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What happened to demonetisation deposits?

A look at the deposit data before, during and after the months of demonetisation shows that Indians haven’t really bothered to take back the cash that the government forced them to deposit in banks through the cash purge. Indeed, deposits are still growing at a healthy pace of over 10% year-on-year.

The accompanying charts show that almost all the demonetisation-induced deposits found their way into demand deposits, essentially current accounts that pay no interest and a small part into savings accounts (paying 4%). That is because during demonetisation, the public was preoccupied with just depositing cash into whatever account they held.

The year-on-year growth in time deposits averaged around 9% before demonetisation and rose to 14% during the demonetisation months. Since then, the growth has tapered off slightly to 10%. But growth in demand deposits rose exponentially to 25% during demonetisation and has averaged 26% in the months after. Demand deposits include current account deposits and the volatile part of savings account balances, while time deposits include fixed deposits and around 80% of savings account deposits of banks

This shows that demonetisation resulted in a permanent improvement in bank deposits while not really inspiring large withdrawals among people in its aftermath. This is why demand deposits are still 26% higher than they were a year ago because whatever money was deposited in banks remains there.

No wonder the country’s largest lender, State Bank of India, was emboldened into cutting its savings rate and expects no big fall in its current account and savings account deposits. The Reserve Bank of India, in an internal study, estimated that excess deposits in banks during the 50 days of demonetisation worked out to Rs4 trillion. Even after considering some tapering off in the two months following demonetisation, the excess deposit works out to not less than Rs3.5 trillion.

This is the stock that banks get to keep if indeed the recent trend in deposit growth is anything to go by. The months following the cash purge saw deposits flow towards more investment-friendly avenues like mutual fund schemes. But eventually even these investments found their way into banks as funds and corporates put their money into current accounts and term deposits

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http://www.livemint.com/Money/ebXI3bmo7NaZ3xt1nKE9nK/What-happened-to-demonetisation-deposits.html

 

 

 

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RBI clears proposal to introduce Rs 200 notes

RBI is likely to start the process of printing the new Rs 200 notes after June, only after the government officially approves this new denomination, says an official

 

The board of the Reserve Bank of India (RBI) has cleared a proposal to introduce banknotes of Rs 200 denomination, two people aware of the development said.

The decision was taken at the RBI board meeting in March, these people said. They didn’t want to be identified as they aren’t authorized to speak to the media.

The process of printing the new Rs 200 notes is likely to begin after June, once the government officially approves this new denomination, said one of the two people cited earlier.

An RBI spokesperson declined to comment.

The move to introduce lower denomination notes comes against the backdrop of the government’s move to rework the currency mix.

On 8 November, it announced the withdrawal of Rs 500 and Rs 1,000 currency notes, amounting to around 86% of currency in circulation of Rs 17.9 trillion.

Since then, RBI has replaced these with the new Rs 2,000 and redesigned Rs 500 bank notes. As on 24 March, currency in circulation was Rs 13.12 trillion, still around 27% off pre-demonetization levels. The government is encouraging digital payments and may not increase currency in circulation to the pre-demonetization level.

On 13 March, RBI lifted all cash withdrawal caps. ATM operators, however, say that there is a paucity of lower denomination banknotes.

So far, the central bank has not revealed how many of the old currency notes it has got back from the public. The window for Indians who were out of the country between 8 November and 30 December ended on Friday.

The RBI board has 14 members. Apart from governor Urjit Patel and four deputy governors, the board also has economic affairs secretary Shaktikanta Das and financial services secretary Anjuly Chib Duggal.

http://www.livemint.com/Industry/IbqZxSMbvhbOg5oAH3VnzJ/RBI-clears-proposal-to-introduce-Rs-200-notes.html

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Tough steps needed to make India more tax-compliant: Arun Jaitley

FINANCE MINISTER Arun Jaitley on Friday said that the government has taken measures to simplify direct and indirect taxes but “some tough steps (are) required” to ensure that India becomes an increasingly tax-compliant society. This will lead to higher resources with the government for spending on infrastructure projects, he said.

“The last few years have seen several significant changes. The opening up of many more sectors, the simplification of the process of attracting investments. I am now in the final stages of doing away with the FIPB (Foreign Investment Promotion Board)… the process of ease of doing business, the process of eliminating all the governmental discretions and resorting to a market mechanism in allocation of all resources… the entire effort to simplify both direct and indirect tax structures,” Jaitley said at the annual session of the Confederation of Indian Industry (CII).

“Some tough steps are required to see that India increasingly becomes a tax-compliant society because higher resource with the state is going to now mean that greater investment in infrastructure and greater investment in rural India, and these are going to be the two primary drivers of growth itself,” he said.

As per data presented by Jaitley in the budget 2017-18, as against estimated 4.2 crore persons engaged in organised sector employment, the number of individuals filing return for salary income are only 1.74 crore. As against 5.6 crore informal sector individual enterprises and firms doing small business in India, the number of returns filed by this category are only 1.81 crore.

Out of the 13.94 lakh companies registered in India up to March 31, 2014, 5.97 lakh companies have filed their returns for Assessment Year 2016-17. The number of individuals and companies filing returns and paying taxes was even lower.

Roughly only about 5.5 per cent of earning individuals in India are within the tax net, while the tax to GDP ratio is 16.6 per cent, lower than the emerging markets economy average of 21 per cent.

On the rates that will be proposed under the Goods and Services Tax (GST) regime, Jaitley said the government will not spring any surprises, as the rates will not be very different from the present level of taxation.

“We are now in final stages of fixing tariffs for different commodities. The formula under which it is being done has also been explained and therefore nobody is going to be taken by surprise, it’s not going to be very significantly different (from present),” he said.

He said companies should pass on to consumers the benefit of reduction in taxes under GST, which will replace the plethora of central and state taxes that currently exist. “Profit is not a bad word…but unfair enrichment is. And therefore the benefit of reduction in taxation is a benefit that consumers are entitled to. And that’s not a principle that can be seriously contested,” he said.

The GST laws approved by Parliament have incorporated an anti-profiteering provision to ensure that the reduction of tax incidence is passed on to the consumers.

The GST Council, headed by Jaitley and comprising representatives of all the states, is scheduled to meet in Srinagar on May 18-19 to finalise tax rates on different goods and services. Fitment will be done by adding the total incidence of current taxation (central plus state levies) and then putting the good or service in the tax bracket closest to it.

On the proposed defence manufacturing policy, Jaitley said, “We are in the advanced stages of formulating a policy where we can ensure that instead of just being buyers… on the strength of technological and other tie-ups, India also becomes a manufacturing economy.” The government wants to reduce imports of defence products and encourage foreign manufacturers to set up plants in India in collaborating with local industries, he said.

“India is the world’s largest arms importer, spending some 1.8 per cent of its GDP on defence. It imports about 70 per cent of defence equipment, a proposition which the government wants to change,” said Jaitley.

 

FINANCE MINISTER Arun Jaitley on Friday said that the government has taken measures to simplify direct and indirect taxes but “some tough steps (are) required” to ensure that India becomes an increasingly tax-compliant society. This will lead to higher resources with the government for spending on infrastructure projects, he said.

“The last few years have seen several significant changes. The opening up of many more sectors, the simplification of the process of attracting investments. I am now in the final stages of doing away with the FIPB (Foreign Investment Promotion Board)… the process of ease of doing business, the process of eliminating all the governmental discretions and resorting to a market mechanism in allocation of all resources… the entire effort to simplify both direct and indirect tax structures,” Jaitley said at the annual session of the Confederation of Indian Industry (CII).

“Some tough steps are required to see that India increasingly becomes a tax-compliant society because higher resource with the state is going to now mean that greater investment in infrastructure and greater investment in rural India, and these are going to be the two primary drivers of growth itself,” he said.

As per data presented by Jaitley in the budget 2017-18, as against estimated 4.2 crore persons engaged in organised sector employment, the number of individuals filing return for salary income are only 1.74 crore. As against 5.6 crore informal sector individual enterprises and firms doing small business in India, the number of returns filed by this category are only 1.81 crore.

Out of the 13.94 lakh companies registered in India up to March 31, 2014, 5.97 lakh companies have filed their returns for Assessment Year 2016-17. The number of individuals and companies filing returns and paying taxes was even lower.

Roughly only about 5.5 per cent of earning individuals in India are within the tax net, while the tax to GDP ratio is 16.6 per cent, lower than the emerging markets economy average of 21 per cent.

On the rates that will be proposed under the Goods and Services Tax (GST) regime, Jaitley said the government will not spring any surprises, as the rates will not be very different from the present level of taxation.

“We are now in final stages of fixing tariffs for different commodities. The formula under which it is being done has also been explained and therefore nobody is going to be taken by surprise, it’s not going to be very significantly different (from present),” he said.

He said companies should pass on to consumers the benefit of reduction in taxes under GST, which will replace the plethora of central and state taxes that currently exist. “Profit is not a bad word…but unfair enrichment is. And therefore the benefit of reduction in taxation is a benefit that consumers are entitled to. And that’s not a principle that can be seriously contested,” he said.

The GST laws approved by Parliament have incorporated an anti-profiteering provision to ensure that the reduction of tax incidence is passed on to the consumers.

The GST Council, headed by Jaitley and comprising representatives of all the states, is scheduled to meet in Srinagar on May 18-19 to finalise tax rates on different goods and services. Fitment will be done by adding the total incidence of current taxation (central plus state levies) and then putting the good or service in the tax bracket closest to it.

On the proposed defence manufacturing policy, Jaitley said, “We are in the advanced stages of formulating a policy where we can ensure that instead of just being buyers… on the strength of technological and other tie-ups, India also becomes a manufacturing economy.” The government wants to reduce imports of defence products and encourage foreign manufacturers to set up plants in India in collaborating with local industries, he said.

“India is the world’s largest arms importer, spending some 1.8 per cent of its GDP on defence. It imports about 70 per cent of defence equipment, a proposition which the government wants to change,” said Jaitley.

Tough steps needed to make India more tax-compliant: Arun Jaitley

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India to see $35-40 billion worth impact investments by 2025: GIIN

GIIN South Asia adviser, Anil Sinha, hopes there will be 25% annual growth rate in impact investments—from $4 billion now to $35-40 billion by 2025

New Delhi: India is projected to see impact investments worth up to $40 billion by 2025 as the country is in a “sweet spot” with high potential to deliver solutions for various problems, according to global grouping Global Impact Investing Network (GIIN).

Based in New York, the GIIN is a not-for-profit group that works to promote impact investments and has around 230 members. Generally, impact investments refer to those made with the aim of having a social and environmental impact along with the investors getting financial returns.

GIIN’s advisor for South Asia, Anil Sinha said, there has been tremendous development in India around impact investing activities in the last five years and the country is in a sweet spot. “In India, about $4 billion has been invested as part of impact investments in about five years. On an average annual basis, it is around $1 billion,” Sinha told PTI in an interview.

India is a place where poverty is high but the potential to deliver solutions is also very high, Sinha said, adding the country can be a global innovation hub for models that can address issues at the base of the pyramid.

“We hope there will be 25% annual growth rate as it (impact investments) grow and it might grow from $4 billion to $35-40 billion in India by 2025,” he said. At current exchange rates, it translates to a range between Rs2,24,000 and Rs2,56,000 crore.

Globally, total assets under management by impact investors is estimated to be about $70 billion, according to Sinha. The financial returns on impact investments is estimated to be around 10% annually.

Sinha, a private sector finance specialist who has served in various roles at the International Finance Corporation (IFC), said impact investments are evolving and their global growth rate is around 25%. He noted that financial inclusion and energy have been dominant areas in the $4 billion impact investment portfolio in India.

GIIN, as a promoter of impact investing activities, is looking to attract more Indian companies to be impact investors. “We are certainly playing a role in defining the role of impact investing and social enterprises. We need to have our own definition of social enterprises,” Sinha said.

http://www.livemint.com/Money/vqqkcjdeUp3O72SsMWQC8H/India-to-see-3540-billion-worth-impact-investments-by-2025.html

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LiveMint: Real Estate Act comes into force today, only 13 states notify rules

Real_Estate_Act_Livemint

New Delhi: The much-awaited Real Estate Act comes into force from Monday with a promise of protecting the right of consumers and ushering in transparency but only 13 states and Union Territories (UTs) have so far notified rules.

The government has described the implementation of the consumer-centric Act as the beginning of an era where the consumer in king. Real estate players have also welcomed the implementation of the Act, saying it will bring a paradigm change in the way the Indian real estate sector functions. The government has brought in the legislation to protect home buyers and encourage genuine private players.

The Real Estate (Regulation and Development) Bill, 2016, (RERA Act), was passed by Parliament in March last year and all the 92 sections of the Act comes into effect from 1 May. “The Real Estate Act coming into force after a nine-year wait and marks the beginning of a new era,” Housing and urban poverty alleviation (HUPA) minister M. Venkaiah Naidu said. The minister said the law will make “buyer the king”, while developers will also benefit from the increased buyers’ confidence in the regulated environment.

“The Act ushers in the much-desired accountability, transparency and efficiency in the sector, defining the rights and obligations of both the buyers and developers,” Naidu said. The developers will now have to get the ongoing projects that have not received completion certificate and the new projects registered with regulatory authorities within 3 months from Monday.

Under the rules, it is mandatory for the states and UTs to set up the authority. However, only 13 states and UTs have so far notified the rules. The states that have notified the rules are Uttar Pradesh, Gujarat, Odisha, Andhra Pradesh, Maharasthra, Madhya Pradesh and Bihar.

The housing ministry had last year notified the rules for five UTs—Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu, and Lakshadweep, while the urban development ministry came out with such rules for the National Capital Region of Delhi. The other states and UTs will have to come out with their own rules.

A HUPA ministry spokesperson said the ministry has been taking up the matter with all the states and UTs for implementation of the Act, requesting them to ensure action as per the provision of the Act within the time limit. The ministry had earlier formulated and circulated the model rules to the states and UTs for their adoption and it is their responsibility to notify the rules, the spokesperson said. Those states which have not notified the rules will face public pressure and even people could approach the court in the matter, he added. On reports that key provisions have been diluted by some states, he said it was pointed out to those states and they have assured the ministry that it would be corrected.

The Indian real estate sector involved over 76,000 companies across the county. Some of the major provisions of the Act, besides mandatory registration of projects and real estate agents, include depositing 70% of the funds collected from buyers in a separate bank account for construction of the project. This will ensure timely completion of the project as the funds could be withdrawn only for construction purposes. The law also prescribes penalties on developers who delay projects. All developers are required to disclose their project details on the regulator’s website, and provide quarterly updates on construction progress. In case of project delays, the onus of paying the monthly interest on bank loans taken for under-construction flats will lie on developers unlike earlier, when the burden fell on home buyers, said real estate service provider JLL India CEO and Country Head Ramesh Nair.

RERA also states that any structural or workmanship defects brought to the notice of a promoter within a period of five years from the date of handing over possession must be rectified by the promoter, without any further charge, within 30 days, he added. If the promoter fails to do so, the aggrieved allottee is entitled to receive compensation under RERA, Nair said.

Other highlight of the Act is imprisonment of up to three years for developers and up to one year in case of agents and buyers for violation of orders of appellate tribunals and regulatory authorities. As per industry data, real estate projects in the range of 2,349 to 4,488 were launched every year between 2011 and 2015, amounting to a total of 17,526 projects with investments of Rs13.70 lakh crore in 27 cities, including 15 state capitals. About ten lakh buyers invest every year with the dream of owning a house.

Real estate industry bodies Confederation of Real Estate Developers Associations of India (CREDAI) and National Real Estate Development Council (NAREDCO) said the implementation of this law will bring paradigm change in the way Indian real estate functions. They expect property demand to rise but supply may get affected in the near term. “It will bring a paradigm change in the real estate sector. It will protect buyers who have purchased flats in the past. The regulator under the RERA should find ways to help complete ongoing projects and provide relief to home buyers,” NAREDCO chairman Rajeev Talwar said.

CREDAI president Jaxay Shah said RERA will increase transparency in the sector and boost confidence of both domestic and foreign investors. He, however, said there will be some “teething problem” initially in implementation of this law. Asked about the impact on prices, Shah said, “Supply will dip during this year but demand will improve as buyers will have increased confidence about investing in the property market” The real estate prices will remain stable now but rates could rise by 10% in the next six months, he added.

http://www.livemint.com/Companies/5P2gvJ8eUojc1vz0fgR2hJ/RERA-comes-into-effect-tomorrow-only-13-states-notify-rules.html

 

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Live Mint: 100 days after demonetisation, have digital payments become more popular?

100 days after the government scrapped 86% of the currency in circulation, where do digital transactions stand? Has the disruptive policy shock been able to change in people’s transaction habits?

Data from the Reserve Bank of India’s electronic payment system indicators can help answer this question. RBI’s monthly database has information on volume and value of transactions through all sorts of payment systems. The digital payment systems commonly used in day to day transactions are: credit and debit cards, mobile wallets, mobile banking and unified payments interface (UPI).

Except for UPI, for which there is data only from November 2016, it is possible to calculate year on year increase in total and average value of transactions for each of these methods. Year on year growth in total value of transactions has displayed a positive trend for all methods except debit cards. The negative growth in value of transactions through debit cards is probably a reflection of ATMs still running dry, as ATM withdrawals accounted for more than 90% of total value of Debit Card transactions before demonetisation. Mobile wallets saw the highest percentage increase in the value of transactions among these methods. Transactions using the newly introduced UPI have increased from Rs90 crore in November 2016 to Rs1,659 crore in January 2017.

This happy picture of increase in value of digital transactions is moderated by the trend in average values of transactions through these methods. Except mobile banking, there has been no year on year growth for most transaction methods in terms of average value of transactions. This is understandable as the cash crunch forced people to go digital for carrying out even small-value transactions.

What is to be made out of these trends? As pointed out previously in a Plainfacts column, most electronic payment methods saw a decline between December 2016 and January 2017, implying that the high growth in digital transactions in the immediate aftermath of demonetisation might not be sustainable. Still, any final verdict on demonetisation’s effect on popularity of digital payment methods should be withheld till the re-monetisation process is complete, .

There can be a useful benchmark to revisit this question at a later stage though. Cash withdrawals through debit cards at ATMs were way ahead of other digital transaction methods such as use of debit/credit cards, mobile wallets or UPI in October 2016, the last month before demonetisation. Using ATMs to withdraw cash had been the default option for people to take care of their transaction demand for money in the pre-demonetisation period. It will be interesting to see if these numbers change significantly once liquidity supply is back to normal.

http://www.livemint.com/Politics/Bk68qA95Y0sdktjZprgUYL/100-days-after-demonetisation-have-digital-payments-increas.html