Money & Banking
Interest coverage ratio witnessed recovery in FY2017, says report

Banks are currently dealing with a challenging problem of stressed assets that has adversely impacted their profitability. As a precautionary measure, the Reserve Bank of India (RBI) wants banks to be prudent in their assessment of possible future stress in their asset portfolio, for which provisions needs to be made. In this regard, the RBI recently directed the banks to review various financial parameters of borrowers with the objective of framing policy for making provisions for standard assets. One such suggested parameter to be looked at closely is interest coverage ratio (ICR) that help understand and evaluate present and potential risks of borrowers. In general, the ICR witnessed a recovery in FY2017 after a continuous decline in the earlier period, says a research note.

In the report, CARE Ratings Ltd, says, "With regard to classification based on net sales, companies in the lower turnover bracket (net sales < Rs100 crore) had low interest cover and vice-versa. The classification of companies on their debt levels indicated that companies with higher debt (> Rs10,000 crore) were witnessed to have deteriorating debt servicing capabilities, which is a concern. Sectors like FMCG, automobile and ancillaries, pharmaceuticals and drugs, chemicals, consumer durables, construction material are better placed with regard to debt servicing capabilities."

In its analysis of 2,183 companies across industries excluding banks, oil exploration and refineries, finance and IT firms, the ratings agency found that interest payment capabilities did come down till FY2016, but improved marginally in FY2017. "For all years, the ICR is above 3 indicating comfortable debt servicing capability of the corporates in these years. However the interest coverage ratio declined considerably from 4.47 in FY2013 to 3.68 in FY2016, improved marginally to 3.84 in FY2017," it says.

According to the ratings agency, the recovery may be attributed to a combination factors. It says, "First interest rates have come down in FY17 which has lowered the outflow on this score. Also companies have been substituting cheaper credit points (CPs) with bank credit to take advantage of lower market rates compared with bank MCLRs. Second, overall borrowing by the corporate sector has been subdued due to a drop in investment. Third, as per CARE’s study on corporate results for FY2017, growth in profits also improved for a select set of companies relative to FY2016."

 

 

 

 

 

 

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Under pressure from consumers on high charges, SBI reduces NEFT, RTGS charges by up to 75%
Following baby steps by Reserve Bank of India (RBI), state-run State Bank of India (SBI) too is slowly waking up to public anger about rising bank charges. On Thursday, the state-run lender decided to reduce charges by up to 75% on national electronic funds transfer (NEFT) and real time gross settlement system (RTGS), while waiving charges on interbank mobile or immediate payment service (IMPS) for transfers of up to Rs1,000.
 
In a release, SBI says, "The reduced charges will be applicable from 15 July 2017 on the transactions done through internet banking (INB) and mobile banking (MB) services offered by the bank."
 
As on 31 March 2017, SBI had 3.27 crore customers using internet banking and nearly 2 crore customers using mobile banking. Along with customer convenience, the reduction in charges will attract more customers towards transacting digitally, the bank says.
 
Here are new reduced charges of SBI on NEFT and RTGS...
 
 
 
Last week, following Moneylife Foundation's persistent battle in support of bank customers, the RBI issued a circular to reduce liability of customers in unauthorised electronic banking transactions. The circular also asks banks to put in place a mechanism to record and address customer grievances or pay compensation in a systematic and timely manner.
 
RBI’s action comes two days after a unique #TweetMorcha, which appealed to Prime Minister Narendra Modi with the hashtag #BankSeBachao. This was preceded by a two-month campaign, including an online petition that garnered over 2.14 lakh signatures, several complaints from customers, letters and memorandums. 
 
Moneylife Foundation has been at the forefront of speaking up for bank customers. Earlier, on 4th July, thousands of people joined the unique #TweetMorcha against arbitrary bank charges, with the hashtag #BankSeBachao trending at top spot in India and also featuring in worldwide trends that afternoon. People from across the globe sent tweets to @NarendraModi and @ArunJaitley with the hashtags of #BankSeBachao and #TweetMorcha. 
 
An online petition launched by us on Change.org has garnered more than two lakh signatures. (Sign the Petition).
 
The group, including well known NGOs, trade unions, finance editors and experts, had on 12 May 2017 presented a 1,100 page printout of over 100,000 signatures to an online petition at Change.org to M Veerappa Moily, Chairman of Parliamentary Standing Committee on Finance.
 
The Moneylife Foundation Campaign has certainly ruffled several feathers at the Reserve Bank as  can be seen by some decisions taken by the regulator. This includes limiting customer liability, asking banks to share details of transactions in passbook or statements, expanding the role of the Banking Ombudsman. However, there is so much more that the Reserve Bank needs to do, like making its Consumer Charter more effective and effectively curtailing the practice of mis-selling and unfair service charges.

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COMMENTS

manoharlalsharma

4 months ago

Nice tweeter idea i would like to suggest to repeat to oppose INCOME-TAX as activation of GST and for hotel should be charge GST above Rs/-1000/- but I found ordinary hotel are charging 18% also to be taken as subject to oppose./thanks

kirtida t ved

4 months ago

As the country moves towards digitisation, there should be no charges if electronic media is used for funds transfer. Such services should be free from GST and other bank charges. GST @ 18% is too costly as electronic media is a necessity.

Trivendra

4 months ago

It is pinch of salt. Big hole penalty for minimum monthly balance rs 115/-. Two ATM machines kept in same location, one metro another non metro, classification on what grounds?

Beena Kothari

4 months ago

But there are certain charges which defies logic and cant be justified under any circumstances. I wish the situation changes completely and it shall happen as long as customers are educated, demanding return for their money and united..

Gurudutt Mundkur

4 months ago

Congratulations to Moneylife Foundation!
However, where NO Bank employee MANUAL INTVERVENTION is required, I firmly believe the charges must be nil.

SuchindranathAiyerS

4 months ago

Since inception of Modern Banking, it is the obligation of the Banker to provide a statement of Account to the customer to ensure his confirmation of account activity.SBI charges Rs 115/-plus GST per forty transactions on the very first statement of account. I was charged a fortune for my annual statement of account. Ombudsman in Bangalore made a laughable format rejection while the Chairman bounced my complaint to the Local Head Office who have done nothing about it.

Vijayakumar Gaari Abbaayi Karthik

4 months ago

The table above.. To whom it is helping? Middle class? Rs 2 to 1

DeMo Effect: Digital India leapfrogs 3 years in just 7 months
Owing to demonetisation and initiatives to promote card transactions on point of sales (PoS) terminals, card and digital transactions have increased stupendously post November 2016. After analysing data for PoS sales and digital transactions, it appears that demonetisation has brought India at least three years ahead in digital payments, says a research note.
 
In the report, State Bank of India (SBI) says, "If demonetisation had not happened, it would have taken three years more for credit plus debit cards transactions on PoS terminals to reach the current level of Rs70,000 crore, assuming a yearly growth rate of 25%. Post demonetisation, Indian banks have been able to set up 11.8 lakh extra PoS terminals. We believe that increasing number of PoS terminals and ease of doing digital transaction will increase this level further."
 
According to the report, similar trends are observed in case of usage of pre-paid instruments, including m-Wallet, PPI cards, and paper vouchers and mobile banking too. Prepaid payment instruments (PPIs) witnessed a sharp growth, with transactions worth Rs10,700 crore in May 2017, compared to Rs5,100 crore in November 2016.  
 
Seven months after demonetisation, the transaction value is quite large and approximately double of what it had been in the corresponding month and period last year, the report says.
 
SBI feels that such digitisation will result in lower inflation. SBI estimated a simple regression model by taking headline consumer price index (CPI) inflation as dependent variable and credit plus debit cards transactions on PoS terminals in rupees billion (DCPoS) as independent variable. 
 
 
"The estimated model was statistically significant and the results indicate an increase in Rs 100 billion transaction by credit plus debit cards at PoS terminals will lead to around 1.1% decline in CPI inflation, ceteris paribus. This augurs well for a lower inflation regime going forward. We also believe that combined with a structural change in food inflation regime that we are witnessing
India is well poised for a favourable growth inflation mix in the coming years!" SBI added.

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COMMENTS

SRINIVAS SHENOY

4 months ago

I feel if proper payment security measures are in place, the volume of card transactions will significantly improve in the days to come.

Beena Kothari

4 months ago

Its a good sign. I favour digital transactions in most of the cases. But it cant be undertaken just by learning to do it. One must be educated about how to handle those products without hurting themselves due to ignorance.

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