Central Bank Increases ATM Cash Withdrawal Limit
India’s central bank the Reserve Bank of India (RBI) on December 30 raised the daily ATM withdrawal limit to US$65 (Rs 4,500) from January 1, from the earlier limit of US$36 (Rs 2,500) per day. The weekly limit of US$351 (Rs 24,000) remains the same; for traders the limit is US$732 (Rs 50,000) per week. The development comes after the RBI stated that there should be enough currency notes in circulation following the surprise demonetization of the US$7 (Rs 500) and US$14 (Rs 1000) rupee notes on November 8. While the increase in withdrawal limit is welcome, most ATMs still do not have enough cash, particularly in big cities like Delhi, Mumbai, Kolkata, Chennai and Bangalore. A report by a leading newspaper stated that only 40 percent of the 220,000 ATMs in the country. Other reports say that the situation will fully normalize by March. Analysts have questioned the regulation saying that the increase in cash withdrawal might make the situation worse as the new currency is still not enough to meet demand.
India, Singapore Amend Tax Treaty
The governments of India and Singapore revised their tax treaty on gaining taxation rights over capital gains. The development comes after similar agreements with Mauritius and Cyprus. The new pact will take effect from April 1. There will be a transition period. Two years from the date, capital gains tax will be subject to 50 percent of the prevailing domestic rate; the short term rate at present is 15 percent. The full rate will apply from April 1, 2019. Mauritius and Singapore are the two top FDI sources to India. Total FDI from Mauritius in the past decade stood at US$95.9 billion while from Singapore it was US$45.8 billion.
Effective April 1, when a Singapore resident sells Indian equity shares, acquired on or after April 1, 2017, the capital gains arising on such a transaction will be taxable in India. There is no change or impact on equity shares acquired before April 1, 2017 as both governments agreed to grandfather such investments irrespective of when they are sold or transferred. But, like in the past, this grandfathering or exemption from tax will be subject to the Singapore resident meeting the criteria set out in the Limitation of Benefits clause in the treaty.
Digital Lending Firms Included in Credit Guarantee Scheme
The government has announced the inclusion of non-banking financial companies (NBFCs) in the credit guarantee scheme to provide credit to small, medium and micro enterprises (SMEs). This inclusion has opened up opportunities for digital lending players who had seen a slowdown in borrowings after demonetization. The scheme for NBFCs has been extended for loans up to US$293,880 (Rs 20,000,000) with a guarantee cover of 85 percent of the sanctioned amount. Until now, the credit guarantee scheme included loans up to US$146,949 (Rs 10,000,000) per SME borrower with no collateral security or third-party guarantee.
Earlier, the eligible lending institutions were only commercial and rural banks, but now the inclusion of digital players will allow them to reach out to more borrowers. NBFCs earlier had to face substantial risk by providing loans to borrowers who would not be eligible as per established norms. This move will allow NBFCs to reach out to smaller business and personal loan segments. Such schemes have already been successful in developed economies like the UK and Indian NBFCs hope to repeat the success and push for financial inclusion.
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