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Paytm Launches Payments Bank

Paytm has rolled out its Payments Bank operations by launching its first physical branch in Noida. With this launch, there are three payments bank operational in the country, the other two being Airtel Payments Bank Ltd and India Post Payments Bank Ltd. The Paytm Payments Bank will be the first bank in the country to offer cashbacks on deposits.

Significance

As a Payments Bank, Paytm will be able to accept deposits upto Rs 1 lakh per customer in wallet and savings/current accounts. Further it can also offer other services like Debit Cards, Online Banking and Mobile Banking. It will not be allowed to lend to customers. However, it will be able to offer financial products like loans, insurance, mutual funds, pension funds etc by partnering with other financial institutions and banks.

Other Salient Features

Interest Rate 

Paytm Payments Bank will offer 4% interest on savings account in line with the interest rates of all leading commercial banks including State Bank of India, Bank of Baroda and ICICI Bank Ltd, which also offers 4% interest rate on savings account deposits.

Cash withdrawal charges

Customers will be given five free transactions in non-metro cities and three free transactions in metro cities. After the exhaustion of free limits, customers will be charged Rs 20 for each subsequent cash transactions.

Debit Cards

The customers will be offered a Rupay debit card at an annual subscription cost of Rs 100 plus delivery charges. The bank will also provide a cheque book at a cost of Rs 100.

Online fund transfer

Paytm Payments Bank will provide services such as Immediate Payment Service (IMPS), Unified Payment Interface (UPI) and National Electronic Fund Transfer (NEFT) free of cost to its customers.

Background

The Reserve Bank of India (RBI) had given in principle approval to Paytm Payments Bank Ltd, an entity majority owned by One97 Communications earlier this year. In 2015, RBI had awarded ‘in-principle’ approval to Vijay Shekhar Sharma to set up a Payments Bank along with 10 others with an objective of deepening financial inclusion. The Paytm Payments Bank aims to plans to roll out operations in 31 branches and 3,000 customer service points in the first year.

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RBI to Reconstitute Oversight Committee to Tackle Bad Loans

The Reserve Bank of India is set to reconstitute Oversight Committee to operationalise the banking ordinance, which was recently cleared by the Union Cabinet to amend the Banking Regulation Act for the sake of giving more powers to Reserve Bank of India for effectively dealing with non-performing assets (NPAs) in the banking sector. The existing Oversight Committee was constituted by the Indian Banks’ Association (IBA). The move is aimed at containing the bad loans which have reached to over Rs 8 lakh crore.

Salient Highlights

In addition to reconstituting the Oversight Committee (OC), the RBI has also proposed to include some more members so that it can constitute requisite benches to deal with the volume of cases referred to the committee. the existing OC constituted by the IBA has only two members.
RBI is also working on a framework to facilitate consistent decision making in those cases which are referred for resolution under the Insolvency and Bankruptcy Code, 2016.

RBI envisages a vital role for the credit rating agencies and is exploring the feasibility of rating assignments being determined by the RBI itself. The agencies would be paid out of a fund constituted out of contributions from the banks and the Reserve Banks.

RBI envisages coordination among various stakeholders including banks, ARCs, rating agencies, IBBI and PE firms. The apex bank has already sought information on the present status of the large stressed assets from the banks.

Background

Recently, the union cabinet had authorised the RBI to issue directions to any banking company or banking companies to initiate insolvency resolution process under the provisions of the Insolvency and Bankruptcy Code, 2016. The ordinance also empowered the RBI to act against loan defaulters and defaulting companies under the bankruptcy code. Amendments will enable RBI to set up multiple oversight committees to deal with NPAs.

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GST Council Finalises 4-slab Service Tax Structure

The GST Council headed by finance Minister Arun Jaitley has finalised a 4-slab service tax structure at the rates of 5, 12, 18 and 28 per cent as against the single rate of 15% levied on all taxable services. GST regime is scheduled to be implemented from July 1. In the next GST Council meeting, tax rates on gold and other precious metals will be taken up for discussion.

Salient Highlights

Luxury hotels, gambling, race club betting and cinema services will attract a tax rate of 28%.

Education, healthcare and non-AC rail travel will remain exempted from the GST tax regime. However, the states will be given the option to levy additional taxes on cinema to compensate for the revenue losses entailed due to merging of entertainment tax with GST. At present, the total tax incidence on cinema including entertainment and service tax is in the range of 55%. The states need to use the legislative route if it wants to levy additional tax on cinema.

States will also be permitted to levy any new tax as the taxation powers of the states have only been restricted and not abolished after the rollout of GST.

Telecom and financial services will be taxed at a rate of 18%.

Transport services will be taxed at the rate of 5%. Cab aggregators like Ola and Uber will have to pay 5% under GST in place of 6%. AC rail travel will attract 5% tax. Economy class air travel will attract 5 % GST while business class will attract 12%. Travelling on metro, local train and religious travel such as Haj Yatra would be exempted from GST.

The e-commerce players like Flipkart and Snapdeal would be required to shell out 1% Tax Collected at Source (TCS).

Non-AC restaurants and AC restaurants will attract a GST of 12% and 18% respectively.

Advertisements published in newspapers will attract 5% GST. At present it is exempt from service tax.

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