Government seeks to cut SBI stake to 51% from 55%

March 08, 2010

Finance minister Pranab Mukherjee has moved the SBI

(Amendment) Bill, 2010, in the Lok Sabha that seeks

to cut the government's stake in the Bank to 51% from 55%

A Bill, seeking to reduce the Indian government's shareholding
in the State Bank of India (SBI) to 51% from 55% now and to
allow the Bank to raise more capital from the market through
preference shares, was introduced in the Lok Sabha on Monday, reports PTI.

Finance minister Pranab Mukherjee moved the State Bank of India
(Amendment) Bill, 2010, amidst slogan shouting by Samajwadi Party
(SP), Rashtriya Janata Dal (RJD) and Bahujan Samaj Party (BSP)
members against the Women's Reservation Bill in its present form.

The Bill's statement of objects and reasons said that the 

legislation was aimed at allowing 'reduction of shareholding

of the Central government to 51% from 55% consisting of 

the equity shares of the issued capital'.

It said that the SBI Act, 1955, was amended in 1993 to
enable the Bank to access the capital market.

"While SBI can access the capital market by issuing
equity shares or bonds, or by both equity shares and bonds,
there is no express provision under the SBI Act to enable the
bank to issue preference shares and also bonus shares," the Bill added.

"The amendment Bill seeks to provide for enhancement
of the capital of (the) State Bank (of India) by issue of
preference shares, to enable it to raise resources from the
market by public issue or preferential allotment or private placement," it said.

"The Bill also aims to provide for flexibility in the
management of the Bank," it added.

The Bill will provide for increasing the authorised capital
of SBI to Rs5,000 crore and enable the Union government
to increase or reduce the authorised capital in consultation
with the Reserve Bank of India.

PayPal allows local bank withdrawls in India

 by krishna

Earlier I have posted that RBI had suspended the Indian paypal payments.

As we know many of the webmasters and small business owner
rely on paypal service to receive the money from other countries.

The reason why RBI had issue is, you can send the any number
of amount using the paypal as the personal payments.

These transactions are not submitted to the RBI’s notice and
it requested PayPal to provide the adequate information on the issue,
till the time resolve is sorted out, RBI ordered paypal to stop the payments to Indian users.

Last two weeks Indian paypal users can not withdraw money to their local bank accounts.


From 3rd March, 2010… PayPal lifted the ban and allowed users to withdraw money to their bank accounts.

But, there is no option for the personal payments and

we can not send any payment as the personal payments. 

PayPal allows only the commercial payments. 

It also introduced the Purpose Code which is used to
identify the nature of income for the users.

NOTE:

please send a mailto:

bankfinance555@gmail com....

To get full details

The following is the table lists all the purpose codes.

Code	Category	Description	Who should be using it
P0104	Export of Goods	Value of export bills negotiated / purchased/discounted etc. (covered under GR/PP/SOFTEX/EC copy of shipping bills etc.)	eBay merchants, jewelers, sellers of collectibles and other such products through eBay and your own websites / catalogues globally.Please note: Cross border shipment of goods and services for which you file GR / PP / SOFTEX / EC forms only should be processed with this code. If you have any questions, please check with your bank to help you with the same.
P0301	Travel , Hospitality and Tours	Purchases towards travel (Includes purchases of foreign TCs, currency notes etc over the counter, by hotels, hospitals, Emporiums, Educational institutions etc. as well as amount received by TT/SWIFT transfers or debit to Non-Resident account).	Online Travel Agents, Airlines, Railways, Buses, Taxicab Services, Hotels, B&Bs and other travel / tourism related sales through PayPal
P0801P0802 P0803	Information Technology	Computer Information Services. Hardware / Software / Data Processing consultancy/implementation	If you are an independent / freelance coder / hardware consultant or data processing service provider, or a small business providing such services for websites globally, please use these codes.For all IT related consulting services where you know you do not need to file a SOFTEX form, please use the appropriate code. 801 for hardware consulting, 802 for software consulting and 803 for data management and processing consulting services
P0805P0806	Content and Journalism	News Agency and Subscription services	If you are a freelance journalist / blogger / news aggregator please use this purpose code for withdrawals.If you are a newspaper or an online news aggregator for websites overseas, please use the appropriate code from these two. 805 if you a freelance journalist, and 806 if you are a newspaper / aggregator
P0902	Licensing of creative works	Receipts for use, through licensing arrangements, of produced originals or prototypes (such as manuscripts and films)	Artists, designers, other creative service providers where the principal revenue mode is license fees, please use this code.If you produce creative works which you license out for entities overseas, licensing revenues may be classified under this purpose code
P1004	Other services	Legal Services	If you are providing outsourced law related services
P1005		Accounting, auditing, book keeping and tax consulting services	For accounting consulting and accounting services
P1006		Business and management consultancy and public relations services	Management / brand consulting and management services can be exported with this purpose code
P1007		Advertising, trade fair, market research and public opinion polling services	Marketing/ brand consulting / logo design / event management services can be exported with this purpose code
P1008		Research & Development services	If you are an outsourced research and development services provider based in India, receipts can be inwarded through this purpose code
P1009		Architectural, engineering and other technical services	Any other technical services such as eTutoring, education and other services you render over the internet via web conferencing tools or similar channels, please use this code for your withdrawals

Bank need to deduct tds on accrual of interest not on mere Provisioning of the same

Mar 9, 2010

No income tax at source will be deducted if banks 

have only made a provision for interest on fixed deposits

and not actually paid it to the depositor, the Finance Ministry

has clarified. Until now, tax was supposed to be deducted

by banks even if only provisioning was made for interest payment.

However, this was creating problems for banks using
Core-Branch Banking Solutions (CBS), which enables
customers to access their accounts from any branch.

The Indian Banks’ Association in a representation to the
Income Tax department had said that for banks using the
CBS software, interest payable on fixed deposits is
calculated generally on a daily or a monthly basis but is
parked in the provisioning account for monitoring only.

The interest is actually credited to the depositor’s accoun
either at the end of the financial year or at periodic intervals
or on maturity of the deposits. The matter was considered
by the Central Board of Direct Taxes to plug this loophole.

According to a Finance Ministry official, CBDT clarified
that since no credit is given to the depositors while
calculating interest on fixed deposits on daily or monthly
basis in the CBSsoftware used by banks, tax need not be
deducted at source on such provisioning of interest.

“In such cases, tax shall be deducted at source on accrual
of interest,” the board clarified, according to a source.
 
Income tax is charged at the rate of 10 per cent on
interest income of more than Rs 10,000 in a year.

Budget 2010: Empowered Income tax department to cancel any charitable organisation’s registration

Mar 9, 2010

The Income Tax department has got the power

to cancel any charitable organisation’s registration that

accords it the benefit of tax exemption. 

The department can annul the registration and the
exemption emanating from it if the organisation is
found to violate the norms for registration,
according to Budget 2010-11.

By this move, the government has made its intent to prevail
over a series of court judgments, which held that the I-T department
did not have the right to cancel registration of organisations with it.

The government provides relief to specified not-for-profit
or charitable organisations under Section 12A of the Income
Tax Act. A registration with the Income Tax department
cannot be taken away by an I-T commissioner if violations
are found, some courts had said earlier.

However, the Budget proposal has said,
“The power of cancellation of registration is inherent
and flows from the authority of granting exemption.”

Many organisations that are registered under the Section of
the I-T law have had a tiff with the department that sought to
cancel their registration on alleged violations of the rules.

Such organisations have to maintain books of accounts for any
commercial activity undertaken by them and if they fail to do so,
the taxman enjoys the authority to question the concerned entity
on the issue. The Budget proposal now gives the taxman the
additional power to cancel the registration.

There were instances where the exemptions were being misused
by the organisations, official sources said, adding that the object
of the organisation stated in the registration was often changed
without any knowledge of the tax department.

“I think this (the Budget proposal to empower the I-T department
is an appropriate move. Someone who gives a licence or
with whom you register, the same organisation should also
have the power to cancel the registration or licence,” said
senior chartered accountant and ICAI vice-president G Ramaswamy.

In 2008, however, in a case of an appeal made by NGOs
whose registration was cancelled by the tax department,
the court had said that such a measure cannot be taken.

The Budget proposal has pointed out that judicial rulings
in some cases have held that commissioner does not have
the power to cancel the registration obtained by a trust
or institution as it is not specifically mentioned in Section 12AA.

“It is therefore, proposed to amend Section 12AA
so as to provide that the commissioner can also
cancel the registration obtained under Section 12AA,”
the Finance Bill 2010-11 has said. 
 
Charitable organisations would, however,
be given a chance to be heard by the tax
commissioner before he decides to cancel the registration.

RBI ordered special audit of Bank of Rajasthan

 

 

 

Mar 9, 2010

The Reserve Bank of India (RBI) has ordered a special 

audit of the accounts of Bank of Rajasthan (BoR) following 

investigations into irregular dealings by the private sector bank. 

 

The regulator has appointed Deloitte Haskins & Sells to 

audit the bank’s lending policy among other things while

the parent accounting and consulting firm Deloitte Touche 

Tohmatsu has been hired to audit the information 

security system of the bank.
Special audits are rare and directed by RBI only 

under exceptional circumstances.

A week ago, BoR made news after RBI imposed

a Rs 25-lakh fine on the bank following a string of 

violations. RBI pulled up the bank following violations

in property transactions, anti-money laundering norms,

irregularities in the conduct of accounts of a corporate

group and failure to provide certain documents sought by RBI.

Deloitte Touche Tohmatsu’s main mandate is to find out

whether BoR’s IT systems are in line with the best 

practices followed by other banks in terms of 

information security. It will also suggest whether

there is a need to modernise and upgrade BoR’s present system.

RBI has felt the need for such an audit following BoR’s 

decision to give a huge intra-day overdraft to the 

Lucknow-based Sahara group. 

 

The overdraft facility extended by BoR was well

beyond all permissible limits. Besides, a systems

audit may be partly driven by the revelation that 

some of the bank’s records got deleted.

The bank’s poor corporate governance standards

have prompted RBI to conduct special audit.

One of the concerns is the presence of S K Tayal, 

a relative of promoter PK Tayal, on the bank’s credit

committee and board of directors.

BoR, unlike other commercial banks, which have various

credit committees depending on loan size, has a single 

committee for approving loans. In most banks the local 

office may have the power to sanction loans up to Rs 25 crore,

while loans of Rs 25-50 crore are approved by the credit committee

at the head office and loans above Rs 50 crore go to

management committee.

In BoR, the RBI, according to sources in the central bank,

fears that the directors play a significant role in the entire 

credit delivery mechanism.

Deloitte Heskins & Sells has been asked to carry out an audit 

of the “internal delegation of sanctioning powers followed by the bank.”

Last year, the central bank appointed G Padmanabhan, 

a former State Bank of India official, as the MD and CEO of BoR 

after it sensed certain irregularities in the bank. 

 

When contacted by ET, Mr Padmanabhan confirmed 

that RBI has mandated a special audit after BoR made 

certain disclosures while announcing its third quarter

financial results. The disclosures relate to inadequate

provisioning for bad loans and superannuation benefits,

and the dispute over the rent the bank should pay for 

the Mumbai property where the BoR head office is located.

Deloitte Heskins & Sell’s will review whether the bank

has made adequate provisioning for bad loans and 

whether it has followed all asset classification norms

laid down by RBI. The other area that the auditors 

will review is the superannuation benefits given to

a section of the bank’s employees.

While 90% of the bank’s 4,000 employees receive salary

in line with the bi-partite agreement signed between the 

Indian Banks Association and the member banks, 

around 10% employees in the mid to senior level have a

different salary and pension structure. 

 

The bank has not fully provided for the 

superannuation benefits of these 10% employees.