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WEEKLY FINANCIAL SNIPPETS- 08/12/2018

  1. RBI TO LINK INTEREST RATES TO EXTERNAL BENCHMARKS RATES : Reserve Bank of India (RBI) has proposed that banks will now have to link the interest rates charged by them on loans to the external benchmarks instead of the present internal benchmarks for better transmission of policy rates. According to the proposal the loans can be benchmarked to any one of the following: 1. RBI Policy Repo Rate, 2. Government of India 91 days treasury bill yield as fixed by Financial Benchmarks India Pvt Ltd (FBIL), 3. Government of India 182 days Treasury bill yield as fixed by FBIL, or 4. Any other benchmark market rate fixed by FBIL. However, the spread over and above the benchmark rate is to be wholly decided by the bank at its discretion and it should remain unchanged during the tenor of the loan, unless the borrower’s credit assessment undergoes a substantial changes.
  1. PERMISSION FOR NEW BRANCHES FOR URBAN CO-OP BANKS RESTRICTED BY RBI: In a move to ensure better professionalism and governance in co-operative sector, RBI has put a condition that Urban Cooperative Banks(UCBs)  will be allowed to open new branches only if they amend laws to set up a Board of Management (BoM). A Board of Management be constituted in every UCB  in addition to Board of directors with a view to strengthening the governance.
  1. RBI LAYS DOWN NORMS ON LOAN SYSTEM FOR LARGE BORROWERS: The Reserve Bank of India has said that borrowers with an aggregate Fund Based working capital limit of Rs 150 crore and above will need to have at least 40% in loan component from April 1, 2019. And this would go up to 60% by July 2019. The India Rating report said that the impact can be significant for working capital intensive sectors.
  1. RBI EASES NORMS FOR NBFCs TO SECURITISE LOAN BOOKS: A move likely to ease the stress in the NBFC sector facing a crisis of confidence and funds crunch, RBI has relaxed norms for NBFCs to securitise their loan books. As per a notification of the RBI, NBFCs have been permitted to securitise loans of above Five-year maturity after holding them for a minimum period of six months.
  1. INCOME TAX APPELLATE TRIBUNAL SAYS CONVERTING A COMPANY TO LLP IS A TRANSFER HENCE TAXABLE: Earlier Companies and professional were allowed to convert to Limited Liability Partnerships (LLPs) as this was facilitated by the government to attract foreign investors. Under a LLP it was allowed to freely distribute profits to partners as dividend without deducting dividend distribution tax. But  the recent ruling by Income-Tax Appellate Tribunal says that since transfer of companies and professionals into LLP is a transfer, hence the dividend thus transferred to partners is taxable.
  1. THREE NEW PAN CARD RULES COME INTO EFFECT: The Department of Revenue has put into effect new rules with respect to Permanent Account Number (PAN) to check tax evasion and allow more options to tax payers. These 3 new rules are : 1. A resident person other than an individual ( like  an HUF, Firm, Charitable trust et cetra) who enters into a financial transaction of Rs 2.50 lakhs or more in a financial year and who has not been allotted PAN, shall apply for one by May 31  of the next financial year. 2.  A person who is Managing Director, Director, partner, trustee, Karta of such entities mentioned in

Point no 1 and who has not been allotted a PAN no shall apply for one. 3. Mentioning Father’s name in a PAN card will not be mandatory.



This post first appeared on IMPACT OF DEMONITIZATION OF CURRENCY IN INDIA IN 2016, please read the originial post: here

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WEEKLY FINANCIAL SNIPPETS- 08/12/2018

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