Source Business standard
| Centre plans major banking reforms; SARFAESI Act to be amended |
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Mumbai, 20 August Two moves by the government will significantly impact India's banking segment— a decision to amend the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest ( SARFAESI) Act, 2002, during the Winter Session of Parliament to allow banks to take charge of companies that wilfully default on loan repayment and second, a plan to put in place a holding company structure for public sector banks. The SARFAESI Act empowers banks and financial institutions to recover non- performing assets without the intervention of courts. "Whenever the borrower is deliberately not repaying, a change of management can be done by banks. This is a provision we are going to add to the SARFAESI Act," G S Sandhu, secretary in the Department of Financial Services, said here on Wednesday. The Act, in its current form, provides three alternatives to recover non- performing assets — securitisation, asset reconstruction and enforcement of security without the intervention of court. The plan to amend the Act comes at a time when non- performing assets ( NPAs) in the banking sector have seen a steep rise. According to RBI data, as of March 31 this year, gross NPAs in the banking system accounted for four per cent of gross advances, while net NPAs accounted for 2.2 per cent. According to Reserve Bank of India ( RBI) norms, a wilful defaulter is one that defaults in payment obligations to lenders even if it has the capacity to pay and doesn't use the funds for which the loan was availed of, or diverts those. Recently, Kolkatabased United Bank of India had issued awilful defaulter notice to Vijay Mallya, chief of UB Group and the grounded Kingfisher Airlines. The airline has, however, challenged the decision in court. On the holding company structure, Sandhu said while different modes had been proposed, no final decision had been taken. The proposed structure is aimed at meeting banks' capital requirements. Sandhu said there were two views on the holding company structure. " One is we should have one holding company for all banks. The second view is we should have a holding company at the bank level, particularly for those that have a large number of subsidiaries such as State Bank of India and Punjab National Bank. So, each bank should have one holding company and above that company, there will be an apex holding company," he said. " There is also a view about capital requirement — whether you have to provide capital for each level." The finance ministry estimates public sector banks will need ₹ 2.4 lakh crore of equity capital through the next four years. Amendment in Winter Session of Parliament; two models on holding company structure for banks being considered The SARFAESI Act empowers banks and financial institutions to recover NPAs without the intervention of courts |
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Source Business Line States agree for threshold limit of ₹ 10 lakh for imposition of GST Our Bureau No clarity on changes in Constitution Amendment Bill New Delhi, August 20: The States on Wednesday agreed on new threshold limit of ₹ 10 lakh for imposition of Goods & Service Tax (GST) regime, lower from ₹ 25 lakh earlier proposed. In other words, traders with annual turnover of ₹ 10 lakh and above only will attract GST. A decision to this effect was taken at the Empowered Committee of States' Finance Minister meeting here on Wednesday to discuss various pending issues on GST regime. The meeting, however, ended without any clarity on Centre's stand over the changes suggested by the States on the Constitution (Amendment) Bill. After the meeting, the Chairman of the Committee Abdul Rahim Rather, who is also the Finance Minister of Jammu & Kashmir, said that the threshold limit for general category States will be ₹ 10 lakh, while it will be ₹ 5 lakh for special category and North Eastern States. On the issue of dual control, Rather said that the meeting discussed the report by the committee and decided to seek legal power for control of tax administration for business units having annual turnover of ₹ 1.5 crore. "It was decided to recommend to the Central Government that for threshold of ₹ 1.5 crore, the Centre will not interfere in assessment, audit, and other matters. It will be left exclusively to States," he said adding that but, officials representing the Centre insisted that only administrative control will be given to the states. "The States insisted that legal powers should also be given to them," Rather said. States also want GST compensation structure to be part of the Constitution (Amendment) bill. Rather said that about ₹ 13,000 crore worth of compensation up to 2010 is pending, while amount for 2011-12, 2012-13 and 2013-14 is yet to be calculated. States have also proposed to keep the list of exemption goods common for the Centre and States. Currently, exemption list for States' VAT consist of 96 items, while for Central Excise it is 243. While the Centre and States seem to agree upon keeping alcohol out of the proposed tax regime, there is no clarity on petroleum products. GST aims to subsume central indirect taxes such as Central Excise Duty and Service into Central GST (CGST) and various States levies such as VAT and Central Sales tax into States GST (SGST). The Centre has already announced its intention to bring Constitution Amendment Bill to pave way for introduction of GST in forthcoming Winter Session. This bill was brought in previous Lok Sabha, but lapsed as the previous Central Government failed to evolve a consensus among States. |
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