We think the fiscal assumptions are optimistic on asset sales, but conservative on tax projections. Disinvestments and strategic sales are pegged at Rs565 billion (versus Rs253 billion in FY16), while revenue from the telecom spectrum (under the communication category, which includes past arrears and fresh auction receipts) has been budgeted at Rs990 billion (versus Rs574 billion in FY16). We view these as optimistic. However, gross tax revenues have been budgeted to rise only 11.7% in FY17 versus 17.2% in FY16, which could be higher. On nominal GDP, the budget has assumed 11% growth in FY17 versus 8.6% in FY16, which we think is reasonable. In our view, the revenue target is achievable, on an overall basis, with some overshoot on taxes and some undershoot on non-tax revenues and asset sales. 
  2. Accounting for pay commission and OROP: The total outlay on account of the pay commission and the "one rank one pension" scheme is estimated at Rs1.1 trillion. At first glance, the budget seems to have under-budgeted for this, which suggests a staggered implementation of the pay commission's recommendations or greater outlay at a later stage.
  3. Quality of spend suffers: The quality of spending has deteriorated given the higher wages and pensions bill and elevated subsidies. Revenue expenditure (running expenses of the government) is budgeted to rise 11.8%, up from 5.5% growth in FY16, while capital expenditure growth is budgeted to slow to 3.9% y-o-y from 20.9% in FY16, which suggests less budgetary support for capital expenditure and greater reliance on off-budgetary sources. 
  4. Key expenditure announcements: There were no major steps to rationalise subsidies in the near term, except a plan to move to direct cash transfer to curtail leakages. Subsidies remain elevated at Rs2.5 trillion in FY17 (1.7% of GDP), compared with Rs2.6 trillion in FY16 (1.9% of GDP). The budget also announced no increase in public sector bank recapitalisation, which has been left unchanged at Rs250 billion in FY17, lower than expected (Nomura: Rs350 billion). 
  5. Gross borrowings: Gross market borrowings are slated to rise to Rs6.0 trillion in FY17 from Rs5.85 trillion in FY16, while net market borrowings are pegged at Rs4.25 trillion, up from Rs4.0 trillion in FY16, lower than expected.
  6. Key focus areas:  On the reform side, key focus areas were
    (1) agriculture (irrigation, e-platform for unifying wholesale markets, crop insurance);
    (2) rural infrastructure and employment (rural roads, R-URBAN clusters, rural electrification, subsidised cooking gas to households below the poverty line, higher allocation for rural employment scheme);
    (3) health (Rs1 lakh health cover per family);
    (4) education and skill creation (Higher Education Financing Agency);
    (5) infrastructure (higher allocation to roads, modernisation of ports and airports); and
    (6) financial sector reforms (bankruptcy bill, RBI Act amendment to set up a monetary policy committee, amendments to the SEBI Act to introduce new products in commodity markets).
  7. Key tax changes:
    (1) new tax amnesty scheme to improve tax compliance (45% tax on declaring undisclosed income);
    (2) lowering the corporate tax rate from 30% currently to 29% for small companies and 25% for new manufacturing companies;
    (3) GAAR implementation from 1 April 2017;
    (4) long-term capital gains on unlisted companies reduced to two years; and
    (5) infra cess on car sales.

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)