RBI asked banks to cap bank charges
Jan 12, 2010 RBI
Banks may soon have to cap the charges on basic services such as issuing a draft, remittances or for stop-payment instructions. Faced with a rising number of customer complaints on excessive charges, the Reserve Bank of India (RBI) has asked the Indian Banks’ Association (IBA) to come up with guidelines on what the reasonable charges should be.
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Term Loan waiver availed by the assessee is not assessable income
Jul 21, 2009 Income Tax Case Laws
SUMMARY OF CASE LAW
The waiver amount of term loan availed by the assessee does not partake the character of assessable income either under section 28(iv) or under section 41(1) of the Income-tax Act, 1961.
CASE LAW DETAILS
Decided by: ITAT, COCHIN BENCH, COCHIN, In The case of: Accelerated Freez & Drying Co. Ltd.V.DCIT, Appeal No.: ITA No. 971/Coch/2008, Decided on: May 5, 2009.
RELEVENT PARAGRAPH
19. First we will marshal the facts of the present case. The assessee had availed terms loans from three banks, viz. ICICI Bank Ltd., Standard Chartered Bank Ltd. and Sumitomo Mitsui Banking Corporation (SMBC), Hong Kong. These terms loans were availed by the assessee company for the purpose of acquiring capital assets necessarily to be deployed in the manufacturing system of the assessee company. The assessee company became de-faulter in making the repayments of the installments of term loans along with interest mainly due to its bad financial position. At that point of time, may be for the reasons of recession in business and industry, such defaulted amounts were increasing with various banks. These sticky accounts were necessarily be held by the banks as Non-performing assets (NPA). The Reserve Bank of India was little anxious to watch the high increase in the amount of NPA held by various banks from time to time. Therefore, the RBI formulated a scheme to wipe out the NPA from the balance sheets of the banks through a scheme known as “One Time Settlement Scheme” (OTS). Under this scheme, bank and its constituents could enter into an agreement to settle the loan account in terms of the guidelines of the RBI so that some relief is given to the borrowers by way of waiver in the loan amount.
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Tags: capital assets, income tax act, income tax act 1961, reserve bank of india, section 28, settlement scheme, standard chartered bank, sumitomo mitsui banking, sumitomo mitsui banking corporation, term loan waiver, term loans
RBI ask to cut salary of CEO of ING Vysya Bank, Axis Bank and DCB
Jun 6, 2009 RBI
The Reserve Bank of India, citing its powers as banking regulator, has put on hold the salaries of Chief Executive Officers of three private sector banks, ING Vysya Bank, Axis Bank and Development Credit Bank, arguing that these are inflated and not in sync with the market.
Incidentally, all three banks have recently hired CEOs from outside their ranks. Shikha Sharma, for instance, joined Axis Bank, the third largest private bank in India, as its Managing Director and CEO from ICICI Prudential Life Insurance Company where she was the Managing Director and CEO.
Murali Natrajan has joined as CEO of Development Credit Bank from Standard Chartered Bank where he was the global head for SME (Small and Medium Enterprise) banking. Gautam Vir is yet to join ING Vysya Bank following the RBI’s objection. He was CEO of Development Credit Bank earlier.
The RBI derives its powers to intervene on issues such as compensation of bank CEOs from the Banking Regulation Act. In fact, the Act empowers the RBI to even issue directions to banks to fix salaries at certain levels.
In the case of Shikha Sharma, the central bank did not find her new compensation package justifiable. It has written back to the bank suggesting an alternate and “acceptable” package. Sharma refused to comment but confirmed that the RBI did not agree with the package originally offered to her by Axis Bank. Vir and Natrajan were unavailable for comment.
When contacted, an RBI spokesperson said the central bank would respond only tomorrow.
The salaries of the CEOs, decided by their boards, are not known. But Sharma, who joined Axis Bank yesterday, had an annual salary package of about Rs 2.03 crore in her previous job at ICICI Pru Life Insurance Company, according to an ICICI bank executive. Vaughn Richtor, who retired as ING Vysya’s CEO recently, had an annual salary of Rs 1.1 crore.
At ICICI Pru, Sharma was in the same salary bracket as Chanda D Kochhar, the new MD and CEO of ICICI Bank, the latter’s annual cost to company being Rs 2.05 crore, which was approved by the RBI in February this year.
Kochhar’s predecessor KV Kamath had an annual salary of Rs 2.8 crore. Now he gets an honorarium of Rs 20 lakh a year as ICICI Bank’s non-executive Chairman.
Though the RBI does not have clear guidelines or parameters on CEO compensation in banks, it is said to be guided by the size of the banks. Multinational banks, though under RBI’s regulatory framework, escape such strictures. In India, according to a banker in a top private bank, the CEO salaries can be broadly categorized thus: Rs 1 crore for public sector banks; Rs 2-3.5 crore for private sector banks and Rs 8-9 crore for foreign banks.
Sources said the RBI cites the public outrage in the US against banking CEOs’ salaries and subsequent moves on salary caps. However, US salaries (which include bonuses and stock options) run into millions of dollars. And the caps imposed apply to only those banks that have used taxpayers’ money for a bailout.
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