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Banking and Financial Awareness Digest: July 2022

Published on Friday, August 05, 2022
Banking and Financial Awareness Digest: July 2022

Traders to gain in GST relief for E-Commerce sellers, Transport

  • Goods and Services Tax Council has lowered the GST to 5% from 18% on ropeways, renting of goods carriage, including fuel cost, and even exempted the foreign component of the tour package from GST and also given relief to the transport sector and small online sellers by waiving mandatory registration norms for small businesses.
  • Changes in the law will come into force on January 1, 2023. The move will benefit approximately 120,000 small traders.
  • Apart from that it also allowed composition dealers to undertake intra-state supplies via e-commerce operators.
  • Composition dealers are those with a turnover of up to Rs 1.5 crore. They are required to pay GST at flat rates with an input tax credit.
  • They have also given an exemption from registration for supply of goods and/or services up to Rs 40 lakh or Rs 20 lakh, who operate offline.
  • In fact, to reduce the burden on taxpayers, the council has waived requirements for filing refund claims by condoning the two-year period between March 1, 2020, and February 28, 2022.

Outlook for global credit conditions in 2022 is Negative: Moody

  • Credit rating agency Moody’s Investors Service reported that the outlook for global credit conditions this year has turned more negative.
  • The main reasons behind it were slower global growth, rising borrowing costs, surging prices for energy and commodities, and increased financial market volatility.
  • It is believed that the increase in energy and food costs happened due to the invasion of Ukraine.
  • Apart from that, it has weakened the purchasing power of households, rising input costs for companies.
  • Besides, the borrowing costs of many countries govt increased among which many countries' economies still have not fully recovered from the pandemic crisis.
  • To tackle it, Central banks start to raise interest rates in response to high inflation.

SEBI comes out with a new format for Disclosure of Shareholding Patterns

  • SEBI developed a new format for disclosing the shareholding pattern of the public shareholders to bring clarity and transparency in the disclosure of shareholding patterns to investors.
  • As per new rules, all listed entities will have to disclose details related to foreign ownership limits in the prescribed format.
  • Besides, the names of the shareholders holding 1% or above of shares of the listed entity are to be disclosed.
  • A new pattern has been designed for disclosing non-promoter non-public shareholders.
  • Apart from that, SEBI has added a new column for the sub-categorization of shares.
  • These subcategory includes shareholders who are represented by a nominee director, secondly who have entered into a shareholder agreement with the listed entity, and thirdly persons in concert with the promoter.

Credit growth to industry accelerates to 8.7%

  • Credit Growth to industry grew 8.7% in May, compared to 7.1% earlier, as per RBI data.
  • Credit growth to medium industries grew 49.3% in May compared to 47.9% earlier.
  • The credit growth to micro and small industries has shown a drastic increase to 33% from 8.9% earlier.
  • The main reason behind it was a rise in economic activity, higher working capital limits due to rising input costs, and borrowing has also increased.
  • Apart from that, it has seen dramatic growth in agriculture and allied activities at 11.8% in May 2022.
  • As per RBI, an uptrend has been seen in retail loans which grew by 16.4%, especially in the housing and vehicle loans segments.

Gross NPAs could hit 9.5% in case of Severe Stress

  • As per the bi-annual report of RBI, gross non-performing assets (NPAs) may climb to 9.5% by March 2023 from 5.9% in March 2022.
  • As per the report banks would be able to comply with minimum capital adequacy norms even in a severe stress scenario.
  • It has been estimated that non-banking financial companies, may be vulnerable to liquidity shocks.
  • Public sector banks (PSBs), private sector banks (PVBs), and non-banking finance companies (NBFCs), credit increased to 29.9% of credit-active consumers as of September-end 2021.
  • Scheduled Commercial Banks’ slippage ratio rose to 3.6%.
  • The major risks were commodity prices, domestic inflation, equity price volatility, asset quality deterioration, and credit growth.

CRISIL Cuts FY23 GDP growth estimate

  • Credit rating agency Crisil lowered India's actual GDP growth forecast to 7.3% in FY23 from 7.8% earlier.
  • They have lowered GDP by seeing downward revision to higher oil prices, slowing export demand, and high inflation.
  • Apart from that it also included high commodity prices, elevated freight prices, and the largest demand-side driver of private consumption.
  • Besides, inflation was pegged at 6.8% in FY23 compared to 5.5% in FY22, Which results in reduced purchasing power.
  • As per the report, the main factors for such a broad-based rise in Inflation are an increase in domestic food production, high international commodity prices, and input costs.
  • This will also create an impact on the currency, and the rupee is also recorded as very low at 79 against the US dollar.

Big Tech firms offering Financial Services pose risk to Stability

  • Big tech companies offering financial services pose a risk to financial stability due to undisturbed operational linkages as per the RBI report.
  • Due to increased disintermediation, big tech can scale up rapidly and pose risk to financial stability.
  • As per the 25th Financial Stability Report (FSR) of RBI, it requires more engagement of stakeholders such as regulators, the FinTech industry, and academia to work toward common principles for the management of FinTech activities.
  • The global FinTech market size was valued at USD 111 billion in 2020 and is projected to reach USD 698 billion by 2030.
  • Besides, FinTech can promote financial inclusion, broaden the offering of financial products and services, and increase efficiency for the delivery of financial services.
  • If we talk about the Indian FinTech industry it is among the fastest-growing in the world and is projected to reach USD 150 billion by 2025.

Govt revamps Banks Board into Financial Services Institutions Bureau

  • The government has transformed Banks Board Bureau (BBB), into Financial Services Institutions Bureau (FSIB) by making some amendments.
  • Besides, general managers and directors of public sector general insurance companies have been made part of FSIB.
  • The decision of amendments was taken as the BBB is not a competent body to select the general managers and directors of state-owned general insurers.
  • The amendment has been done to Nationalized Banks (Management and Miscellaneous Provisions) Scheme of 1970 with the approval of the Finance Minister.
  • The Appointments cabinet committee has also approved the appointment of Bhanu Pratap Sharma, as the initial chairperson of FSlB for two years.
  • Earlier in 2016 PM approved the constitution of BBB which makes recommendations for appointing whole-time directors as well as non-executive chairpersons of public sector banks (PSBs) and state-owned financial institutions.

RBI Pegs state govt market borrowing for July-Sept at Rs 2.1 trillion

  • As per RBI data borrowing by state governments in July-September has been pegged at Rs 2.12 trillion rupees.
  • Apart from that state governments also did a market borrowing worth Rs 1.90 trillion in April-June.
  • State governments increase their borrowing in the second half of the year as the Centre tends to borrow less during that period.
  • RBI to ensure that the state bond auctions are conducted in a non-disruptive manner taking into account market conditions.
  • Apart from that, the Centre announced a record-high gross market borrowing program of Rs 14.95 trillion.
  • The central bank will also aim for the state government borrowings to be distributed evenly throughout the quarter.

Public Sector banks shut down 2,044 branches in FY22

  • Indian government-owned banks saw a reduction of 2,044 branches and about 13,000 employees in 2022 compared to earlier.
  • As per the report, the number of branches of private banks went up by 4,023 to 34,342 branches in 2022 as compared to 2021.
  • Besides Public sector banks reduced to 86,221 in FY22.
  • The Net Profits of the government banks in FY22 went up to Rs 689.79 billion, compared to Rs 331.77 billion in FY21.
  • Public Sector banks in FY21, had faced many challenges relating to non-performing assets, subsequent rationalization of branches, and staff retirements.
  • All India Bank Employees Association is a unique trade union organization in the comity of trade unions in the financial sector in particular and middle-class organizations in general.
This digest is not complete. Read the complete digest on the Financial Awareness Course. 
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