RBI Monetary Policy August 2020

No Change in Repo Rate

RBI Governor Shaktikanta Das announced that the repo rate will remain unchanged. RBI has taken an accommodative stand to balance growth and inflation.

No further increase in Moratorium

The five-month moratorium on loan payments ends on 31st August 2020. Since no extensions were announced by Governor, we can assume that loan payments need to restart from 1st September 2020. Availing the moratorium leads loan to become bigger due to unpaid interest.

Restructuring of stressed debts of MSME borrowers

RBI allowed stressed MSME borrowers to restructure debt if their loans were classified as ‘standard’ as on 1 March 2020. The MSME loan restructuring scheme was already in place, but, due to the coronavirus, the MSME pain has been aggravated, and this warrants additional support.

Additional liquidity of Rs 5,000 crores announced to be infused in NHB

The policy delivers support to a large range of sectors including NBFCs, HFCs, corporate debt market, debt MF, agriculture and backward districts (for priority sector loans). Increase in LTV for gold loans is another significant step.

Loan to Value (LTV) Ratio incrased for Gold Loans 

In an effort to mitigate the impact of COVID-19 on households, the RBI has increased the permissible loan to value ratio (LTV) for loans sanctioned against pledge of gold ornaments and jewellery for non-agricultural purposes from 75 per cent to 90 per cent till 31 March 2021.

Positive Pay System for Clearing of High Value Cheques 

Introduction of Positive Pay on cheques of Rs. 50,000 and above means that an added layer of security has been provided to the instrument. When you issue a high-value cheque, you can upload its details (such as front and back images) to the bank. When the bank receives the cheque from your beneficiary, it will verify the details uploaded by you.

Compiled by :

CA IP Mukesh Mittal

B.Com., FCA

Insolvency Professional

Independent Director

Certified Concurrent Auditor

9215536951, 9813340495

ca.mukeshmittal@gmail.com

https://camukeshmittal.blogspot.com

DISCLAIMER: The Author have taken utmost care while drafting the article but it may occur that certain error creeps in. This article is for academic purpose and should not be treated as a professional advice. The readers are advised to refer the relevant circular or notification before making any judgment. 

Positive Pay System - New clearing process for high value cheques soon

To increase customer safety in cheque payments and reduce instances of fraud occurring on account of tampering of cheque leaves, the RBI has decided to introduce a mechanism of Positive Pay for all cheques of value ₹50,000 and above.

Under the new mechanism, cheques will be processed for payment by the drawee bank based on information passed on by its customer at the time of issuance of cheque.

Under the Positive Pay system, an account holder shares the details of issued cheque to bank like Cheque Number, Cheque date, Payee name, Account number, Amount etc along with an image of the front and reverse side of the cheque, before handing it over to the beneficiary.

When the beneficiary submits the cheque for encashment, the cheque details are compared with the details provided to the bank through Positive Pay. If the details match, the cheque is honoured.

Under this mechanism, cheques will be processed for payment by the drawee bank based on information passed on by its customer at the time of issuance of cheque. This measure will cover approximately 20% and 80% of total cheques issued in the country by volume and value, respectively.

Operational guidelines for the purpose will be issued, the RBI said.

Compiled by :

CA IP Mukesh Mittal

B.Com., FCA

Insolvency Professional

Independent Director

Certified Concurrent Auditor

9215536951, 9813340495

ca.mukeshmittal@gmail.com

https://camukeshmittal.blogspot.com

DISCLAIMER: The Author have taken utmost care while drafting the article but it may occur that certain error creeps in. This article is for academic purpose and should not be treated as a professional advice. The readers are advised to refer the Bare Acts, Related Material and Rules before making any judgment. 

Change in Policy of Opening of Current Accounts by Bank

Now banks can not open current accounts for borrowers who have a cash credit account with any other banks

If borrowers don’t have any cash-credit account with any bank, they fall under 3 categories:

Loans upto 5 crore from banks:

Those under-5crore loans from banks: for these companies banks can open current Accounts.

Loans above 5 crore but upto 50 crore from banks

For Borrowers with 5-50 crore loans from banking system, only lending banks may open current Account., non lending banks may only open collection accpunts i.e. these accounts can receive money which have to be paid into the cash-credit Account.

Loans above 50 crore from banks:

For borrowers over 50 crore loans, one lender bank has to open an escrow account & only this bank can open current Account. Other banks can open collection accounts , but no Non fund based facility can be given on balances in these accounts; non-lending banks can’t open Current Accounts.Small banks will be hit: For cash-credit &overdraft (CC/OD) facility, banks with over 10% exposure can open CC/OD accounts;

New RBI regimen on opening of current accounts & cash-credit accounts. New rules likely to benefit corporate lenders like SBI, BOB, PNB, will take away CA float from banks like HDFC, ICICI, Axis which have good cash Management products, but don’t lend to mid-corporates.

Other lenders can have collection accounts; but have to debit money only to CC/OD accounts of banks that have more than 10% exposure to borrower.

Intent of new current Account & CC/OD rules is to ensure banks who have lent, can monitor cash flows of borrower. But this makes it tough for smaller banks to garner fresh current accounts, as they are unlikely to have 10% exposure to a company.

Click Here to download New Current Account Opening Policy by RBI

Compiled by :

FCA IP Mukesh Mittal

B.Com., FCA

Insolvency Professional

Independent Director

Certified Concurrent Auditor

9215536951, 9813340495

ca.mukeshmittal@gmail.com

https://camukeshmittal.blogspot.com

DISCLAIMER: The Author have taken utmost care while drafting the article but it may occur that certain error creeps in. This article is for academic purpose and should not be treated as a professional advice. The readers are advised to refer the relevant circulars and notifications before making any judgment. 

Extension in last date of filing of income tax return for the assessment year 2019-20

Income Tax Return filing: The Central Board of Direct Taxes (CBDT) has extended the last date for filing ITR for AY 2019-20 (FY 2018-19). The date has been extended from July 31 , 2020 to September 30, 2020. In a tweet from its official handle, Income Tax department today said, “In view of the constraints due to the Covid pandemic & to further ease compliances for taxpayers, CBDT extends the due date for filing of Income Tax Returns for FY 2018-19 (AY 2019-20) from 31st July, 2020 to 30th September, 2020, vide Notification in S.O. 2512(E) dt 29th July, 2020.”

Taxes paid before the new extension will be treated as advance tax. An official notification of CBDT said: “in case of an individual resident in India referred to the sub-section (2) of Section 207 of the Income Tax Act, 961 (43 of 19610, the tax paid by him under section 140A of that Act within the due date (before extension) provided in that Act, shall be deemed to the advance tax.”

Compiled by :

CA IP Mukesh Mittal

B.Com., FCA

Insolvency Professional

Independent Director

Certified Concurrent Auditor

9215536951, 9813340495

ca.mukeshmittal@gmail.com

https://camukeshmittal.blogspot.com

DISCLAIMER: The Author have taken utmost care while drafting the article but it may occur that certain error creeps in. This article is for academic purpose and should not be treated as a professional advice. The readers are advised to refer the relevant circular or notification before making any judgment.