Money & Banking
Election Commission allows RBI to issue new bank licenses

Affirming the stand taken by RBI governor, the EC allowed the central bank to take appropriate action on issuing new bank licenses

The Election Commission (EC) has allowed Reserve Bank of India (RBI) to take action on new banking license as 'appropriate'. "RBI can go ahead with in- principle nod for banking licences," the EC said.


Earlier in the day, affirming that the grant of new bank licences is a regulatory process and not political, RBI governor Raghuram Rajan had said the central bank sought the EC's nod only to shield the announcement from any political controversy.


"This (giving bank licences) is not in any way a political process. It is an economic and regulatory process and therefore seen as distant and different...We have to undertake what we have to undertake," he said in response to objections raised by the BJP with regard to awarding bank licences when the election process is on.


"I think one should respect all the (political) opinions that are expressed," he added.


The process to award new bank licences was initiated in 2011 and it has spilled over to the election season because the due diligence process took a little longer, he said, adding, "All regulatory processes have to come to an end."


He said "this process has been taking place under its own steam. It is a regulatory process. It is not a governmental process and the notion of asking the EC was primarily because this is election season and we did not want the potential licensees to get their approvals under a cloud."


The EC is yet to decide on RBI's request to grant new licences during the election season. There are 25 applicants in the fray for new bank licences.


The model code of conduct came into force on 5th March with the announcement of the Lok Sabha election schedule. Voting will be held over nine days starting on 7th April and ending on 12th May with counting on 16th May.


"Once they (EC) say there is no issue there, they (RBI) would be in a position to announce the bank licences very quickly after taking it to the committee of the central board," he said.


On the issue of differentiated bank licences as well as on-tap licences, Rajan said, "The point is we should not be giving licences every 10 years and I also think that there is scope for having people with partial licences, for example, only for payments, lending, to come into the system.


FinMin says no to raise I-T exemption limit to Rs3 lakh

While reducing the tax exemption age for senior citizens to 60 years, the finance ministry rejected Parliamentary Committee’s proposal to raise income tax exemption limit to Rs3 lakh

The Finance Ministry has rejected a Parliamentary Standing Committee’s recommendation to raise the income-tax (I-T) exemption limit to Rs3 lakh and to adjust other slabs. It has however decided to reduce the age for tax exemption for senior citizens to 60 years from 65 years.


As per the current structure, there is no tax on income of up to Rs2 lakh per annum; 10% on Rs2-5 lakh; 20% on Rs5-10 lakh and 30% on income beyond Rs10 lakh.


The Ministry on Tuesday released a revised and comprehensive draft direct taxes code (DTC) 2013 for comments. “The recommendation (to increase the exemption limit) is not acceptable as it will result in huge revenue loss. The total revenue loss on account of recommended changes in personal I-T slabs and removal of cess works out to about Rs60,000 crore,” the proposed DTC 2013 said.


The revised version of the DTC is aimed at widening tax net, removing ambiguities and plugging loopholes in the current tax laws to check tax evasion.


In the draft, 153 out of 190 recommendations made by the Standing Committee of Finance are accepted. This includes, relaxing the age for senior citizens to 60 years from 65 years and setting up tax rate of 35% for individual, Hindu undivided family (HUF) with an income over Rs10 crore.


“With a view to maintaining overall progressivity in levy of income tax, the revised Code provides for a fourth slab for individuals, HUFs and artificial judicial persons. In their case if the total income exceeds Rs10 crore, it is proposed to be taxed at the rate of 35%,” the ministry added.


The draft DTC also proposes to levy an additional 10% tax on dividend income exceeding Rs1 crore.


The earlier version of the DTC had said a company was liable to be taxed in India only if 50% of its assets were located in the country. However, according to the new draft, a company would be liable to be taxed in India if it has 20% of its total assets located in the country.



Dr VS Gogia

3 years ago

A basic exemption limit and slabs may be debated and agreed on only once and then linked to inflation index so that govt has another worry to contain inflation to manageable levels. It will further reduce politicking every year on demands/rejection for exemption and slab changes.

Ramesh Poapt

3 years ago

Considering high inflation,proposed subsidy free regime, the limit to be 3 lacs.

Banks should allow prepayment of floating rate loans without penalty

The Reserve Bank of India has said that banks should consider the possibility of allowing them to pre-pay floating rate term loans without any penalty

The Reserve Bank of India, in its first bi-monthly policy had said that banks should allow customers to prepay floating rate term loans without any penalty. Similarly, the central bank has asked bank not to levy penalty charges on non-maintenance of minimum balance in savings account.


"In the interest of their consumers, banks should consider allowing their borrowers the possibility of prepaying floating rate term loans without any penalty. Banks should also not take undue advantage of customer difficulty or inattention," RBI said in the policy statement.


According Dr Raghuram Rajan, governor of RBI, the central bank is envisaging a number of measures to protect consumers. “For example, banks should not levy penal charges for non-maintenance of minimum balance in ordinary savings bank account and inoperative accounts, but instead curtail the services accorded those accounts until the balance is restored," he said.


Instead of levying penal charges for non-maintenance of minimum balance in ordinary savings bank accounts, banks should limit the services available on such accounts to those available to basic savings bank deposit accounts and restore the services when the balances improve to the minimum required level, RBI said.


Further, banks should limit the liability of customers in electronic banking transactions in case where they are not able to prove customer negligence.



Khaja Mohiuddin

3 years ago

The suggestions made by Banks not to levy penalty for premature closing of floating rate loans(housing loans) will make borrowers to pay early and liquidate the loan.

The second suggestion that levy penalty to savings bank accounts for non maintenance of minimum balance to abolished instead services rendered to be curbed, is good suggestion.

All Banks to examine the above suggestions to improve the customer service and encourage borrowers for timely/early liquidating of loans. Small savings depositors will be encouraged for better banking and the penalty every month will eat away the small balance held, depriving the small savings depositors to lack for having an account.

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