September data showing credible signs of economic growth: Finance Ministry

 

The Finance Ministry on Saturday said the month of September has exhibited credible signs of economic growth towards normalcy and the government is not averse to taking any further measures to ameliorate the suffering of people.

It said during the last six months of Covid-19 crisis, while pushing the fiscal stimulus and packages to boost recovery process of the economy it has taken every possible measure to address the concerns of all the stakeholders and the citizens and has progressively extended help on both the demand and supply side to bring the economy back on track.

Earnest efforts made by the government in last few months during coronavirus period have now started showing the green shoots and the month of September has exhibited credible signs of economic growth towards normalcy, the ministry said in a statement.

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The ministry further said that to minimise Covid-19's impact on the economy and people's livelihood, the government is open to all possibilities and the Finance Minister is not averse to taking any further measures to ameliorate suffering of people.

It said with phased relaxation of lockdown, the economy is gaining encouraging momentum. Increased business activities are imparting positive recovery of the economy as is evident in the month of September when the GST collection with Rs 95,480 crore was up by 4 per cent in the month (year-on-year).

It said rail freight revenue earnings were up by 13.5 per cent, power consumption up by 4.2 per cent, and rising tractor sales, healthy monsoons and other growth indicators like PMI manufacturing, the index of eight core industries, E-way bills, exports, kharif sowing, cargo traffic and passenger vehicle sales, etc., are showing credible upward movement.

All this makes the ministry confident that its effort to mitigate impact of Covid-19 are on the right track towards faster recovery of economy to normalcy, the ministry added.

 

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The government has effectively implemented two major stimulus packages the Pradhan Mantri Garib Kalyan Package(PMGKP) without delay post lockdown on March 16, 2020, and the Aatmnirbhar Bharat Package (ANBP) of Rs 20 lakh crore on May 12, 2020, which was a judicious mix of fiscal and monetary policies to mitigate the negative impact of Covid-19 on the economy.

The government implemented several measures under these packages which include relief measures for households and cash transfers to senior citizens, widows, disabled, women Jan Dhan Account holders, farmers; insurance coverage for workers in the healthcare sector; and wage increase for MGNREGS workers.

The ministry's relief efforts during Covid-19 provided 42 crore people with direct financial assistance of Rs 68,921 crore. It included almost 8.94 crore beneficiaries under PM KISAN with two instalments of Rs 17,891 crore each.

Further, Rs 30,952 crore has been deposited into 20.65 crore women Jan Dhan accounts through DBT.

Around 1.82 crore construction workers received financial support amounting to Rs 4,987.18 crore, and 40.59 lakh members of EPFO took online withdrawal benefit of the non-refundable advance amounting to Rs 10,615 crore.

 

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Also, 20 crore household are being provided with free pulses @1 kg/month for eight months and 81 crore beneficiaries are helped with free food grains at 5 kg per beneficiary for 8 months, which constitutes more than 60per cent of India's population.

Under MGNERGS total allocation has been raised to Rs 1,01,500 crore for this year by making additional provision of Rs 40,000 crore. Besides, the Ministry has introduced relief measures for MSMEs such as collateral-free lending with 100 per cent credit guarantee, also eased compliance burden of taxpayers by postponing of tax-filing deadlines, reduction in penalty interest rate for overdue GST filings.

The Centre has continued to lend unflinching support to State Governments towards faster economic revival, the ministry said.

Despite the pandemic and the consequent fall in gross tax revenue, Rs. 2,17,976 crore has been transferred to State Governments as Devolution of Share of Taxes by Government of India in the first five months of FY 2020-21 which is only Rs 37,629 crore lower than the previous year.

Also, the Centre has already raised the borrowing limit of states from 3 per cent to 5 per cent of GDP to cope with pandemic induced requirement of higher expenditure.

As per recently announced, the borrowing programme of the Government of India Rs. 4.34 lakh crore for the second half of FY 2020-21 is expected to be completed by January 2021 to help generate sufficient space to manage the borrowing programme of the State Governments smoothly, the ministry added.

Further, Rs 1,25,412 crore collateral-free loan has already been disbursed to more than 25.63 lakh businesses in just four months.

India's banks wrote off Rs 2 trillion worth of bad loans in 2018-19

India’s 42 scheduled commercial banks (SCBs) collectively wrote off Rs 2.12 trillion worth of loans in 2018-19, according to figures given by the finance ministry in Parliament. Not only was this 42 per cent higher than the Rs 1.5 trillion written off the previous year, but also about 20 per cent of all their non-performing assets (NPAs).

Banks generally take NPAs off their books to make their balance sheets look cleaner — with reduced liabilities and potential losses. According to Reserve Bank of India (RBI) guidelines, "non-performing loans, including, those in respect of which full provisioning has been made on completion of four years, are removed from the balance sheet of the bank concerned by way of write-off."

Since 2014-15, when the Narendra Modi-led government first came to power, India’s banks have written off Rs 5.7 trillion worth of bad loans.

So far as the country’s 21 public-sector banks (PSBs) are concerned, the amount of bad loans taken off their balance sheets has increased progressively over the years. In 2018-19, these banks wrote off Rs 1.9 trillion worth of bad loans — about 90 per cent of the total for all SCBs, and four times their own write-offs in 2014-15. Only a third of SCBs reported lower write-offs in 2018-19 than the previous year; and only three of those that did were PSBs, show government statistics.

State Bank of India (SBI) reported the biggest jump in write-offs, to Rs 56,500 crore. The significant increase in SBI’s write-offs in the past couple of financial years has been on account of a merger of five other banks — State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Hyderabad and State Bank of Mysore — with it.

For India’s SCBs, an increase in write-offs has occurred concurrently with a rise in NPAs. Bad loans on the books of all banks have tripled in four years — from Rs 3.2 trillion in 2014-15 to Rs 9.4 trillion in 2018-19.

The massive rise in write-offs by India’s PSBs and some crisis-hit private lenders assumes more significance in view of a higher rate of bad-loan recoveries under the country’s new insolvency resolution process, which came into force through a legislation in 2016. According to an RBI report, in 2018-19, banks were able to recover Rs 74,500 crore from companies under the resolution process — at a recovery rate of 43 per cent. This was significantly higher than recovery rates for other forums like Lok Adalats, debt resolution tribunals (DRTs) and procedures initiated under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act (Sarfaesi).

According to the new Insolvency and Bankruptcy Code (IBC), 2016, once proceedings have been initiated against a borrower under the IBC, the Sarfaesi Act cannot be invoked against them. Similarly, if an errant borrower was being pursued under the Sarfaesi Act before the IBC came into effect, and the lender now wants to initiate proceedings under the IBC, the Sarfaesi proceedings would cease to apply to the borrower.

While more banks are now using the corporate insolvency resolution route, the sheer scale of bad loans and write-offs suggests that banks would have to take a heavy haircut. Even if the loan recovery rate under insolvency resolution were to improve to 50 per cent in coming years, India’s banks would still never be able to recover Rs 5 trillion from various errant corporate borrowers.

Govt asks homebuyers to approach lenders for revival of their loans

The finance ministry on Thursday issued clarification on alternative investment fund (AIF), advising affected homebuyers to approach lenders for additional borrowing or revival of their loans.

“Homebuyers are advised to reach out to their respective lending institutions to seek necessary guidance for additional borrowing or revival of their existing home loans within the existing legal and regulatory framework and standard board approved policies of the lending institutions,” the ministry said in the note.

It clarified that projects that are already at the high courts or at the Supreme Court will not be considered, which means homebuyers of projects from Jaypee Infra and Amrapali group, among others, will not be able to avail of this fund. The ministry has set a cap on cost of individual unfinished projects at Rs 400 crore for being considered for financing through the AIF.

Finance Ministry job ended unceremoniously, says Subhash Chandra Garg

Subhash Chandra Garg (pictured), who retired on Thursday on voluntary basis after he was shifted from the post of the finance secretary to the power secretary, said his postings as the head of the finance departments at the Centre and in Rajasthan ended “little bit unceremoniously”.

“It is not that I was immune to the consequences of my independent and unconventional ways of functioning. It might be a little strange, but all my postings as chief of finance departments in the state (Rajasthan) and at the Centre ended little bit unceremoniously,” he wrote on Twitter. The power secretary said he was an “independent-minded officer” who implemented bold and unconventional decisions that may have not kept his bosses in “good humour” sometimes.

He said he could have become the longest-serving finance secretary if he had held the post until his superannuation in October 2020.

Garg, a 1983-batch IAS officer of the Rajasthan cadre, was designated finance secretary in March 2019 as he was the senior-most secretary in the finance ministry. He had held the post of economic affairs secretary that time.

In July, he was shifted to the power ministry as secretary, but he opted for voluntary retirement. Though there was no official reason given for his reshuffle, it was speculated that the proposal of overseas sovereign bond mooted by him was the reason behind his transfer.

Garg also pressed for a transfer of the Reserve Bank of India’s reserves to the government. The Bimal Jalan committee was looking at the capital economic framework that time. It was also speculated that he might give a dissent note to the panel finding. But before the panel could finalise its report, he was transferred from the finance ministry.

In his note, Garg highlighted the point that there was little investment happening in infrastructure despite this being the biggest opportunity.

“There is enormous unmet demand in housing, roads, airports, railways, energy, and irrigation," he said.

He said no businesses would invest when there are no returns.

Garg said he saw himself as a policy analyst, policy craftsman, and strategist and an advocate for developing the right kind of economic and financial policy framework for India achieving the target of $10-trillion economy.

Govt considering another 'booster dose' to revive economy: Report

The finance ministry is working on one more booster dose to give a leg-up to the economy that has hit over six-year low of 5 per cent, a senior finance ministry official said.

The blue print for the stimulus is ready that would be announced by Finance Minister Nirmala Sitharaman in the next few days, the official said without giving further details.

The government announced a slew of measures in three dosages which include a special window for real estate, export incentives, bank consolidation and sops for micro, small and medium enterprises (MSMEs) and the automobile sector.

Earlier this week, RBI Governor Shaktikanta Das had said the government has taken a number of measures to boost the economy in three phases and indicated that more steps are likely.

"I think with right measures taken, things should improve. It's a positive trend that the government is responding fast and I don't think we have heard the last from the government with regard to dealing with the current economic situation... My expectation is that it will be a continuous process and they would definitely be dealing with other challenges," he had said.

The first set of announcements was made on August 23 that included rollback of the enhanced surcharge imposed on foreign portfolio and domestic investors in Budget 2019-20.

Sitharaman had in her maiden Budget raised the surcharge on income tax paid by super-rich individuals.

The surcharge, levied on top of the applicable income tax rate, was hiked from 15 per cent to 25 per cent for those with a taxable income of Rs 2-5 crore, and to 37 per cent for those earning more than Rs 5 crore. This increased the effective tax rate for these two groups by 3.12 per cent and 7 per cent to 39 per cent and 42.74 per cent, respectively.

Some 40 per cent of foreign portfolio investors (FPIs) automatically came under the higher tax rate as they have been investing as a non-corporate entity, such as trust or association of persons (AOPs), which in the income tax law is classified as an individual for the purpose of taxation.

It was followed by announcement with regard to consolidation of 10 public sector banks (PSBs) into four on August 30.

According to the consolidation exercise, United Bank of India and Oriental Bank of Commerce are to be merged with Punjab National Bank, making the proposed entity the second-largest PSB.

Syndicate Bank is to be merged with Canara Bank. Allahabad Bank will be merged with Indian Bank. Andhra Bank will be amalgamated with Corporation Bank and Union Bank of India.

This would be the second round of consolidation of PSBs. Earlier this year, State Bank of India had absorbed its five associate banks and the Bharatiya Mahila Bank to form the biggest public sector lender. In another merger, Bank of Baroda had taken over Dena Bank and Vijaya Bank.

Last week, the government announced a slew of measures to boost exports and the real estate sector.

During the week, the finance minister will chair the 37th meeting of the GST Council, which is expected to discuss rate revisions for various sectors, including automobiles, fast-moving consumer goods, and hotels.

Besides, she will meet heads of the PSBs to discuss issues, including following up on transmission of monetary policy rates.

Finance ministry dept's fine on banks an afterthought: Delhi High Court

The Delhi High Court has rejected 15 appeals by the Financial Intelligence Unit (FIU) of the finance ministry against an order of the appellate tribunal of the Prevention of Money Laundering (PML), which set aside the fine imposed on banks for failing to report suspected transactions.

In its order upholding the judgment of the appellate tribunal for PML, a single-judge Bench of Justice Vibhu Bakhru said as the FIU had already warned banks in writing about their failure to report suspected transactions, the fine imposed on them was an afterthought and, therefore, rightly set aside.

The case dates back to 2013, when a sting operation was conducted by a media outlet on various banks, which showed them to be favouring money laundering operations by sidestepping the know-your-customer (KYC) norms set by the Reserve Bank of India (RBI). The sting operation showed 23 public sector banks (PSBs) as well as private sector lenders' employees agreeing to launder money for a minister without asking for details. Based on the sting operation, the FIU had started investigation.

In September 2014, the FIU wrote to these banks, asking them to be more vigilant about reporting such suspicious transactions. However, later the agency also imposed a fine on these banks, including Corporation Bank, Federal Bank, Punjab National Bank, Axis Bank, Canara Bank, Kotak Mahindra Bank, YES Bank, Indian Bank, Allahabad Bank, IndusInd Bank, Bank of Maharashtra, Bank of India, State Bank of India, ICICI Bank, and HDFC Bank.

The FIU contended that the banks should have reported to the authorities when they were approached during the sting operation. The banks, meanwhile, said they had not offered any services and the employees involved in the sting had been sacked. The banks also contended that the transcript of the alleged sting operation that FIU put before them did not present the full picture, as “they have been edited and extracted in a manner so as to feed the perception that the respondent banks are complicit in money laundering”. The banks challenged the fine as well as the observation that they had not reported suspicious transactions deliberately.

The appellate tribunal for PML held that though banks had not reported the matter to the authorities, the director, FIU, should not have imposed the maximum penalty for the offence. While it reduced the penalty imposed on most banks, it set aside a penalty of Rs 300,000 imposed on Kotak Mahindra Bank (then ING Vysya Bank).

Finance ministry tells large CPSEs to accelerate investment activities

The finance ministry on Friday asked large central public sector enterprises (CPSEs) to accelerate their investment activities and monitor release of payments for various projects to push up economic growth.

The growth had plunged to over six-year low in the first quarter of the current financial year.

At a meeting between finance ministry officials and heads of ‘Maharatna’ and ‘Navratna’ CPSEs, the public sector enterprises were also told to resolve outstanding payments, held up due to disputes.

The meeting, co-chaired by economic affairs secretary Atanu Chakraborty, expenditure secretary G C Murmu and also attended by financial advisors of infrastructure ministries, also reviewed capital expenditure by various CPSEs and ministries.

“They were impressed upon to adhere to the expenditure plan and accelerate investment activities,” a statement by the finance ministry said.

The statement further said focus was also on “monitoring release of payments” for procurement and other contracts without delay to ensure liquidity in a time-bound manner.

The meeting also called upon public sector undertakings to resolve outstanding payments which may have been held up on account of disputes.

“Ministry of Finance would constantly monitor the progress of large infrastructure projects for ministries as well as CPSEs and further meetings would be held,” it added.

After the meeting, ONGC executive director N C Pandey said as many as 27 projects worth Rs 87,000 crore are on stream. These projects will be completed in 3-4 years, he told reporters. “We are on track. We are hopeful that these projects will be completed on time,” he said.

On issues related to payment, Pandey said it was emphasised in the meeting that endeavours should be made to make payment ahead of scheduled date.

Gross fixed capital formation in the economy crawled up to four per cent in the Q1, FY20 against 3.4 per cent in Q4 of FY19.

Besides ONGC, representatives from PGCIL, NTPC, NHAI, SAIL and GeM participated in the meeting. Financial advisors of railways, health and family welfare, petroleum and natural gas, road transport and highways, shipping, power, civil aviation, housing and urban affair, water resources, rural development and HRD ministries also took part in the meeting.

On Thursday also, Chakraborty and Murmu had met officials from the ministries of road transport & highways, railways, telecom and housing & urban affairs to review their capital expenditure programme.

Finance ministry asks departments, PSUs to expedite capital expenditure

As part of the Modi government’s bid to boost economic activity and pump in liquidity into the infrastructure sector, senior finance ministry officials are meeting officials from other departments, as well as state-owned firms. The PSUs are being told to boost capital expenditure (capex), while the departments, especially those related to infrastructure sectors, are being told to expedite spending of allocated sums and release outstanding payments to contractors.

Economic Affairs Secretary Atanu Chakraborty and Expenditure Secretary Girish Chandra Murmu on Thursday met officials from the ministries of road transport & highways, railways, telecom, and housing & urban affairs to review their capex programme.

The two secretaries, it is learnt, are expected to meet representatives of other infrastructure-related departments, as well as managing directors and senior officers of PSUs, on Friday.

“The departments are being told to clear pending payments to contractors, especially those in the micro, small & medium enterprises (MSMEs) sector. They will be directed to front-load their capex allocations, while PSUs are also being told to boost capex. The idea is to create more liquidity in the infrastructure sector,” said an official.

These capex reviews come just a day after Finance Minister Nirmala Sitharaman met representatives of the infrastructure sector — the latest of the many sectoral meetings she has had in the past one month.

The meetings came against the backdrop of India’s gross domestic product growth slumping to a six-year low of 5 per cent in the April-June quarter. Experts have pointed out that a capex boost focused on infrastructure by the private sector and the government is a way out of the slowdown as the Centre looks to create jobs. In his Independence Day speech, Prime Minister Narendra Modi had said the government will invest Rs 100 trillion on developing modern infrastructure to help nearly double the size of the economy to $5 trillion in the next five years.

In the meeting on Wednesday, representatives of infrastructure companies like Hindustan Construction, NHAI, and Ircon had discussed issues related to financing, land, capital, and environmental clearances. There were suggestions on speeding up the execution of projects.

April GST return filing deadline extended till 20 June in parts of Odisha

The Finance Ministry has extended the deadline for filing summary sales return for April in 14 districts of Odisha affected by cyclone Fani by a month till June 20.

Similarly, the due date for filing final sales return or GSTR-1 for April for taxpayers having aggregate turnover more than Rs 1.5 crore too has been extended by a month till June 10.

In two separate notifications, the Central Board of Indirect Taxes and Customs (CBIC) said that these extended deadlines for filing April returns would be for registered taxpayers whose principal place of business is in the districts of Angul, Balasore, Bhadrak, Cuttack, Dhenkanal, Ganjam, Jagatsinghpur, Jajpur, Kendrapara, Keonjhar, Khordha, Mayurbhanj, Nayagarh and Puri in the state of Odisha.

The due date for filing summary sales return GSTR-3B and GSTR-1 for April was earlier notified as May 20 and May 11, respectively.

However, the CBIC notification extends this deadline of GSTR-3B and GSTR-1 for the specified 14 districts in Odisha to June 20 and June 10, respectively.

Odisha was hit by "extremely severe" cyclonic storm Fani earlier this month, which has left 64 dead and at least 241 people injured in the state.