Rupee falls further, now hits 72.35 per dollar
Continuing its slide, the Indian rupee touched another fresh low of 72.35 on Monday, weakening by 62 paise from its previous close of 71.73 per US dollar.
 
Around 10.30 a.m., the rupee traded at 72.32 per greenback. It had opened at 72.18 per dollar.
 
Along with decline in global currencies against the dollar and persistent trade tensions, a wider current account deficit of India also weighed on the rupee, analyst said.
 
India's current account deficit in April-June period stood at 2.4 per cent of gross domestic product (GDP), against 1.9 per cent of GDP in the January-March quarter of 2017-18, according to data released by the Reserve Bank of India on Friday.
 
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.

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Debt-laden IL&FS Calls Emergency Board Meeting for Raising Funds
Infrastructure Leasing & Financial Services (IL&FS), the an unlisted infrastructure behemoth with scores of complex subsidiaries, some of which are listed and a giant load of debt, has called an emergency meeting of its board of directors for raising funds. The financial services conglomerate, with around Rs1-lakh-crore public debt, is gasping for liquidity after failing to meet certain repayment obligations and triggering fears of loan recalls, says a report from Times of India.
 
"The emergency meeting is expected to convey the intensifying crisis at IL&FS to all the main shareholders and also possibly expedite a proposed Rs4,500-crore rights issue, which is scheduled for early November. On the positive side, all prominent shareholders - Life Insurance Corp of India (LIC), Orix of Japan, State Bank of India (SBI), Abu Dhabi Investment Authority and HDFC - have agreed in principle to participate in the rights issue," the report says. 
 
Other report from Business Standard says the board will take a call on fundraising, sale of assets, including road projects, and default by its subsidiary IL&FS Financial Services (IFIN) on commercial paper. 
 
Last month, IL&FS Financial Services has failed to meet its repayment obligations through a commercial paper. Due to this, Reserve Bank of India (RBI) barred the group company from raisng short-term funds through commercial paper route till 2019.
 
Ratings agencies have downgraded the debt of IL&FS Transportation Networks Ltdd and two other entities in the road sector are struggling to make payments on time. There are also reports about delayed salaries in its toll company and ILFS Environmental Infrastructure and Services Ltd. Several fund raising plans have also failed. 
 
As reported by Moneylife, IL&FS has reportedly defaulted on a short-term loan worth hundreds of crores from Small Industries Development Bank of India (SIDBI). According to our sources, IL&FS has defaulted in repaying a short-term loan of Rs1,000 crore to SIDBI. At the same time, a subsidiary of IL&FS too has defaulted in repaying loan worth about Rs500 crore to the development financial institution.
 
Defaulting on short-term loan commitment that too from an infrastructure development and finance company with pan-India presence, is very serious issue. Nothing of this sort has happened before, our source says.
 
Separately, last week, ratings agency ICRA has downgraded to 'D' from 'C' bank debt of Rapid Metrorail Gurgaon South Ltd (RMGSL) for not making interest payment for August 2018 on time. RMGSL is a special purpose vehicle (SPV) sponsored by IL&FS Rail Ltd (IRL) with 65.0% stake and IL&FS Transportation Networks Ltd (ITNL) with balance stake.
 
"The revision of RMGSL's rating takes into account the recent irregularities in debt servicing by the company. RMGSL has not paid the interest for the month of August 2018. The company's inability to generate sufficient revenues due to continued weak ridership on the project route had made it highly dependent on timely funding support from promoters. However, the promoter has not made available the required funds. As per the RMGSL's management, the company has represented to Haryana Urban Development Authority (HUDA) for claims due to breach of provisions of the Concession Agreement," ICRA has said.
 
Total cost of the project was funded by a combination of debt of Rs1,500 crore and equity. The entire term loan of Rs1,500 crore has been sanctioned by a consortium of five banks with Canara Bank as the lead bank and an external commercial borrowing (ECB) loan lender. The project achieved commercial operations on 31 March 2017.  
 
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Data Suggests Jan Dhan Accounts Were Used for Money Laundering
The government is caught in a Catch-22 situation. On the one hand, banks appear to have been the biggest laundry for unaccounted cash, with 99.3% of demonetised currency having returned to the banking system. But, on the other, it now turns out that the Pradhan Mantri Jan-Dhan Yojana (PMJDY), which is touted as a ‘boon to the poor people’ of India, was an important route for laundering this cash and depositing it in banks. Many experts had warned that this would happen, especially after the Aadhaar linkage. We now have proof.
 
The sums deposited are staggering, as revealed by Right to Information (RTI) queries by Moneylife. United Bank of India alone has admitted to a gigantic deposit of Rs93.82 crore in a single Jan Dhan account. While this was, by far, the largest deposit, several nationalised banks have also admitted to deposits running into crores of rupees in Jan Dhan accounts. 
 
The largest single deposit in Bank of India was a hefty Rs3.05 crore; Union Bank of India admitted to Rs1.21 crore; Bank of Maharashtra to Rs98.45 lakh and Dena Bank admitted to Rs94.45 lakh as the highest deposit in a single account. This information is not complete. It pertains only to those public sector banks (PSBs) that bothered to respond to RTI queries. It is another matter that one bank now claims that it has converted the Jan Dhan account into a regular one. That and other issues is the subject of another article. 
 
Moneylife also sought information on the number of accounts with deposits of over Rs1 lakh. Of the 16 banks that provided this information, only Indian Bank appears to have been fairly circumspect in accepting large deposits. It had only 198 accounts with deposits of over Rs1 lakh. United Bank of India has 1.18 million Jan Dhan accounts with deposits of over Rs1 lakh. Union Bank of India had 0.32 million, Oriental Bank of Commerce had 0.28 million, Bank of Baroda 79,240 and IDBI Bank 68,147. 
 
 
The government has been emphatic in asserting that Jan Dhan accounts were aimed at financial inclusion and to provide basic banking facilities to unbanked Indians and a small insurance cover.
 
These accounts were for the very poor Indians who have no access to the formal banking system and need to be included so that subsidies and State benefits and pensions can be credited to their accounts without being gobbled up by corrupt intermediaries. 
 
With this objective, Jan Dhan accounts were allowed to be opened with just an Aadhaar card (which is an incomplete and unauthenticated identity proof) or job card issued under MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) duly signed by a government officer, or a letter issued by a gazetted officer accompanied by an attested photograph of the applicant. 
 
The Reserve Bank of India (RBI) also allowed these accounts to be opened on the basis of a self-attested photograph and a signature or thumb print (affixed in the presence of a banker). But account-holders with no identity needed to apply for some form of identification within 12 months and this low-level KYC (know your customer) would be valid for another 12 months thereafter. 
 
The PMJDY website makes it clear that there would be specific restrictions on such accounts. They cannot have aggregate credits of over Rs1 lakh in a year, or aggregate withdrawals of over Rs10,000 in a month. Importantly, the balance in the accounts cannot be more than Rs50,000 at any point of time. This is stated on the Jan Dhan website. However, such is the confusion and lack of clarity about these accounts, that one academic has been arguing that all restrictions on such accounts have been withdrawn. More on this later. 
 
Now consider this. The bulk of Jan Dhan accounts were opened in the massive drive that started after 15 August 2014 with banks resorting to all kinds of subterfuge and trickery to fulfil the stiff targets imposed by the government for opening such accounts. 
 
Jan Dhan was declared a spectacular success and even made it to the Guinness Book of World Records for most bank accounts opened in one week. Over 325.4 million accounts have been reported on the PMJDY website, at last count. 
 
It is not that the government was unaware that Jan Dhan accounts would be misused. Problems had surfaced soon after the scheme was launched. Speaking at a bankers’ conference on 24 May 2016, RBI’s then deputy governor SS Mundra had said that Jan Dhan accounts ‘very vulnerable’ to misuse for ‘money muling’. 
 
This was nearly six months before demonetisation was announced, when there were only around 220 million Jan Dhan accounts. He cited the specific case of a labourer in Punjab in whose account Rs1 crore was deposited, which came to light only when the income-tax (I-T) authority served a notice on the account-holder. 
 
On 5th September, the Business Standard (BS) reported that over 60% of Jan Dhan deposits after demonetisation, amounting to Rs42,200 crore (Rs422 billion), were classified as ‘suspicious’. The PMJDY website reports total deposits of Rs82,039 crore into Jan Dhan accounts, as on 29 August 2018. 
 
The BS report quotes the finance secretary, Hashmukh Adhia, as saying that the Central Board of Direct Taxes has received 30 one-time reports from 187 reporting agencies and investigations were on. He also insists that these deposits will be considered illicit only after an investigation and validation by the courts. 
 
This is rather surprising because we have no way of knowing whether this covers every suspicious account. It will soon be two years since demonetisation and we don't even know if all Jan Dhan accounts with crores of rupees have been frozen or whether banks have been colluding with depositors and allowing withdrawals. Given the many cases of scams in collusion with bankers, this is a high possibility, since we have only had silence from the government. 
 
Finance minister Arun Jaitley was rather more forceful. On 6th September he tweeted: “Cash once deposited removes anonymity of its owner. Accordingly, post-demonetisation about 1.8 million (18 lakh) depositors have been identified for enquiry. Many of them are being fastened with tax and penalties. Mere deposit in a bank does not lead to a presumption that it is tax-paid money.” 
 
Mr Jaitley does not say if these are Jan Dhan accounts; also, he is only partly correct. Cash deposited in regular, KYC-compliant savings accounts is not at all anonymous; it could be a problem only in Jan Dhan accounts. A detailed inquiry may reveal that the beneficiary account-holders may be entirely fictitious or are being used as ‘money mules’. 
 
There is a clear case for marking every Jan Dhan account with a deposit of over Rs1 lakh as suspicious since they were never meant for stashing large sums of money; sadly however, if the account-holder has been victimised and used as a money mule, making the depositor responsible for proving the source of funds may only harass many innocents.  
 
Our RTI application reveals that as many as 2.08 million Jan Dhan accounts in just 18 banks (which provided data) ought to be classified as ‘highly suspicious’. The actual number will be significantly higher if all nationalised and scheduled commercial banks as well as cooperative banks are included. Are these separate from the 1.8 million accounts that the finance minister has referred to?
 
Curiously enough, the government is not in a hurry to go after these deposits. After all, India’s political machine is greased by cash and over 69% of political funding comes from unknown sources (says the Association of Democratic Reforms). This government has only made the process less transparent with its electoral bonds. Further, one academic who works in the banking sector has been sending us long emails that are very agitated at the suggestion that there are restrictions on withdrawal from Jan Dhan accounts with full KYC. This adds another shady dimension to the whole business, since we have no idea whether all "suspicious" accounts have been detected and frozen or a few thousand or more have had the deposits transferred and withdrawn as clean, white money. 
 
Two years is a very long time for the tax department not to show results, especially when general elections are less than a year away. What will happen with a new government at the Centre is anybody’s guess. 
 
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COMMENTS

SuchindranathAiyerS

2 weeks ago

There was a frenzy of Black Money hoarders transferring cash to their servants' and poor relatives Jan Dhan accounts. The BJP's policies and implementation are noteworthy for their complete IAS and Lawyer worthy disregard of reality;

Meenal Mamdani

2 weeks ago

It is sad to see the collusion of govt / bank officials and holders of black money in this demonetization exercise.
All the various ways that the demonetization exercise was gamed were so obvious to even an ordinary person on the street. It is hard to believe that well informed bureaucrats and seasoned politicians were not able to anticipate these methods and create appropriate mechanisms to detect and prevent these scams.
The sad reality in India is that the people have been swindled by almost all political parties so the only recourse available to them is to kick out the scoundrels every five years hoping that the incoming scoundrel will be a little more careful this time and not indulge in brazen theft.

Shankar Pachari

2 weeks ago

The best response is from Bank of Baroda. "No such data is maintained". Ignorance is bliss.

ksrao

2 weeks ago

All bank officials who allowed the balance in any Jan Dhan account to exceed Rs.50,000 should be punished. The massive return of black money to banks and their conversion into white money could not have taken place without the collusion of bank officials, who also must have made lot of money for themselves. Since the present demonetization has been just a tamasha, now Rs.2000 notes should be banned and the mistakes made in the past should not be allowed to be perpetrated in the new note ban exercise. Money supply should be flooded with small notes only, which are not very profitable for counterfeiters to fake and for black money creators to carry.

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