Minister’s Reply to Rajya Sabha regarding Restoration of Old Pension System in place of Contributory Pension System

Minister’s Reply to Rajya Sabha regarding Restoration of Old Pension System in place of Contributory Pension System

Shri Santosh Kumar Gangwar, Minister of State in the Ministry of Finance, reply to Rajya Sabha regarding Restoration of Old Pension System in place of Contributory Pension System

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF FINANCIAL SERVICES

RAJYA SABHA

UN STARRED QUESTION NO. 2130

TO BE ANSWERED ON MARCH 21, 2017/PHALGUNA 30, 1938 (SAKA)

RESTORATION OF OLD PENSION SYSTEM IN PLACE OF CONTRIBUTORY PENSION SYSTEM

2130. Shri T. G. Venkatesh

Will the Minister of FINANCE be pleased to state:

(a) whether it is a fact that the newly introduced Contributory Pension System is not beneficial to the employees and so the employees unions are requesting Government to re-introduce the old pension system in its place, if so, the details thereof; and

(b) whether any representation has been received in this regard by Government, if so, the details thereof and the stand of Government in this regard?

ANSWER

The Minister of State in the Ministry of Finance
(Shri Santosh Kumar Gangwar)

(a) & (b) National Pension System (NPS), which is a contributory pension system, has, inter alia, the following features which benefit the employees:

• NPS is a well designed pension system managed through an unbundled architecture involving intermediaries appointed by the Pension Fund Regulatory and Development Authority (PFRDA) viz. Pension Funds, Custodian, Central Record keeping and Accounting Agency, National Pension System Trust, Trustee Bank, Points of Presence and Annuity Service Providers. It is prudently regulated by PFRDA which is a statutory regulatory body established to promote old age income security and to protect the interests of subscribers of NPS.
• Dual benefit of Low Cost and Power of Compounding– The pension wealth which accumulates over a period of time till retirement grows with a compounding effect. The all-in-costs of the institutional architecture of NPS are among the lowest in the world.
• Tax Benefits– Tax benefits are available to the NPS subscribers under various provisions of the Income- tax Act, 1961.
  Transparency and Portability is ensured through online access of the pension account by the NPS subscribers, across all geographical locations and portability of employments.
• Partial withdrawal– Subscribers can withdraw up to 25% of their own contributions towards their pension account, before attaining superannuation age for certain specified purposes subject to certain conditions.

Representations have been received from certain quarters regarding the implementation of NPS which, inter alia, include the demand that NPS may be scrapped and the Government may revert to old defined benefit pension system. However, there is no proposal to replace the NPS with old pension scheme in respect of Central Government employees recruited on or after 01.01.2004.

Source: RAJYA SABHA

  

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7th Pay Commission Allowances and Anomaly Committee reports – Minister replies that Allowances Committee is finalising its report

7th Pay Commission Allowances and Anomaly Committee reports – Minister replies that Allowances Committee is finalising its report

Rajya Sabha press release on Ministers reply regarding finalising the 7th CPC Allowances Committee report.

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

RAJYA SABHA

STARRED QUESTION No. 2986

TO BE ANSWERED ON TUESDAY, THE 28th MARCH, 2017

CHAITRA 7, 1939 (SAKA)

ALLOWANCE OF GOVERNMENT EMPLOYEES

2986. SHRI A. VIJAYAKUMAR
SHRI RAM KUMAR KASHYAP:

Will the Minister of Finance be pleased to state:

(a) Whether Government has formed a Committee for taking decision about the allowances to the Central Government employees and removal of anomalies in their pay scales announced by the Seventh Pay Commission;

(b) if so, whether the Committee has submitted its report;

(c) if so, the main features thereof and if not, the reasons for delay in submission of report;
and

(d) the time by which recommendations of Seventh Pay Commission regarding the allowances are proposed to be implemented?

ANSWER

MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI SANTOSH KUMAR GANGWAR)

(a) to (d): The Committee on allowances has been constituted vide order dated 22.07.2016 to examine and make recommendations as to whether any changes in the recommendations of the 7th CPC relating to allowances are warranted and if so, in what form. A separate anomaly committee at National Level has also been set up, vide O.M. dated 09.09.2016, to settle the anomalies arising out of the implementation of the 7th CPC recommendations.

The National Anomaly Committee has made recommendations on the calculation methodology of the Disability Pension for Defence forces personnel. The Committee on allowances has received a large number of demands on allowances and even now receiving such demands. All the demands have been diligently examined. The Committee has already held 13 meeting so far and interacted with the representatives of Central Nodal Ministries, National Council (Staff Side), Joint Consultative Machinery (JCM) and officers and representatives of employee associations of Ministry of Health and Family Welfare, Home Affairs, Railways, Defence and Department of Posts. The Committee is now in the process of finalizing its Report. Decisions on implementing the Report will be taken after the Report is submitted by the Committee.

Source : Rajya Sabha

  

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Gramin Dak Sevak(GDS) Some Facts & Figures Indian Postal Service

Gramin Dak Sevak(GDS) Some Facts & Figures Indian Postal Service

This video presents 13 facts about Gramin dak sevak, their roles, their occurrences and their efforts.

GDS, BPM - the Office of Branch Post Office Under the Sub Office/Head Office in India Post

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Not Perform Any activities in Finacle on 01.04.2017 without Specific Order

Not Perform Any activities in Finacle on 01.04.2017 without Specific Order

Dear SPOC

Trail mail forwarded for information please. Please advice SOLs not to perform any activities in Finacle even non financial transactions on 1.4.2017 without any specific orders from this office 

Thanks & Regards

Circle Processing Centre (CBS)

Tamilnadu Circle

Contact No. 044 - 28295964 / 65

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Important- Annual interest Run-Request to instruct SOLs to verify all unverified transactions

Important- Annual interest Run-Request to instruct SOLs to verify all unverified transactions

You are all aware that we are nearing the end of the financial year 2016-2017 & annual interest calculation and posting are due for Savings Accounts- SB, SSA, PPF, NSS 87 & NSS 92 .

It is requested to kindly cause to instruct all CBS Offices to verify all the accounts which have been modified but verification is pending since interest posting for such accounts will fail resulting in complaints and tickets being raised for non-posting of interest.


Unverified accounts can be listed by respective offices using the HAFI menu. Following are the fields to be entered in HAFI for finding out unverified transactions:

SOLID: Default SOLID
Ref. No.: Enter one or two spaces
Table Short Name: GAM
General Ledger Subhead Code: 30001
Authorize: Select the radio button 'Not Authorized'
Function Code: M
Following are the GL Heads
SB - 30001
PPF - 33001
NSS87 -30021
NSS92 -30022
SSA - 30042

Accounts thus identified have to verified to ensure interest is calculated and posted in them on 1st April 2017

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SB Order 02/2017 : Revision of Interest rates for Small Savaings Schemes - Department of Posts

SB Order 02/2017 : Revision of Interest rates for Small Savaings Schemes - Department of Posts

Download

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CBDT notifies new IT Return Forms for AY 2017-18

CBDT notifies new IT Return Forms for AY 2017-18

CBDT notifies new Income Tax Return Forms for AY 2017-18: Introduces one page simplified ITR Form-1(Sahaj) 

The Central Board of Direct Taxes has notified Income-tax Return Forms (ITR Forms) for the Assessment Year 2017-18. One of the major reforms made in the notified ITR Forms is the designing of a one page simplified ITR Form-1(Sahaj).  This ITR Form-1(Sahaj) can be filed by an individual having income upto Rs.50 lakh and who is receiving income from salary  one house property / other income (interest etc.) . Various parts of ITR Form-1 (Sahaj) viz. parts relating to tax computation and deductions have been rationalised and simplified for easy compliance. This will reduce the compliance burden to a significant extent on the individual tax payer. This initiative will benefit more than two crore tax-payers who will be eligible to file their return of income in this simplified Form.  

Simultaneously, the number of ITR Forms have been reduced from the existing nine  to seven forms. The existing ITR Forms ITR-2, ITR-2A and ITR-3 have been rationalized and a single ITR-2 has been notified in place of these three forms. Consequently, ITR-4 and ITR-4S (Sugam) have been renumbered as ITR-3 and ITR-4 (Sugam) respectively.

 There is no change in the manner of filing of ITR Forms as compared to last year. All these ITR Forms are to be filed electronically. However, where return is furnished in ITR-1 (Sahaj) or ITR-4 (Sugam), the following persons have an option to file return in paper form:-

(i) an individual of the age of 80 years or more at any time during the previous year;   or

(ii)  an individual or HUF whose income does not exceed five lakh rupees and who has not claimed any refund in the return of income,

The notified ITR Forms are available on the department’s official website www.incometaxindia.gov.in

Source: PIB

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7th CPC Fixation of Pay in case of employees who seek transfer to a lower post under FR 15(a): Clarification by DoPT OM dated 31.03.2017

7th CPC Fixation of Pay in case of employees who seek transfer to a lower post under FR 15(a): Clarification by DoPT OM dated 31.03.2017

7th CPC Fixation of Pay in case of employees who seek transfer to a lower post under FR 15(a): Clarification by DoPT OM dated 31.03.2017

No.12/1/2016-Estt(Pay-I)

Government of India

Ministry of Personnel, Public Grievances and Pensions

Department of Personnel and Training

North Block, New Delhi

Dated the 31st March, 2017

OFFICE MEMORANDUM

Subject : Fixation of pay in case of employees who seek transfer to a lower post under FR 15(a)- clarification regarding.

The undersigned is directed to refer to this Department’s OM No.16/4/2012-Pay-I dated 5th November, 2012  read with OM No.13/9/2009-Estt.(Pay-I) dated 21st October, 2009, whereby clarification was issued by this Department for fixation of pay in case of employees seeking transfer to lower posts under FR 15(a) subsequent to the implementation of the recommendations of 6th CPC and CCS(RP) Rules, 2008. It was clarified therein that in case of transfer of a Government servant to a lower Grade Pay under FR 15(a) on his/her own request w.e.f. 1.1.2006, the pay in the Pay Band will be fixed at the stage equal to the pay in Pay. Band drawn by him/her prior to his/her appointment against the lower post. However; he/she will be granted the Grade Pay Of lower post. Further, in all cases, he/she will continue to draw his/her increment(s) based on his pay in the Pay Band +Grade Pay (lower).

2. Consequent upon the implementation of 7th CPC Report and CCS(RP)Rules, 2016, the concept of new Pay Matrix has replaced the existing Pay Bands and Grade Pays system. Accordingly, in partial modification of this Department's OMs dated 5th November, 2012 and 21st October, 2009 ibid: the method of pay fixation in respect of a Government Servant transferred to a lower post under FR 15(a) on his/her own request w.e.f 1.1.2016 will be as under:

‘In case of transfer to a lower Level of post in the Pay Matrix under FR 15(a) on his/her own request w.e.f. 1.1.2016, the pay of the Government Servant holding a post on regular basis will be fixed in the revised pay structure at the stage equal to the pay drawn by him/her in the higher Level of post held regularly. If no such stage is available, the pay will be fixed at the stage next below in the lower Level with respect to the pay drawn by him/her in the higher Level of post held regularly and the difference in the pay may be granted as personal pay to be absorbed in future Increment(s). If maximum of the vertical range of pay progression at the lower Level in which he/she is appointed, happens to be less than the pay drawn by him/her in the higher Level, his/her pay may be restricted to that maximum under FR 22(I)(a)(3).

3. All Ministries/Departments are requested to revise the Terms/Conditions of such transfer, if any, in line with para 2 above.

4. In so far as persons serving in the Indian Audit and Accounts Department are concerned, these orders issue after consultation with the Comptroller & Auditor General of India.

5. This order takes effect from 1.1.2016.

6. Hindi version will follow.

sd/-

(Pushpender Kumar)

Under Secretary to the Government of India

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Filing of assets details by Government officials

Filing of assets details by Government officials

The Section 44 of the Lokpal and Lokayuktas Act, 2013 requiring declaration of assets and liabilities in respect of public servants, their spouses and dependent children has been amended by the Lokpal and Lokayuktas (Amendment) Act, 2016 on 29.07.2016. The Amended Act shall be deemed to have come into force on 16.01.2014. The amended Section 44 reads as:

“44. On and from the date of commencement of this Act, every public servant shall make a declaration of his assets and liabilities in such form and manner as may be prescribed”.

The Government had introduced the Lokpal & Lokayuktas and other related Law (Amendment) Bill 2014, which inter-alia proposes to amend certain provisions of the Lokpal and Lokayuktas Act, 2013 so as to provide for situations where the composition of the Selection Committee is deficient/incomplete due to absence of Leader of Opposition in the Lok Sabha, etc.

This was stated by the Minister of State in the Ministry of Personnel, Public Grievances and Pensions and Minister of State in the Prime

PIB

 Minister’s Office Dr. Jitendra Singh in a written reply to a question by Shri A. Vijayakumar in the Rajya Sabha today.

Source :

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Expected DA July 2017 - AICPIN for February 2017

Expected DA July 2017 - AICPIN for February 2017

All India Consumer Price Index for Industrial Workers (BY 2001=100) for the month of February 2017 released by the Labour Bureau today.

The All-India CPI-IW for January 2017 remained stationary at 274 (Two hundred and Seventy four).

The Labour Bureau today published the magix number of AICPIN for the calculation purpose of Dearness Allowance and Dearness Relief for the existing and retired employees of Central Government.

For more details, Click the link to view the Press Release

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7th Pay Commission report on revised allowances:

7th Pay Commission report on revised allowances: Announcement likely after April 12

Revised allowances including house rent allowance (HRA) will likely be announced for the central government staff after the ongoing Budget session of Parliament is over on April 12.

The additional allocation required from the general Budget could be around R15,000 crore in 2017-18.

Revised allowances including house rent allowance (HRA) will likely be announced for the central government staff after the ongoing Budget session of Parliament is over on April 12. The finance secretary-led panel, which is giving final touches to the reworked allowances based on the 7th pay panel’s recommendations, will hold its final meeting shortly, sources told FE. The panel met for over three hours on Wednesday to deliberate on the subject. “Decisions are broadly taken on allowances pending a final review. But these will be announced only after current Budget session ends on April 12 to avoid any controversy,” another source said. In the case of the employees in metro cities, the panel was considering to make HRA a little more generous than the CPC’s award. Taking note of employees’ representations, the finance secretary-led panel was looking at HRA of 30% of basic pay for those in cities with a population of over 5 million, against 24% recommended by CPC. In the Sixth CPC award period (2006-2015), HRA was 30% for these cities. HRA accounts for about 60% of the total allowances bill.

The secretaries’ panel is reviewing the commission’s recommendations pertaining to allowances including rationalisation of some 196 existing benefits. The pay panel has suggested the abolition of 52 benefits and merger of 36 with existing ones to end their separate identities. The financial implication of revised allowances would be broadly in line with the CPC’s estimate of around R29,300 crore (including for the railways) in the first year. While the revised pay and pension was implemented from January 1, 2016, allowances will be implemented prospectively. The delayed implementation of allowances have saved the government nearly R33,000 crore in 15 months.

With just R4,500 crore additional allocation in the Budget (excluding armed forces for which no separate data is usually provided) for allowances and assuming R7,600 crore expenditure would be borne by the railways, the additional allocation required from the general Budget could be around R15,000 crore in 2017-18. “This additional requirement could be met largely from savings from allocations made to various departments for the year,” a third source said. The Union Budget size is R21.47 lakh crore for next fiscal year.

On June 29, 2016, the government accepted the pay- and pension-related recommendations of CPC for over 10 million central government staffers and pensioners, entailing additional cost of R84,933 crore in 2016-17. In the 2017-18 Budget, the government has not explicitly provided for additional costs to be incurred after implementation of the revised allowances under CPC. The Centre’s allowance expenditure is pegged at R69,222 crore (excluding defence) in FY18, just 7% higher than R64,677 crore in FY17, factoring in business-as-usual growth in expenditure.

Many government employees see the formation of the secretary panel itself as a delaying tactic. The delay in implementation has helped the government save on additional costs towards allowances in 2016-17 and redeployed the resources to give a spending boost of R36,000 crore to various programmes. Unlike pay and pension, allowances are paid prospectively. Salary revision took effect from January 1, 2016. The pay panel had given an overall 23.55% increase in pay, allowances and pensions, including 16% pay rise, 63% surge in allowances and 23.6% increase in pension.

 

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Seventh CPC Lok Sabha Q & A

Seventh CPC Lok Sabha Q & A

Government Of India
Ministry Of Finance
Department Of Expenditure

LOK SABHA

UNSTRARRED QUESTION NO.4881

TO BE ANSWERED ON FRIDAY, THE 31ST MARCH, 2017
CHAITRA 10, 1039 (SAKA)

SEVENTH CPC

QUESTION

4881. DR.P.VENUGOPAL:

Will the Minister Of Finance be pleased to state:

(a) Whether the Government has accepted the Seventh Central Pay Commission (CPC) panel clause on increment cut and if so, the details thereof; and

(b) whether there is no clarity on the parameters which would form the basis of monitoring the performance of an employee and if so, the details thereon?

ANSWER
MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI ARJUN RAM MEGHWAL)

(A). The 7th Central Pay Commission has retained rate of annual increment at 3 percent. The 7th CPC also recommended withholding of annual increments in the case of those employees who are not able to meet the benchmark either for MACP or a regular promotion within the first 20 years of their service. These recommendations have been accepted by the Government.

(b). The 7th CPC has observed that it is essential to have a linkage between Departmental Results Framework Documents (RFD) and Annual Appraisal Performance Report (APAR) and has suggested the following modification in the existing APAR system for determining Performance Related Pay:

(i) Alignment of Objectives: The Ministry’s Vision/Mission needs to be translated into a set of strategic objectives for each department and these objectives need to be cascaded by the Department Head to his subordinates and subsequently down the chain.

(ii) Prioriting Objectives, Assigning Success Indicators and their Weights: Objectives reflected in the APAR should be prioritized and assigned weights along with success indictors or key performance indicators. The Commission recommended 60 percent weight on work output and 40 Percent weight on personal attributes, instead of existing 60 Percent weight on personal attributes and only 40 percent weight to work output.

(iii) No Ex-ante Agreement: The indicators in the APAR of an officer/staff will need to be discussed and set with the supervisor at the beginning of the year.

(iv) Timelines: The timelines for RFD may be synchronized with the preparation of the APAR so that the targets set under RFD get reflected in individual APARs in a seamless manner.

(v) Online APAR System: The Commission recommended introduction of online APARs system for all Central Government Officers/Employees.

Source: Lok sabha

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NCJCM Staff Side – Brief of the meeting held with the Cabinet Secretary

NCJCM Staff Side – Brief of the meeting held with the Cabinet Secretary

No.NC/JCM/2017

Dated: March 30, 2017

All Constituents of the
NC/JCM(Staff Side)

Dear Comrades!

Sub: Brief of the meeting held with the Cabinet Secretary

I met the Cabinet Secretary on 28th March, 2017 and shown anguish about the inordinate delay in resolution of long pending demands of the Central Government Employees, and subsequently handed him over a letter on the subject matter on the next day.

The Cabinet Secretary given us assurance that, he is already pursuing these issues, and though there had been some delay in finalization of the allowances, report of the Committee on Pension has already been submitted to the Cabinet, NPS Committee is already on its job and we would try to resolve the pending issues within a short period.

He also expressed his apprehension that, MCD elections may result in some delay, but at the same time, he assured that, as soon as he gets report of the Committee on Allowances, that will immediately be forwarded to the Cabinet, and after approval of the Cabinet, if need be, we would take necessary permission from the Election Commission.

This is for your information.

Source: NCJCM

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Government seeks Powers to levy GST on all Rental Income

Government seeks Powers to levy GST on all Rental Income

GST rate on housing is expected to be pegged at 18% with a final decision expected to be announced over next few weeks.

The government is arming itself with powers to levy goods and services tax (GST) on all rental income but is unlikely to impose the tax on individuals renting out homes. Currently, service tax is levied on rental income from commercial property, but not levied on residential property.

The Central GST (CGST) Bill — one of the four legislations introduced in Parliament — provides that any lease or letting out of the building, including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services.

Waman Parkhi, a senior tax consultant at KPMG, however, said that in the final rules, the government may exempt residential rental income from GST. The government has introduced the bill which will be followed by detailed rules where exceptions and exemptions are likely to be built in, he said. If the existing system of not taxing rental incomes from residential property under service tax has to be continued, then the same provision of exemption has to be introduced in GST too.

“Any law has to be read with the rules. It should not be seen in isolation,” said MS Mani, senior director at Deloitte. He said that at best the government can impose GST on residential property taken on rent by companies, which can then use it as a tax credit. In any case, GST kicks in at Rs 20 lakh and only some residential property fetches that kind of annual rent.

GST, which is likely to be rolled out from July 1, will subsume central excise, service tax and state VAT among other indirect levies on manufactured goods and services. A senior urban development ministry officer clarified that GST will not lead to any additional tax on end-users. He said finance ministry has already accepted it in principle.

GST rate on housing is expected to be pegged at 18% with a final decision expected to be announced over next few weeks. Developers and tax experts said this rate will be acceptable to all the stakeholders as it will not lead to any increase in the final price of property. CREDAI president Getamber Anand said that at present the levy is around 12% of project cost paid as excise and Vat. In addition, at the time of sale, buyers pay around 6% of the price as service tax and Vat. So, the total net outgo is around 18%.

At present, while levying service tax on constructed house, an abatement of 60% of the total value is allowed to exclude the value of land and other goods such as bricks, cement and other material from the ambit of service tax. But under the new regime, a consultant said, this would not be required.
Affordable housing is exempted from service tax. To pass on current benefits to buyers, Parkhi said that GST on the ready to move-in houses in the affordable segment will have to be pegged at zero. The GST Bill has also clearly defined that the tax will not be levied on sale and purchase of immovable property like land, house and other real estate assets, which are not under construction.

Source: ET

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Filing Income Tax Returns to be less Painful as Government simplifies ITR Forms

Filing Income Tax Returns to be less Painful as Government simplifies ITR Forms

A crisp income tax form for salaried individuals will be introduced from April 1, doing away with some columns to simplify the filing of returns.

Individuals with salary and interest income will have to fill fewer columns as some of these for claiming income deductions have been clubbed in ITR1 form called ‘Sahaj’.

In the form for Assessment Year 2017-18, deductions claimed under different sections of Chapter VIA have been removed and only mostly used ones have been included.

“Columns that will remain include those for claiming deductions under Section 80C, mediclaim (80D). Those individuals who want to show deductions under other heads can do so by selecting an option,” an official told PTI.

Currently, the ITR 1/Sahaj has 18 different columns for claiming deductions under Section 80 of the Income Tax Act.

Under section 80C, a deduction of Rs 1.5 lakh can be claimed from total income for investments in LIC, PPF and repayment of housing loan.

Section 80D provides for tax deduction from the total taxable income for the payment of medical insurance premium. This deduction is over and above the deduction under Section 80C.

“The forms would be notified by this month end as we want assessees to start filing returns from April onwards,” the official added.

The move is aimed at encouraging more number of people to file returns. Currently, only 6 crore out of 29 crore persons holding permanent account number (PAN) file income returns.

The current 3-page form is simplified version of an income tax return form after removing mandated disclosure of foreign trips and dormant bank accounts introduced two years back.

People with an income of more than Rs 50 lakh per annum and who own luxury items like yacht, aircraft or valuable jewellery will continue to disclose these expensive assets with the I-T department in the ITRs.

The e-filing facility for ITR-1 is likely to be enabled from April 1 and ITRs can be filed till the stipulated deadline of July 31.

Post July 1, as per amendments to the Finance Bill 2017 as passed by the Lok Sabha, it would become mandatory for an assessee to provide the Aadhaar number or the number showing that he has applied for Aadhaar in the ITR.

Also the efiling website would have an online tax calculator to help assessees determine their tax liability.

ITR 1-SAHAJ, 2 and 2A can be used by individual or Hindu Undivided Families whose income does not include income from business.

ITR 4S – SUGAM can be used by an individual or HUF whose income includes business income assessable on presumptive basis.

Source: ET

  

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Government may merge two Large Banks, says Vinod Rai

Government may merge two Large Banks, says Vinod Rai

Banks Board Bureau chairman Vinod Rai said that the government is keen on bank consolidation, but not before building strong balance sheet by addressing the bad debt problem, and in that case merger may happen first between two large banks.

Vinod Rai was speaking at the Credit Suisse annual investors conference, of which the foreign brokerage made a note to clients.

“The government is waiting for the resolution of the NPL (non-performing loans) issue and wants improvement in balance sheet strength before going ahead with the consolidation process. The strength of balance sheet is a hurdle as there are not too many large strong PSUs that can be merged. Therefore, initially the government may look to merge two large banks,” the report said.

It would be preferable to create “strong regional entities”, but the biggest challenge in any merger would continue to be how to reduce the redundancies in terms of branches and employees.

“To address this, various options are being considered such as branch swapping, early VRS (voluntary retirement schemes) and going slow on fresh hiring,” Credit Suisse wrote, attributing to Rai.

The government has already started the bank consolidation process by merging five associate banks with parent State Bank of India, effective April 1. The associate banks have also rolled out VRS schemes for their employees.

Rai’s comments at the summit is contrary to the general expectations in the market that smaller banks would be merged with larger banks. The plan, eventually, is to create a few global banks through consolidation.

However, big bank consolidation talks are not new. In early 2000s, there were some indications that Union Bank could be merged with Bank of India, both Mumbai based, but no concrete steps were taken by the government in this regard.

According to Credit Suisse, government is looking at industry-wide restructuring package, instead of company-wise.

“The government is also focusing on an industry-wide restructuring package instead of company-wise, given that stress is concentrated in a few sectors like infra and steel,” the report said.

The aim of the new restructuring move would be to improve decision making process, Rai said.

“For the resolution of problem loans, the government is looking at various structures including an increase in the number of oversights committees and allowing larger flexibility in the existing mechanisms, as decision-making continues to be the biggest obstacle to resolution,” the report said.

Vinod Rai said the government would be looking for rights issue in fiscal 2017-18 as the budgeted capital allocation is low and can be supplemented by minority shareholders. The budget provisioned for Rs 10,000 crore in the next fiscal, against Rs 25,000 crore in fiscal 2017. The government’s Indradhanush plan envisages infusion of up to Rs 70,000 crore in public sector banks in phases till fiscal 2019. The government, however, had indicated there would be more capital if there was a need.

“Our interaction with Mr Rai highlights that the resolution of stressed accounts will involve deep haircuts and with NPL coverage for banks low at 40%, this means higher provisioning and capital requirement for banks. Remain cautious on corporate lenders,” Credit Suisse said.

Source:BS

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