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Two years after demonetisation, over 99% banned notes back; RBI finishes verification

Nearly two years after demonetisation, RBI has completed the tasks of processing and verifying banned currency notes. On November 8, the number of Rs 500 and Rs 100 notes in circulation was 15.4 lakh crore and the total value of specified bank notes (SBNs) returned to the banks now stands at 15.3 lakh crore, (which amount to 99% of total demonetised notes), RBI annual report for 2017-18 showed.

It was in November 2016, the government had announced the demonetisation of all Rs 500 and Rs 1000 banknotes of the Mahatma Gandhi Series.

The value of banknotes in circulation stands at 18 lakh crore till March end, RBI report also said.”The value of banknotes in circulation increased by 37.7 per cent over the year to Rs 18,037 billion as at end-March 2018. The

volume of banknotes, however, increased by 2.1 per cent,” report showed.

The combined share of Rs 500 and Rs 2000 banknotes which when put together in value terms accounted for 72.7 percent. The total value of banknotes in circulation at the end of March last year 2017 surged to 80.2 percent as at end of March 2018.

At the end of March 2018, the share of freshly introduced Rs 200 banknotes in the total value of banknotes in circulation was 2.1 percent.

RBI expected GDP growth to rise to 7.4 percent in FY19. However, inflation warrants continuous vigil, the report also mentioned. The central bank expects the CPI inflation to face upside risks in the remaining part of the year.

Demonetisation killed rural wage growth, shows Ind-Ra data

India’s rural wage growth has slumped from an average of 11% in the financial years 2013-15 to a mere 0.45% in the financial years 2016-18, due to the negative impact of demonetisation, a report said. An analysis of 25 different occupations in rural areas by India Ratings showed that rural wage growth slumped to decimal points from double-digit in last three years despite government support.

India Ratings noted that even as there were efforts to hike rural wage and support rural employment scheme, they merely ended up shielding nominal wages from falling post demonetisation. “While these measures may have helped shield the nominal wages from falling, they did not provide the necessary impetus to strengthen real wage growth and reduce rural distress in a significant way,” the report said.

“In August 2016 the government had raised the minimum wage for non-agricultural labourers by 42%. As a result, when demonetisation hit the cash-based rural economy, it did not have a drastic effect on non-agricultural rural wages. In addition, the highest ever budget allocation for Mahatma Gandhi National Rural Employment Guarantee Scheme was made in the period after demonetisation to shield the rural/informal economy from the after-effects of the regulatory move,” the report explained.

Fall in rural wage growth was not limited to major agricultural occupations. Even nominal wage growth rates for animal husbandry, which were robust earlier, fell from 21.48%-34.77% in FY13-15 to 7% FY17-18. Notably, India suffered two consecutive drought years in 2014-15 and 2015-16, which also led to farmers’ distress.

However, the largest chunk of the rural population is made of daily wage earners, not farmers, the report said, adding that an equal focus on both rural wages and farm income is vital to relieve rural distress. On the decision to hike minimum support price for the Kharif season, India Ratings said that it will provide only ‘notional comfort’. “It requires a far more concerted effort including a strategy to augment rural infrastructure,” the report said.

After IBC war on NPAs, Modi government gets tough on bank frauds; warns CEOs to keep check or face action

In a stern warning to bankers, the Finance Ministry has asked chief executives of public sector banks (PSBs) to check all NPA accounts exceeding Rs 50 crore for fraud or they could face criminal conspiracy charges, according to official sources.

This missive comes in the light of arrest of Bhushan Steel’s erstwhile promoter Neeraj Singal by the Serious Fraud Investigation Office (SFIO) for allegedly siphoning off funds. The sources said that bankers could be held accountable under Section 120B of Indian Penal Code if they fail to report fraud in an account which is later unearthed by investigating agencies, sources said.

If the investigating agencies find diversion of funds in those defaulting accounts, bankers may be liable to face criminal proceedings, the sources said, adding that this advisory is like an extra precaution to keep bankers from getting into legal tangles.

More than a dozen companies undergoing bankruptcy resolution are being reviewed by banks and investigating agencies for fraudulent activities including diversion of funds. Indian banks are facing mounting non-performing assets (NPAs) or bad loans, especially at PSBs, which have reached over Rs 8 lakh crore. In addition, several banking frauds have been unearthed, including the Rs 14,000 crore scam at PNB, carried out allegedly by diamond jeweller Nirav Modi and his associates.

A senior government official confirmed the development and said that some discrepancies have been pointed out in the case of a steel maker and a real estate firm among 10-12 companies. “There were some inputs and lenders who have been asked to provide transaction details of last five years. If required, banks will also undertake forensic audit,” he said.

Earlier this month, SFIO arrested Singal for alleged diversion of Rs 2,000 crore, raised through loans from state owned banks. “Similar modus operandi has been used by other promoters also,” said another government official, adding that there have been intelligence inputs on associate companies being used for similar transactions.

SFIO is also looking into the books of companies which are currently undergoing debt resolution, he said, adding that this has been done on the basis of specific inputs provided by the ministry of corporate affairs.

During the resolution process, the extensive audit of bankrupt companies has thrown up financial irregularities in several cases.

 

In June 2017, the Reserve Bank of India (RBI) had identified 12 stressed accounts, each having more than Rs 5,000 crore of outstanding loans and accounting for 25 per cent of total non-performing assets (NPAs) of banks for immediate referral under the Insolvency and Bankruptcy Code (IBC). In August, RBI had sent a list of 28 more firms to lenders for resolution by December 2017.

“These accounts also have some firms from the second list and those where later banks filed cases in NCLT (National Company Law Tribunal),” said a bank executive aware of the developments.

The NCLT benches handle banks’ bad debt resolution under Insolvency and Bankruptcy Code (IBC). Banks have to undertake a two-year transaction audit when they start the resolution process through IBC. In case there are any issues or specific information, banks also conduct a forensic audit.

In August 2017, SFIO was given powers to arrest people for company law violations. SFIO is a multidisciplinary organisation having experts for prosecution of white-collar crimes and frauds under the company law. NCLT has so far taken decision on 655 cases under IBC that include more than 200 that have been admitted to various NCLT benches.

DIPP expects significant jump in ease of doing business ranking this year

India’s ranking is expected to improve further in the World Bank’s ease of doing business report this year on the back of reforms carried out by the government, a top government official said. The World Bank’s ‘ease of doing business’ report is slated to be released in October. “We are optimistic that again we will be making a significant jump in the ease of doing business ranking,” Secretary in the Department of Industrial Policy and Promotion (DIPP) Ramesh Abhishek said here.

India leapfrogged 30 places to rank 100th in the last World Bank’s ‘ease of doing business’ ranking report. Speaking at the Taiwan-India Industrial Collaboration Summit, the secretary said that several areas, including starting a business and paying taxes, have seen an improvement. He also asked the Taiwanese businesses to invest in India as the country holds huge potential.

“This is a good time for investments in India,” he said, adding Indian economy is likely to touch USD 5 trillion mark by 2025 and USD 10 trillion by 2030.”We are removing all the bottlenecks and obstacles in areas like logistics and infrastructure,” he said. The secretary also said that the department would be setting up a Taiwan Plus cell to hand hold investors in India. He said India has attracted USD 230 billion FDI in the last four years and Invest India is facilitating foreign investments worth USD 90 billion.

Uncertain jobs data, strained agriculture, lower investments: is Indian economy really looking up?

There is a definite indication of a higher GDP growth in the first quarter of the financial year 2018-19 as compared to the same period last year but the key indicators are likely to display a better picture as they are pitted against a different year which witnessed slowdown due to disruptions caused by the GST before sharp rebound, a report has observed.

In the same period last year, India clocked a three-year-low GDP growth rate of 5.7%, majorly due to massive de-stocking ahead of the implementation of the Goods and Services Tax (GST). Rating and financial institutions are expecting the GDP growth rate in the April-June quarter of the current financial year to be between 7.5% to 7.7%.

“FY18 was different in terms of the operating environment as GST had caused some degree of upheaval with the growth pattern moving into a trough before rising sharply. This was witnessed in GDP growth as well as industrial growth which in turn will tend to display a better picture this year,” a report by Care Ratings said.

“For the current financial year so far, there are mixed signals on the state of the real economy,” the report said. While praising the performance of FDI inflows and better trade numbers, Care Ratings expressed worry over indications of unclear employment scenario, strained agriculture, and lower investments.

“The employment scenario appears unclear given the different contrary indications given by the EPFO and CMIE data,” the report said. On investments, it said that while the picture on domestic investment intentions is still a bit nebulous, the FDI flows have been more positive and definite with growth of 22% in the first quarter from $10.4 billion to $12.7 billion.

Disclose what action taken against wilful defaulters over Rs 50 cr loans: CIC to finance ministry, RBI, MOSPI

The action taken against wilful defaulters of banks loans of above Rs 50 crore should be made public by the Finance Ministry, Ministry for Statistics and Program Implementation and RBI, the CIC has said. The Information Commissioner Sridhar Acharyulu pointed out that the defaulters of small amounts like farmers are defamed in public, while the defaulters above Rs 50 crore were given long rope. The defaulters above Rs 50 crore were given high concessions in the name of one time settlements, interest waivers, several other privileges and their names are hidden from exposure to secure their reputation, he said.

In a terse order, the Commission noted that over 30,000 farmers have committed suicide between 1998 and 2018 as they could not live in shame of not being able to repay their loans. “They lived by and died in the agricultural fields believing in mother earth, but did not leave mother land like 7000 rich, educated corporate industrialists who cheated the nation by evading thousands of crores,” Acharyulu said.

The proactive disclosure clause of the RTI Act Section 4(1)(c) makes it mandatory for all government departments to publish all relevant facts while formulating important policies or announcing the decisions which affect public, while 4(1)(d) asks them to provide reasons for their administrative or quasi-judicial decisions to affected persons, he said in the order.

Acharyulu said the Finance Ministry, Ministry for Statistics and Programme Implementation and RBI have a “duty” to inform people from time to time their policy in dealing with the willful defaulters of Rs 50 crore and above, how do they want to deal with them and save the public money and economy of our nation.

The contention of the RBI is that as the regulator and supervisor of the banking system, it has discretion in the disclosure of such information in public interest and cites clauses of section 8(1) to deny information, he said. “Supreme Court rejected all the contentions of the RBI and directed them to honour all the CIC orders of disclosure without interfering with those orders and dismissing the appeal of the RBI.

In the wake of this order of Supreme Court, the RBI has no other alternative to disclosure of the information sought,” he said. When the RBI has authorised banks to prepare the list of willful defaulters of Rs 25 lakh, and after ensuring no genuine loan-takers’ name is published in the list of willful defaulters, why not ensure publication of the details of willful defaulters of Rs 50 crore and above as sought by this appellant to fulfil the right to information of the citizens, Acharyulu pointed out.

He directed the ministries and the RBI to provide the information about action taken against wilful defaulters of Rs 50 crore and above, reasons for the failure in their efforts, criminal actions initiated, or reasons for not initiating criminal actions. “…if they cannot submit any part of that information, they may chose to explain why should they not be directed to publish the details of the information sought including the names of willful defaulters, before September 20, 2018,” he said.

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