Connect with us

Business

Keep more capital buffer for your own interest: RBI ED to banks

Agencies

Published

on

IST


Mumbai: Reserve Bank executive director Sudarshan Sen has exhorted banks to maintain higher capital levels than the regulatory mandate to see through business cycles and crises, warning those failing to have adequate buffers will get punished by the system itself. There is a need to look beyond numbers like 8 per cent of risk weighted assets or 9 per cent, he said.

“When the going gets tough, it is the banks with capital which will get going and those without it will be punished by the ecosystem,” Sen told an event organised by the Business Standard newspaper late on Thursday.

“Business cycles and financial crisis are old companions and they are here to stay,” he added. Terming the regulatory mandate on minimum capital level as the “poverty line”, he said there is a need to aspire to be well above that.

 

“We shouldn’t really be debating whether the poverty line should be 8 percent or 9 percent because that is not where we want to be,” he said.

The meaningful debate should be around what is the optimum level of capital given the ground realities in our country, including low recovery and high default rates, and not just expediency, he said.

Sen cited studies which have suggested that the minimum capital ratio should be between 9 and 53 per cent and added that banks in jurisdictions that mandate the minimum capital to be at 8 per cent actually operate at a much higher 14 per cent buffer levels.

“We need to reflect that banks which choose to operate at this poverty line of minimum capital, would be condemned to stay poor,” Sen said.

He also said that in our country, banks do not set aside any pillar-2 (tier 2) supervisory capital, and the countercyclical capital buffer is the only cushion which is helpful to absorb shocks. The central banker said studies on the supervisory capital suggest domestic banks will be needing upwards of Rs 2 trillion in capital towards this.

“It is possible in times to come that banks will be required to hold supervisory capital,” he said.

Sen said our banking system follows a standardised approach of computing the capital that needs to be set aside, which depends on external ratings rather than the system of historical losses followed in other jurisdictions and added that a shift in computation can result in a requirement of Rs 2 trillion in capital for the system.

He also said the Insolvency and Bankruptcy Code (IBC) is unlikely to greatly improve loan recovery rates and there is a need to increase bad asset provisioning to above the present 50 per cent, he said.

“Given the fact that recovery rates are so low I am not sure we are going to see any great improvement in the recovery rates if we continue in the same way as IBC has so far been” Sen said.

“I think we have to be cognisant of the fact that the level of provisions that we have for NPAs needs to be much higher than the present level of 50 per cent,” he added.

As a final suggestion, Sen also laid down what should be guiding the thinking for the bankers from here on.

“When we ponder that the worst is behind us, let us spend some time discussing some time what we need to do in terms of capital, competencies and corporate governance to be better prepared for the next crisis when it comes. And come, it will,” he said.


Comments

Business

Income Tax return processing time to reduce from 63 days to just 1 day

Agencies

Published

on

Mumbai:The Union Cabinet approved an integrated income-tax e-filing and centralised processing centre (CPC) portal, which will reduce the return processing time from 63 days to just one day. The new portal is also expected to process the refunds within one day of filing of tax returns, in huge relief for taxpayers. However, one will have to wait for 18 months to see its launch.

“Earlier, taxpayers would face troubles because of delay in refund processing and the CBDT used to spend a lot of money every year as interest on pending refunds, which will be history now,” Union minister Piyush Goyal told reporters after the Cabinet meeting here.

Last month, Central Board of Direct Taxes (CBDT) Chairman Sushil Chandra had said a simplified return form and process would be put in place soon in which the department would process the self-declaration made by the taxpayer. The new Rs 4,241-crore project will incorporate these changes.

 

“This is a laudable initiative and will go a long way to ease tax compliance, and enhanced experience for taxpayers. However, the real success of this will be measured when it brings ease to a common man and is accompanied by changes in the culture of the tax authorities at the operational level,” said Neeru Ahuja, partner, Deloitte India.

Currently, the e-filing portal and the CPC work separately. While e-filing is being managed by Tata Consultancy Services (TCS), the CPC is run by Infosys.

In the bids invited by the government, Infosys emerged as the lowest bidder and it would develop the ITR-CPC 2.0 project in 18 months from now, Goyal said.

Under the new system, Infosys will handle end-to-end solution — from e-filing to return assessment to refund processing. The CBDT and Infosys would work in a revenue-sharing model, sources in the know said.

Goyal said ramping up scrutiny was not the mandate of the new portal. Currently, about 0.3 per cent of the I-T returns are scrutinised, he said. The system intends to resolve taxpayer grievances as well as tax demands from the CBDT faster and equitably, he said.

“The decision will ensure horizontal equity by processing returns filed by all categories of taxpayers across the country in a consistent, uniform, rule driven, identity blind manner. This will assure fairness in tax treatment to every taxpayer irrespective of their status,” a government release said.

But even under the new ecosystem, only those applications which are clean would have the chance of getting processed in a day, sources said.

About 23 crore I-T returns have been processed, along with Rs 2.62 trillion worth of refunds, till September 2018 cumulatively. Of this, refunds worth Rs 1.83 trillion have been processed in 2018-19, said Goyal.

Continue Reading

Business

Lenders considering resolution plan for Jet Airways: SBI

Agencies

Published

on

Mumbai: State Bank of India (SBI) on Thursday said lenders are considering a resolution plan for Jet Airways to ensure long-term viability of the debt-laden company.

The SBI statement comes a day after the crisis-hit airline said discussions were “progressing well” with stakeholders on a comprehensive resolution plan that also contemplates equity infusion and consequent changes in its board of directors.

There are rising concerns over financial health of Jet Airways, whose shares have also taken a beating at stock exchanges.

 

“We would like to state that lenders are considering a restructuring plan under the RBI framework for resolution of stressed assets that would ensure a long-term viability of the company,” SBI said in a statement.

It said the restructuring plan for the cash-strapped airline would need approval from boards of lenders.

“Any such plan would be subject to approval of boards of the lenders and subject to adherence and clearance, if required, from the RBI and/or Sebi (takeover code, ICDR regulations.) and Ministry of Civil Aviation and in compliance with all regulatory prescriptions,” the statement said.

Shares of the airline are trading 4.24 per cent lower at Rs 259.50 apiece on BSE.

Continue Reading

Business

NGT slams Volkswagen for not depositing Rs 100 crore as per its 2018 order

Agencies

Published

on

New Delhi: The National Green Tribunal (NGT) slammed German auto major Volkswagen for not depositing Rs 100 crore in accordance with its November 16, 2018 order and directed it to submit the amount within 24 hours.

A bench headed by NGT chairperson Adarsh Kumar Goel took strong exception to the non-compliance of its order by the automobile giant and asked it to give an undertaking that it will submit the amount by 5 PM Friday.

“Why have you not complied with our order when there is no stay. We will not give you any further time,” the bench, also comprising Justice S P Wangdi, said while asking Volkswagen to submit an affidavit of compliance after deposit.

 

The tribunal deferred the matter for hearing after it was informed that the Supreme Court is also seized of the issue.

On November 16 last year, the tribunal had said that the use of ”cheat device” by Volkswagen in diesel cars in India leads to inference of environmental damage and had asked the German auto major to deposit an interim amount of Rs 100 crore with the Central Pollution Control Board (CPCB).

Continue Reading

Subscribe to The Kashmir Monitor via Email

Enter your email address to subscribe to The Kashmir Monitor and receive notifications of new stories by email.

Join 979,866 other subscribers

Archives

January 2019
M T W T F S S
« Dec    
 123456
78910111213
14151617181920
21222324252627
28293031  
Advertisement