RBI, banks seek higher tax sops under 80C

The Reserve Bank of India and financial sector bosses on Tuesday made a strong pitch for higher incentives for savings, including raising the tax benefit for investing money in fixed deposits and public provident fund (PPF) to Rs 2.5 lakh from Rs 1.5 lakh currently.

Sources said RBI deputy governor Urjit Patel kicked off the customary pre-budget consultation with finance minister Arun Jaitley with a suggestion to "significantly" increase savings, which was followed by demands to raise the cap by bankers as well as insurance companies.

"We need to increase the savings rate in the economy and take it back to 35% of GDP. For that, enhancing section 80C (of Income Tax Act) to Rs 2.5-3 lakh will be helpful," Yes Bank MD & CEO Rana Kapoor said.

Bankers said the ceiling should be enhanced, especially at a time when real interest rates (net of inflation) had turned positive after several years.

Taking a cue from RBI's Patel, Life Insurance Corporation chairman SK Roy suggested that the government could impose sub-limits within the section 80C exemptions, said a source present in the meeting.

Under the current rules, the government allows deduction of up to Rs 1.5 lakh for investment in various savings instruments such as fixed deposits with a tenure of five years or more, provident fund, PPF and life insurance schemes.

The suggestion came amid recommendations from some private sector bankers that the government should lower the quantum of tax-free bonds that are issued, if not completed do away with them. They argued that the bonds were being bought by high net-worth individuals such as film stars and were not benefiting the common man. The bonds issued by certain institutions compete with bank deposits.

Bankers also demanded tax should be deducted on interest of above Rs 50,000 as against the current Rs 10,000.

In addition, Kapoor said, there were suggestions on making the gold monetization scheme more attractive. A finance ministry statement said bankers also suggested that interest rate on small savings schemes such as PPF should be rationalized and linked to the yield on five-year government securities.

Banks as well as the RBI have been demanding the change to ensure that investors don't park funds in PPF and National Savings Scheme, which offer higher rates, and instead opt for fixed deposits with banks. Bankers say higher deposit rates don't allow them to lower lending rates, something that the government has been seeking.

Canara Bank board okays organisational restructuring

Aimed at improving efficiency, public sector Canara Bank’s board has approved organisational restructuring by moving to ‘4-tier system’ that will allow the lender to set up regional offices for a better connect with branches across the country.

“The board of the bank in its meeting held on January 12, 2016 permitted the bank to move to 4-Tier system i.e., Head Office, Circle Offices, Regional Offices and Branches from the existing system of 3-Tier i.e., Head office, Circle Offices and Branches in the next financial year in a phased manner,” Canara Bank said in a BSE filing today.

The bank said this is being done “to enhance the connect between the branches and controlling offices, strengthen the control mechanism and to improve business and profitability by improving the operational efficiency“.

Public sector banks are under pressure to bring down their non-performing assets and improve efficiency.

On Monday, another public sector lender Indian Overseas Bank (IOB) said it will rationalise the number of its regional offices by closing 10 such offices to improve efficiency.

Indian Overseas Bank said currently it has 59 regional offices and seven zonal offices, which provide support and guidance to branches, which are undertaking business activities and are required to monitor the performance of branches.

Royal Sundaram launches 'Lifeline' for Standard Chartered Bank customers

Royal Sundaram General Insurance has launched Lifeline, its flagship health insurance product to Standard Chartered Bank’s India customers through the bancassurance channel. 

Royal Sundaram will leverage its partnership to offer the highly customisable Lifeline suite of health insurance plans complemented with global benchmarks of customer service and exhaustive product knowledge to the corporate and retail customers of the bank.

M.S. Sreedhar, Managing Director, Royal Sundaram General Insurance Co. Limited said, “Lifeline’s suite of health insurance plans has witnessed heartening response from our customers ever since its launch. With the unique offerings and the customisation options, we have successfully established our brand proposition among well established and aspiring customer segments.” 

“We have a long standing relationship with Standard Chartered Bank, spanning almost 15 years largely due to synergies in our vision and commitment. We both believe in providing value to our customers by understanding their needs and risk profile and providing innovative, cost effective, customised solutions to ensure total customer satisfaction. I am sure our portfolio, now strengthened with the addition of Lifeline, will help us together take the partnership to the next level and script yet another winning story”, he added.

Lifeline is the company’s first plan serviced by doctors, offers the widest range of sum insured from Rs 2 lakhs to Rs 1.5 crore. The cover has three sub-plans to choose from–Classic, Elite and Supreme with varying benefits and premiums. The tax-saving plan covers anyone from three-month-old babies to adults of all ages and has family floater benefits too.

To boost smart health practices, the product also covers cost of taking second opinions of as many as 11 critical illnesses.

Rs. 75000 cr disbursed under Mudra scheme till Dec: Mudra Bank CEO

Disbursements to the tune of Rs 75,000 crore has been made under the Pradhan Mantri MUDRA Yojana till December last year; out of a total target of Rs 122,000 crore, Jiji Mammen, CEO, MUDRA Bank, said.

The Micro Units Developments Refinance Agency (MUDRA) scheme that looks at refinancing loans up to Rs 10 lakh was launched in April 2015.

According to Mammen, disbursal has been made to around 1.73 crore beneficiaries; of which, 50 per cent are new units; while the remaining half has been for expansion towards existing ones.

“Against a target of Rs 122,000 crore for this fiscal, we have disbursed Rs 75,000 crore in the first nine months of the year,” he told reporters on the sidelines of the Eastern India Microfinance Summit 2016.

Loans under the scheme have been bracketed in three categories: Shishu loans are up to Rs 50,000; Kishor loans are between Rs 50,001 and Rs 5 lakh; and Tarun loans of Rs 5-10 lakh. Sishu loans are for small businesses, while Kishor and Tarun ones are for larger ones.

Refinance

Till December, the agency has refinanced around Rs 1,500 crore from its corpus of Rs 20,000 crore.

Of this around Rs 800 crore has been for the banks, that include mostly public sector entities like Bank of Maharashtra, Indian Overseas Bank and the State Bank of Travancore, Mammen said. The remaining amount includes microfinance institutions.

To make the MUDRA scheme more attractive, the Centre has also cleared the setting up of a Rs 3,000 crore Credit Guarantee Fund for these loans. This will provide insurance against default on MUDRA loans to a maximum of 50 per cent.

IndusInd Bank reports 30% jump in net profit

Private sector lender IndusInd Bank Ltd on Tuesday said its net profit for the quarter ended 31 December 2015 jumped 30% on strong growth in its core operating income and other income.

Net profit for the quarter stood at Rs581.02 crore compared to Rs447.19 crore—an increase of 29.9%. A poll of 22 Bloomberg analysts had pegged net profit at Rs579.10 crore.

Net interest income, or the core income from lending businesses, rose 36.23% to Rs1,173.42 crore in the October to December quarter compared to Rs861.37 crore in the year-ago period. Other income, which includes earnings from fee-generating businesses, rose 29% to Rs839 crore from Rs649 crore in the year-ago quarter.

Asset quality at the bank remained largely steady although the bank increased provisions during the quarter.

Gross non performing assets (NPAs) at the end of the quarter were at 0.82% of total loans compared to 0.77% in the July-September quarter and 1.05% in the year-ago period.

Net NPAs stood at 0.33% compared to 0.31% in the quarter ended 30 September 2015 and 0.32% in the same period last year.

During the quarter the bank set aside Rs177 crore in the form of provisions compared to Rs158 crore in the previous quarter and Rs98 crore in the year-ago quarter. A number of banks have been setting aside additional provisions as a counter cyclical buffer.