RBI allows 100% FDI in regulated financial services in October 2016

23 Sep

International Banking and Foreign Exchange Management

1. RBI allows 100% FDI in regulated financial services in October 2016. What are the impacts of this move on Indian economy? Will it help for financial inclusion?

2. Mr. Mahesh Singh is an Indian presently working in Canada, his parents are staying in Delhi he want to transfer Rs.25,000 per month to his parents regularly. Suggest him various way to do so. What are the different types of Bank Account he can open in Indian Bank located in India? Explain in detail.

3. MUMBAI, MAY 19: Consumers of financial services such as banking and insurance are unlikely to be affected despite the Goods and Services Tax (GST) Council fixing the GST rate higher at 18 per cent. Some tax experts believe that the input credits that service providers will get under GST will be passed on to consumers, thereby offsetting the higher GST rate. Currently, financial services are taxed at 15 per cent. S Ravi, Practising Chartered Accountant, said, “Though the GST is pegged at 18 per cent, financial service providers will get the benefit of input credits. In service tax. the input credits are limited. So, under the GST regime, there will be an element of balancing that will happen and the end consumer will not be impacted.”Input (tax) credit allows a service provider to lower the tax its owes the government by allowing it to claim a credit on what it has paid on inputs. The impact of GST will be neutral in the short-run, Ravi said, adding that in the medium to long run, it will be beneficial to entities in the financial services sector as well as their customers. Bank of Baroda Executive Director Mayank Mehta said, “We floated an RFP (request for proposal) to engage a consultant to help us (with GST implementation). I don’t think it (GST) will have any impact on the customer…”

More for forex conversion

Sachin Menon, National Head, Indirect Tax, KPMG in India said NRIs may end up paying more on foreign exchange conversion.“The maximum GST charges on conversion of foreign currency have gone up from ₹7,000 to ₹60,000. This can hurt NRIs, especially those working in Gulf countries, who earns low wages and make remittances to their families,” he said. Banks are also up against challenges such as multiple registrations and multiple transactions across States, dealing with transaction-wise invoice, and issues relating to valuation on services from certain centralised services like IT and call centres. But a majority of the financial services players said the negative impact would only be in the short term.

Mohit Sahney, Founder at Finova Capital, said, “Since financial services form the backbone of growth in the economy, the government should have kept it at the previous rate of 15 per cent. However, given the fact that GST is going to boost the entire economy, the slightly increased cost will nullify in the medium to long run.” Rishi Gupta, MD & CEO, Fino Paytech, a payments company and a future payments bank, said there will be increase in compliance requirements at bank branches. “This is a challenge that banks need to gear up to, including the impact on cost of services to the customers,” he added.

SOURCE: Business Line

A. What are the challenges for the Banking Industry due to GST?

B. How Bank earns money in Forex transactions? What will be the impact on income due to GST? How they can increase their income even after GST?

International Banking and Foreign Exchange Management

23 Sep

International Banking and Foreign Exchange Management

1. RBI allows 100% FDI in regulated financial services in October 2016. What are the impacts of this move on Indian economy? Will it help for financial inclusion?

2. Mr. Mahesh Singh is an Indian presently working in Canada, his parents are staying in Delhi he want to transfer Rs.25,000 per month to his parents regularly. Suggest him various way to do so. What are the different types of Bank Account he can open in Indian Bank located in India? Explain in detail.

3. MUMBAI, MAY 19: Consumers of financial services such as banking and insurance are unlikely to be affected despite the Goods and Services Tax (GST) Council fixing the GST rate higher at 18 per cent. Some tax experts believe that the input credits that service providers will get under GST will be passed on to consumers, thereby offsetting the higher GST rate. Currently, financial services are taxed at 15 per cent. S Ravi, Practising Chartered Accountant, said, “Though the GST is pegged at 18 per cent, financial service providers will get the benefit of input credits. In service tax. the input credits are limited. So, under the GST regime, there will be an element of balancing that will happen and the end consumer will not be impacted.”Input (tax) credit allows a service provider to lower the tax its owes the government by allowing it to claim a credit on what it has paid on inputs. The impact of GST will be neutral in the short-run, Ravi said, adding that in the medium to long run, it will be beneficial to entities in the financial services sector as well as their customers. Bank of Baroda Executive Director Mayank Mehta said, “We floated an RFP (request for proposal) to engage a consultant to help us (with GST implementation). I don’t think it (GST) will have any impact on the customer…”

More for forex conversion

Sachin Menon, National Head, Indirect Tax, KPMG in India said NRIs may end up paying more on foreign exchange conversion.“The maximum GST charges on conversion of foreign currency have gone up from ₹7,000 to ₹60,000. This can hurt NRIs, especially those working in Gulf countries, who earns low wages and make remittances to their families,” he said. Banks are also up against challenges such as multiple registrations and multiple transactions across States, dealing with transaction-wise invoice, and issues relating to valuation on services from certain centralised services like IT and call centres. But a majority of the financial services players said the negative impact would only be in the short term.

Mohit Sahney, Founder at Finova Capital, said, “Since financial services form the backbone of growth in the economy, the government should have kept it at the previous rate of 15 per cent. However, given the fact that GST is going to boost the entire economy, the slightly increased cost will nullify in the medium to long run.” Rishi Gupta, MD & CEO, Fino Paytech, a payments company and a future payments bank, said there will be increase in compliance requirements at bank branches. “This is a challenge that banks need to gear up to, including the impact on cost of services to the customers,” he added.

SOURCE: Business Line

A. What are the challenges for the Banking Industry due to GST?

B. How Bank earns money in Forex transactions? What will be the impact on income due to GST? How they can increase their income even after GST?

International Banking and Foreign Exchange Management

27 Jun

Q1. Xlone Ltd is an Indian company planning to raise capital from US market. If you are the head of finance department of the Xlone Ltd suggest them various ways to do so? If company doesn’t want to list in US stock market, than how company can generate fund in USD? What are the Challenges for the same?

Q2. 1991 is the year of transformation for economy of India; LPG (Liberalization, Privatization and Globalization) policy opened the door for many foreign companies in Indian Market. In context to LPG there were many amendments in foreign exchange act. Please explain the same and compare that with the law before LPG.

Q3. FRANKFURT: The European Central Bank is adding half a trillion euros ($579 billion) in stimulus to the eurozone economy as it hopes to support growth as Europe heads into what could be a tumultuous election year. The chief monetary authority for the 19 countries that use the euro said Thursday it would keep injecting money into the economy through its bond-buying program until at least December, past the previous end date of March. It will reduce the amount of bonds it buys after March to 60 billion euros ($64 billion) a month from 80 billion euros. That effectively adds at least 540 billion euros in stimulus to the existing 1.74 billion ($1.87 trillion) effort. That’s slightly more than expected by analysts, who on average thought the ECB would extend for only six months at the same current rate.

SOURCE: Economic Times

1. Why the European Central Bank is injecting the money in the Economy?

2. How monetary policy and Export Policy are related? What is the role of Balance of Payment to improve the employment in the nation?