Against RBI's Demand, Government Mulls Seperate Regulator For E-Payments

New Delhi: With digital transactions gaining traction, the government is mulling setting up of a separate regulator for enabling electronic payment system in the country as well as regulate transaction charges. While the Ratan Watal committee on digital payments suggested that the government makes regulation of payments independent from the function of central banking, sources said the RBI is not very keen on giving up the regulation on Payment systems.

Official sources said that RBI, as a banking regulator, frames policies to benefit banks and not enforcement of competition and innovation objectives in conduct of firms in the payment industry.

"So far, regulations are becoming bank focused. If there is a separate regulator, the focus would be on ease of transaction and rationalisation of cost. Hence, there is a case for setting up of an authority for enabling electronic payment system in India," an official source told PTI.

The Reserve Bank, in its representation before the Watal Committee, has stated that regulation of payments should be with the central bank because regulating money supply is an integral function of a central bank and includes maintaining the confidence in money as a means of exchange. Explaining the need for a separate regulator, the source said that electronic payment does not entail exchange of physical cash and it does not involve deposit taking or credit offtake or servicing of loans/deposits.

"Payments can happen without banking. Payment regulation is different from banking regulation. RBI is not agreeing to it," the source said, adding the proposed regulator should have majority of its membership from businesses having direct familiarity with the payment process, or allied businesses.

The Watal Committee, which submitted its report to Finance Minister Arun Jaitley last month, weighed two options on how best regulation of electronic payments can be made independent from the function of central banking. The committee considered creation of a new payments regulator, or making the current Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) within RBI more independent.

Sources said that RBI, as a regulator, is focusing more on the interest of banks rather than creation of a financial ecosystem and even after coming up with consultation paper on fixing MDR charges in March 2016, it has not been able to fix the charges.

Panel To Relax 2017-18 Fiscal Deficit Target To 3-3.5%: Report

New Delhi: The government has barred cooperative banks from accepting deposits under the new tax amnesty scheme - Pradhan Mantri Garib Kalyan Yojana (PMGKY), a move that comes amidst the Income Tax Department uncovering anomalies post-demonetisation.After junking old Rs. 500 and Rs. 1,000 notes, the Centre had come up with an amnesty scheme for holders of unaccounted cash by asking them to pay 50 per cent tax and parking one-fourth of it in a no-interest bearing four-year deposit.

This deposit could be made with any banks. But now cooperative banks have been barred from accepting such deposits. The PMGKY scheme is open till March 31.
"Application for the deposit in the form of Bonds Ledger Account shall be received by any banking company, other than Co-operative Banks, to which the Banking Regulation Act, 1949, applies," the government said while amending the notification for Pradhan Mantri Garib Kalyan Yojana (PMGKY), 2016.

Under the scheme, holders of unaccounted cash willing to avail the offer will have to first pay the tax amount and then fill up a challan form provided by the bank for availing the four-year deposit scheme.

The authorised banks have to electronically furnish the details of deposit to the Revenue Department on the next working day to enable information verification of the deposit before accepting the declaration under the PMGKY.

Full confidentiality of the data would be ensured by the Reserve Bank of India and authorised banks.
The amendment to the notification comes after the I-T department spotted irregularities in deposits of cooperative banks following demonetisation.

The I-T department's investigation revealed that deposits in the books of certain cooperative banks were in excess of the physical holding of the now-defunct 500 and Rs. 1,000 currency notes.
Initially cooperative banks were allowed to take deposits of old currency notes and as per estimates, about Rs. 16,000 crore was deposited. But six days into demonetisation, the RBI barred these banks from exchanging old currency notes or accepting deposits.

'Reasonable' Valuation Makes BSE IPO Attractive, Say Analysts

The BSE is offering shares for public subscription through its initial public offer (IPO), which opened on Monday. BSE's Rs 1,243 crore IPO is priced in a narrow range of Rs 805-806. The IPO, from Asia's oldest and world's largest exchange by number of listed companies (5,963 companies), is open till Wednesday and can be subscribed in lot sizes of 18. Out of the total issue, 35 per cent is reserved for retail investors. BSE has already raised Rs 373 crore from anchor investors by allotting shares at Rs 806. Its shares will be listed on National Stock Exchange on February 3.
Here are 10 things to know before you decide to invest in the IPO:

1) BSE's IPO is purely an offer for sale. This means that it does not intend to raise any fresh capital from the issue. Through this IPO, BSE's investors like Deutsche Boerse, Singapore Exchange, State Bank of India, LIC etc. are selling around 28 per cent stake in the exchange.

2) Established in 1875, BSE is Asia's oldest and is world's tenth largest exchange according to market capitalisation.

3) In FY2016, BSE had 15 per cent market share in the equity cash market segment and 6 per cent share in the equity derivative segment. In interest rate derivatives and currency derivative derivatives, it had a market share of 17 per cent and 36 per cent respectively.

4) BSE has a diversified source of revenue: In FY2016, 39 per cent of its revenues came from securities services, 26 per cent came from services to corporates, 4 per cent came from data dissemination fees and remaining 31 per cent came from investments and deposits.

5) BSE's revenues have grown at a CAGR of 3.5 per cent during FY2012-16 to Rs 616 crore. In the first half of FY2017, the exchange already generated revenue of Rs 353 crore. Most of its incremental revenues in last fiscal and current fiscal has come from corporate services like listing fees, which accounts for 21 per cent of its overall revenue and has witnessed a CAGR of 20 per cent during FY2012-16.

6) BSE's net profit however has remained sideways in last three fiscal because of its falling profit margins. In FY2016 its net profit was at Rs 123 crore, down from Rs 130 crore in FY2015. In the first half of the present fiscal, BSE's net profit was Rs 105 crore. BSE's net profit margin has fallen from 32.1 per cent in FY2012 to 19.9 per cent in FY2016 and its operating margin (EBITDA) has dropped to 41.9 per cent in FY2016 from 59.3 per cent in FY2012.

7) However, analysts are positive on the future revenue growth prospects of BSE as equity investment as a percentage of total savings in India is 5 per cent, which is very low compared to other countries. (14 per cent in China, 15 per cent in Brazil, 20 per cent in Indonesia and 42 per cent in USA).

8) At Rs 806, the upper end of the IPO price band, BSE's shares are valued at 20.6 times its FY2017 annualised earnings per share, which is a "reasonable" valuation, says Angel Broking. In comparison, Multi Commodity Exchange shares are trading at 44 times its FY17 estimated earnings per share. Angel Broking has a "subscribe" rating on the issue. Other brokerages like ICICI Securities, Geojit BNP Paribas also have a "subscribe" rating on the issue.

9) BSE currently holds 54.2 per cent stake in Central Depository Services Ltd (CDSL), which is a highly profitable venture for the exchange. As per regulatory guidelines, BSE is required to reduce its stake in CDSL to less than 24 per cent, which will create value for the exchange in the future, says Angel Broking.

10) BSE faces strong competition from market leader National Stock Exchange and MCX, which may put pressure on its future revenue growth and is a key concern, say analysts. Volatility in trading volume and technological changes are other key concerns in the business of BSE, analysts said.

Income Tax Exemption Limit May Go Up To Rs 3 Lakh: Report

New Delhi: The Government is likely to make sweeping recast of direct taxes in the ensuing Budget to give a boost to the economy following demonetisation, says a report.
According to SBI's research report Ecowrap, the upcoming Budget is likely to see an increase in personal income tax exemption limit, increase in section 80C exemption limit, interest exemption on housing loan and and at least reducing (if not abolishing) the lock in period for bank fixed deposits.

"We expect an increase in personal income tax exemption limit from Rs. 2.5 lakh to Rs. 3.0 lakh, increase in section 80C exemption limit from current Rs. 1.5 lakh to Rs. 2 lakh, interest exemption on housing loan from Rs. 2 lakh to Rs. 3 lakh and at least reducing (if not abolishing) the lock in period for bank fixed deposits from 5 years to 3 years for availing tax exemption," SBI Research said in its Ecowrap report.

The report, authored by Soumya Kanti Ghosh, Chief Economic Adviser & GM, Economic Research Department, SBI noted that "such giveaways will cost Rs. 35,300 crore but we expect this to be more than balanced by IDS2 revenue and cancelled note liabilities of RBI".
SBI Research expects tax collection under IDS to be around Rs. 50,000 crore and cancelled liabilities from RBI to be around Rs. 75,000 crore.

Following the demonetisation move, the recast in direct tax moves is expected to give a boost the economy.
"The demonetisation has changed the entire gamut of the economy. The GDP growth is expected to be grow by 7.1 per cent in 2016-17 compared to 7.6 per cent growth in 2015-16," it said. The report further noted that the challenges for the budget this year are more formidable than they were in the previous year. "There is no substitute to investment led growth as opposed to consumption led. A more prudent approach will be to select two-three high potential sectors for fiscal stimulus, agriculture being the most promising followed by SME," it said.

SEBI To Allow Mutual Funds To Invest In REITs, InvITs

New Delhi: Mutual funds will be allowed to invest in real estate investment trusts (REITs) and infrastructure investment trusts (InvITs), the market regulator said on Saturday, a move aimed at boosting investor interest in such alternative investments.

The Securities and Exchange Board of India (SEBI) had been working on easing regulations on REITs and InvITs to woo more investors to India's capital-starved property sector.
A fund would not be able to invest more than 5 percent of its net asset value in units of a single issuer of REIT or InvITs, the regulator said in a statement.

The maximum allowed investment in the alternative instruments by a single fund would be capped at 10 percent, it added.

REITs or InvITs are listed entities that invest in rent-yielding assets and distribute most of their income to shareholders as dividends.
The decisions were taken during SEBI's board meeting in Jaipur.

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From Bank FDs To Cash Deposits, How Income Tax Department Is Tracking Your Transactions

From bank deposits to credit card bill payments to property transactions, financial institutions and other entities have to report transactions above a certain threshold to the income tax department. A January 17 notification from the tax department lists the financial transactions that have to be reported. Income tax authorities have set up an e-platform through which banks and other institutions can report the transactions to them. 

Here are 10 key things to know:

1) Banks have to report cash deposits aggregating to Rs 10 lakh or more in a financial year, in one or more accounts (other than a current account and fixed deposit) of a person. 

2) Fixed deposits other than renewals of a person aggregating to Rs 10 lakh or more of a person in a financial year have to be also reported.

3) Cash payments of Rs 1 lakh or more for credit card bills have to be reported. Also to be reported is payment of Rs 10 lakh or more made by any mode (including cheque or wire transfer) to settle credit card dues in a financial year.

4) The tax department also reiterated its November 2016 instruction asking banks to report all cash deposits of Rs 2.5 lakh or more made in one or more accounts of a person during November 9 to December 30, 2016.

5) For current accounts, banks have to report deposits of Rs 12.5 lakh or more during the period. After demonetisation of old 500 and 1,000 rupee notes, the government had allowed the junked currency to be deposited in bank accounts during a 50-day window ending December 30, 2016.

6) Cash deposits during April 1, 2016, to November 9, 2016 in any account that are reportable should also be intimated to the tax authorities by January 31, 2017, the notification said.

7) Companies or institutions have to report receipt from any person an amount aggregating to Rs 10 lakh or more in a financial year for acquiring bonds or debentures.

8) A similar limit is also set for reporting purchase of mutual funds units or buyback of shares.

9) Purchase of foreign exchange including travellers cheque and a forex card aggregating to Rs 10 lakh will have to be reported to tax authorities.

10) Property registrars will have to report to tax authorities purchase or sale by any person of immovable property for an amount of Rs 30 lakh or more.

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Asian Stocks Slip, Dollar Flat As Caution Reigns Before Trump Inauguration

Singapore: Caution was the name of the game in financial markets on Friday ahead of U.S. President-elect Donald Trump's inauguration later in the day, with Asian stocks and the dollar pulling back and U.S. Treasury yields hovering near their highest close this year.
Investors were also awaiting fourth-quarter and full-year GDP data from China at 0200 GMT, for clues on how much momentum the world's second-largest economy is carrying into 2017.
MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.1 percent, and looked set to end the week flat.

Japan's Nikkei rose 0.1 percent, on track for a near 1 percent weekly loss.
Australian stocks retreated 0.6 percent, heading for a 1.1 percent decline for the week. South Korean shares slid 0.3 percent, poised to end the week 0.5 percent lower.
Economists polled by Reuters expect China to report its economy grew by a steady 6.7 percent in the fourth quarter from a year earlier, boosted by higher government spending and record bank lending.
While the stable headline growth may soothe investors, concerns are growing about whether Beijing can contain the financial risks from an explosive growth in debt fuelled by years of government stimulus.
A cooling housing market and painful structural reforms, as well as pressure on exports if Trump fulfils his protectionist promises, are also key risks for China in 2017.
"Today's China December quarter GDP and other monthly data are unlikely to deviate significantly from expectations," Ric Spooner, chief market analyst at CMC Markets in Sydney, wrote in a note.
"Market reaction is also likely to be muted with traders in risk averse mode prior to the Trump (inauguration) speech."

Markets will also be watching Federal Reserve Chair Janet Yellen's speech in California, starting at 0100 GMT, for new clues on the likely pace and timing of Fed rate hikes this year.
The 10-year U.S. Treasury yield was unchanged at 2.472, after spiking to as high as 2.496 on Thursday, amid wariness about whether Trump will deliver on his pro-business promises, including tax cuts, fiscal stimulus and looser regulation kept investors on the sidelines.
The dollar was flat after surrendering most of the gains it made on Thursday on upbeat data pointing to the economy's brightening prospects.
U.S. homebuilding rebounded sharply in December amid stronger demand for rental housing, and the number of Americans filing for unemployment benefits fell to close to the 43-year low touched in mid-November.
The dollar climbed 0.2 percent to 115.02 yen. On Thursday, it surged as much as 0.8 percent before closing less than 0.2 percent higher at 114.82 yen.

The dollar index, which tracks the greenback against a basket of six major global peers, was little changed at 101.18 on Friday after paring a 0.8 percent gain to close up 0.2 percent.
U.S. stocks were also restrained, with the major indexes posting losses of as much as 0.4 percent, and the Dow Jones Industrial Average down for its fourth straight session.
"There's been a lot of positive news priced into the market so it's taking a break on the equities side," said Wade Balliet, chief investment strategist of the Bank of the West in Denver.

Investors are "getting nervous trying to piece together what the policies will be," he said.
The euro erased losses made after European Central Bank chief Mario Draghi played down a recent rise in euro zone inflation, as investors parsed his statement and noted he had announced no changes to policy.

s 0.4 percent on Thursday, before retracing its steps to close 0.3 percent higher.

In commodities, oil rose after the International Energy Agency said oil markets had been tightening even more as cuts agreed by producers took effect. Still, gains were tempered by concerns about swelling U.S. inventories.
U.S. crude added 0.2 percent to $51.52 per barrel, pulling further away from Wednesday's one-week low.
Spot gold was steady at $1,204.32 an ounce, retaining its slight gains from Thursday.

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