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Bad loans worth Rs 5.7 lakh crore may not be eligible under the one-time restructuring scheme permitted by the Reserve Bank of India (RBI).

These repayments, classified as special mention accounts (SMAs), were already overdue by more than 30 days on March 1, the deadline set by the central bank, 

Of the total standard loans, which stood at Rs 94.9 lakh crore at the end of March, 6.03 percent are loans with repayments delayed by 31-90 days, the report added.

This one-time recast will apply to loans overdue for over 30 days (SMA-1 accounts), where the repayment is delayed by 31-60 days, and SMA-2, where the repayment is late by 61-90 days.

The RBI had on August 6 said banks can conduct a one-time restructuring of loans, a move intended to provide borrowers relief during the COVID-19 pandemic.

"It is good that there are specific entry norms to the recast scheme this time. However, we have already been setting aside provisions for stressed loans. Despite provisions, we cannot recast without classifying them as bad, leading to more provisions and capital erosion," the CEO of a state-run lender told Mint.

The RBI had in March instructed banks to set aside 10 percent provisions against SMA-2 loans under moratorium in two tranches.

"September quarter results are unlikely to see a jump in bad loans, except for SMA-2 loan accounts. However, the gradual rise in non-performing loans will begin from the December quarter," a banker told the paper.

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Gratuity Eligibility: The Central government is considering relaxing the minimum eligibility condition for gratuity payments to employees. It is planning to lower the threshold from five years of continuous employment to between one and three years amid growing demand to make the gratuity eligibility criteria shorter.

The Parliamentary Standing Committee on Labour, in a recently tabled report, had recommended that the existing period of five years of continuous service for gratuity payment to employees should be reduced to one year.

Under the Payment of Gratuity Act, 1972, an employee who has worked in a company for over five years is eligible for gratuity by his/her employer.

The Act states that all employees, who are involved in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments, in which 10 or more persons are employed, are required to be paid gratuity by their employers. 

Gratuity is paid mainly at a time of retirement, but in certain conditions it can be paid even before retirement.

There is no set percentage for the amount of gratuity that an employee is supposed to receive. The amount payable depends upon the last drawn salary and years of service of the employee. 

Gratuity is defined as a benefit plan and is one of the major after-job perks received from an employer. 

Here are three ways to calculate one's gratuity balance:

- An employee can visit the Income Tax Department's website (www.incometaxindia.gov.in website). Click on 'Tax Tools' option and search Gratuity from the available options. The given calculator will compute the amount of gratuity payable with respect to the input values such as assessment year, type of employer, gratuity received, exempted gratuity and taxable gratuity.

- A employee can check with his/her employer or with the human resource department in the organisation with regards to the gratuity balance or amount.    

- The formula for calculating gratuity is 15 x (last drawn salary) x (tenure of working)/26 (days). For instance, employee X's last drawn salary is Rs 50,000 per month and has worked with ABC Ltd for about 30 years. So, his gratuity will be calculated as: (15 x 50,000 x 30)/26= Rs 9,37,500. In this formula, the time period of more than six months is considered as one year.

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The dollar’s stunning decline last month, the most in a decade, suddenly looks a lot less consequential once you take into consideration the inflation-adjusted value of the greenback.

That’s the view of veteran strategist Marshall Gittler, who suggested investors should adjust for price levels, use a wider basket of trading peers than the closely-followed U.S. Dollar Index and remember how much the currency had previously risen, in order to put its move in proper context. While the gauge of the dollar fell 4.2% in July, the U.S. Fed Trade-Weighted Real Broad Dollar Index only weakened by 0.9%, according to data compiled by Bloomberg.

“Back in April, the recent peak, the dollar’s real value was the highest it’s been in nearly 18 years,” Gittler, head of investment research at BDSwiss Group, said in a note Friday, published by Nasdaq. “That was the extraordinary move, not the recent decline.”

The Federal Reserve index’s 3.6% drop since April is “far from being a catastrophe that needs explaining” and is in line with its historical long-term trading pattern, he said. By comparison, the Dollar Index is down 7.1% from its April peak.

Gittler joins other strategists, including those at JPMorgan Chase (NYSE:JPM) & Co., pushing back on the intensifying debate over the future of the dollar, including threats of a structural decline voiced by analysts at Goldman Sachs Group Inc 

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Largest Fall in Employment Since 2009 leaves Pound Sterling US Dollar (GBP/USD) Exchange Rate Muted

The Pound Sterling US Dollar (GBP/USD) exchange rate remained flat on Tuesday morning. This left the pairing trading at around $1.3095 following the latest employment data.

The Pound struggled to make gains after this morning’s data showed the number of people in employment fell by 220,000 in Q2.he Office for National Statistics (ONS) noted this was the largest fall in employment since 2009. The coronavirus crisis took a huge toll on the labour market despite support from the government’s furlough scheme.

The unemployment rate held steady at 3.9%, although this largely reflected huge numbers of Brits giving up looking for work.

Separate data also showed that the number of staff on company payrolls fell by -730,000 since March. This suggests there will be a larger increase in the country’s unemployment rate.

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Insurance regulator IRDA has directed third-party administrators (TPA) not to take health claims payment decisions on behalf of insurance companies. This means that a TPA, which is essentially an intermediary between a health insurance policyholder and a general insurer, will merely be involved with the processing of claims.

Whenever a policyholder files a health insurance claim, a TPA has to be contacted. The TPA is an external entity that works with multiple general insurers to help process customer claims. However, the rise in health insurance claims, which has been accelerated by the Covid-19 pandemic, and complaints over payment delays, has pushed general insurance companies to set up internal teams to ensure payments are quicker.

HDFC ERGO General Insurance, Bajaj Allianz General Insurance, ICICI Lombard, Max Bupa and Liberty General Insurance are among insurers that have in-house claims processing teams.

The idea of having a TPA was to ensure that when there is a spike in the volume of claims, the processing can be managed by an external party that could guide the customer on the claims process. However, industry sources said that the rise in claims settlement timelines has led to greater reliance on the in-house team. The idea here is to slowly reduce the reliance on TPAs and build in-house teams to help settle health claims.

Moneycontrol looks at how an in-house claims processing team works and how different it is from a TPA:

Claims intimation to the TPA

A policyholder has to contact a TPA to submit a health insurance claim. The details of the TPA are mentioned in the policy documents given to the customer. In the case of hospitalisation or diagnosis of a health ailment, the TPA has to be informed first.

The TPA then passes on the claim information to the insurance company. This process could take time since this is an external company handling thousands of claims on behalf of multiple insurers.

In comparison, an in-house team is able to pass on the claim information immediately and expedite the claims settlement process.

Submission of documents

Once a claim is submitted to a TPA, the policyholder is required to submit a slew of documents, including the medical bills, hospital discharge certificate and bill, pharmacy receipts, X-Ray reports (if any) as well as doctor prescriptions.

Sometimes, if one or two documents are missing the external TPA has to first contact the insurance company to check whether the claim is payable without the said document. In comparison, an in-house team’s turnaround time is quicker and ensures that documents are submitted on time for claims settlement.

Approval of claim

There is a misconception among customers that the TPA can accept or reject a claim. However, the insurance regulator’s rules state that a TPA is only involved in processing a claim and is not allowed to make any approval-related judgement.

So, once a policyholder has submitted all the claims to an external TPA, this entity has to contact the claims department of the concerned insurer to verify if approval has been granted. This could take about 7-10 days depending on the type of claim and claim size. In comparison, an in-house team would be able to make an approval decision within a week.

Settlement of claims

Whatever be the size of the health insurance claim, only the insurance company can decide what part of the claim is payable and what isn’t. For instance, consumables such as gloves, PPE kits, masks, sanitisers and cotton, which are provided for one-time use, are not typically covered by health insurance policies.

Similarly, any personal expenses incurred in the hospital, including telephone/internet charges or special food and supplements, are also not payable under standard health insurance products. This means that even if these items are filed under claims, the amount will be excluded from payment.

An in-house processing team is able to clearly explain which expenses under health insurance are payable and which ones are not. This is because they are internal company experts. Sometimes an expense covered under a policy’s terms may be inadvertently excluded. In such instances, an in-house team would be able to resolve the discrepancy quickly.

In comparison, a TPA has to first check with the insurance company as to why a particular claim component has been excluded from the final settlement. Customer complaints with respect to exclusions in the settlement amount also take time to be resolved.

At a time when there have been 2.2 million confirmed Covid-19 cases in India, with over 6,00,000 active cases currently, settling health insurance claims through an in-house claims-processing team could prove beneficial for customers.

But it may not be feasible for the industry to take out TPAs immediately. Industry sources are of the view that a phased exit of the model, wherein internal teams will be strengthened to handle claim volumes, is the way forward.

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Saptarshi Mukherjee had planned to attend a computer science programme at a California-based educational institute in 2019. The course fee was approximately Rs 40 lakh a year but Mukherjee presumed it wouldn’t be tough to secure an education loan for a programme in the US. He was mistaken. Three banks — two public sector banks and one private bank — rejected his application as his family lived in rented accommodation.

Ashna Sharif, now pursuing an architecture postgraduate course in London, said that two banks — one public sector and one private — had raised questions about her failing one year during her degree programme, which was due to her falling ill, and rejected her loan request.

With the financial position of Indians worsening amidst the pandemic, hopes of students getting a bank loan are turning bleak. So, many candidates are now pursuing other options to raise funds.

Saptarshi Mukherjee’s father finally decided to take a Rs 25 lakh personal loan from a non-banking financial company at a 13 percent interest rate. The rest came from their personal savings and hypothecation of gold jewellery. “We had kept aside a Rs 7 lakh corpus for medical emergencies, which has now been used for Saptarshi’s education,” said his father Badrinath Mukherjee.

Ashna Sharif’s parents took a gold loan since the banks were in no mood to lend. “It is almost as if they are looking for an excuse to reject the loan application,” she told Moneycontrol. The family took a Rs 15 lakh gold loan at an interest rate of almost 12 percent. The hope is that she will be able to find employment by 2021 and repay the amount.

On the back bench

Reserve Bank of India (RBI) data on sectoral deployment of bank credit shows that there has been an 8.43 percent decline in education loan disbursal (excluding priority sector lending) as of June 2020 to Rs 65,017 crore, compared to the highest level of Rs 71,000 crore, in November 2016. This is a year on year decline of Rs 2,583 crore or 3.8 percent.

RBI data for sectoral deployment of bank credit shows the exact quantum of loans given by these institutions to various sectors. Here, loans for educational purposes have seen a consistent decline and have now flattened to around Rs 65,000 crore.

For students this is tough because specialised higher education programmes in India and any course abroad cost upwards of Rs 10 lakh.

With banks out of the reckoning, students and their families are turning to other financial institutions, gold loans, dipping into the retirement corpus, part-time jobs and crowdfunding.

Pritam Saxena, from Gwalior, was able to raise Rs 2 lakh for his sister Anchal’s hotel management course within four weeks through on online platform. He said that the family did not have any collateral to place for a bank loan and hence they were forced to take this option.

Ramesh Srinivasan, from Chennai, who will be flying to Italy to pursue a course in Design in 2021, has started working to build a corpus of Rs 20 lakh, which he will require immediately. “Based on my interaction with the alumni, I have shortlisted two part-time jobs which will help me pay the mess fees. I have applied for a 40 percent scholarship and in case that doesn’t work out, I will start doing freelance jobs on website development, in which I have some experience,” he added.

Rise in delinquency

While there has been no decline in the number of students pursuing higher education and specialised programmes, banks are wary of the dwindling employment prospects of students and hence the rise in defaults.

“We have seen a rise in delinquencies by students and hence loan disbursal has been very selective. There is a consensus among bankers that loans should be restricted to the top institutes that have a good track record for employment,” said the general manager of a mid-sized public sector bank.

While industry data for FY20 are not available, banking sources said that education sector NPAs stayed close to 8.3 percent for the quarter ended March 2020. This is an almost 100-basis-point jump since March 2017.  

And yet, while banks are going cautious, overall education loan disbursals have increased. Data from CRIF High Mark showed that the education loan book, which includes banks, NBFCs and other financial institutions, stood at Rs 92,711 crore at the end of March 2020. The figure at the end of FY19 was Rs 90,345 crore.

There has also been an increase in the average ticket size of education loans, from Rs 3.94 lakh in FY19 to Rs 4.31 lakh in FY20.

However, there has also been a rise in delinquency or delays in payment of the loan interest. CRIF High Mark data showed that 7.19 percent was the delinquency beyond 360 days at the end of FY20. This meant that 7.19 percent of the education loan book had seen payment delays of one year and above.

This delinquency rate stood at 5.86 percent in the year-ago period, CRIF High Mark data showed.

“Since May-June 2019, we have seen a rise in payment delays by education loan customers. This is making it riskier to lend to this segment,” said the head of personal loans at a private bank.

A rise in delinquencies has also led to banks to seek more documentation and detailed academic records, which has played a dampener for students.

Other lenders step in

With banks not viewing education loans as an attractive segment, customers are gravitating towards other financial institutions.

Amit Gainda, Chief Executive Officer, Avanse Financial Services, told Moneycontrol that education is an essential spend in every household.

“Avanse Financial Services takes a student-centric approach rather than depending only on the co-borrowers’ financial background. As a part of this approach, we evaluate the student’s profile: past academic performance, entrance test scores, university/institute ranking and course selection,” said Gainda.

Gainda added that through this approach, the company is able to assess the employment potential of the student.

Student aspiring to study at an Indian Institute of Management or Indian Institute of Technology will be easier to secure an education loan from a bank. However, a traditional bank would be unwilling to provide a loan for unconventional courses like music, animation or photography.

That is where players such as Avanse Financial Services come into the picture. Gainda said the company lends to students pursuing both traditional and non-traditional programmes.

With loan moratoriums being granted amidst the pandemic and students defaulting due to no placements in 2020, it is unlikely banks will return to lending aggressively to the education sector. More and more students may therefore have to explore non-bank funding options.

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Gujarat has become the highest tax-compliant state in the assessment year 2018-19, behind only Delhi, in terms of the proportion of ‘returns filed to PAN holders’, while Bihar saw the lowest rate of Income Tax Return (ITR) filing.

In AY19, the state witnessed 22.3 percent ITR filers, out of the total Permanent Account Number

The state was followed by the national capital, which had a 20.5 percent population filing ITR. Behind Delhi were Punjab with 16.74 percent, and Telangana with 16.68 percent ITR filing, said the report.

As per the report, Bihar received the lowest rate of ITR filing at 5 percent. Its neighbouring state Uttar Pradesh saw a little higher rate of return filed at 8.11 percent. However, it was much below the national average of 12 percent, it stated.The data of ITR filings may not be the most accurate indicator of tax-compliance, as it is not mandatory for all PAN holders to file returns, said the report.

In the case of companies and businesses, they are supposed to file ITRs even in case of ‘nil’ income. However, this is not applicable to individuals as only those with total income above Rs 2.5 lakh are required to file returns. For senior citizens, the limit is Rs 3 lakh, the report suggested.

Among the total filed ITRs in AY19, the cases picked up for scrutiny halved to 0.25 percent from 0.55 percent in AY18. Among all the states, Bihar had the lowest proportion of such cases at 0.08 percent. The state saw a sharp drop from the 0.42 percent in AY18, said the report.

Its neighbouring state Jharkhand was next at 0.09 percent cases picked up for scrutiny in AY19. It saw a decline from 0.3 percent in AY18, the report stated.

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Gujarat has become the highest tax-compliant state in the assessment year 2018-19, behind only Delhi, in terms of the proportion of ‘returns filed to PAN holders’, while Bihar saw the lowest rate of Income Tax Return (ITR) filing.

In AY19, the state witnessed 22.3 percent ITR filers, out of the total Permanent Account Number

The state was followed by the national capital, which had a 20.5 percent population filing ITR. Behind Delhi were Punjab with 16.74 percent, and Telangana with 16.68 percent ITR filing, said the report.

As per the report, Bihar received the lowest rate of ITR filing at 5 percent. Its neighbouring state Uttar Pradesh saw a little higher rate of return filed at 8.11 percent. However, it was much below the national average of 12 percent, it stated.The data of ITR filings may not be the most accurate indicator of tax-compliance, as it is not mandatory for all PAN holders to file returns, said the report.

In the case of companies and businesses, they are supposed to file ITRs even in case of ‘nil’ income. However, this is not applicable to individuals as only those with total income above Rs 2.5 lakh are required to file returns. For senior citizens, the limit is Rs 3 lakh, the report suggested.

Among the total filed ITRs in AY19, the cases picked up for scrutiny halved to 0.25 percent from 0.55 percent in AY18. Among all the states, Bihar had the lowest proportion of such cases at 0.08 percent. The state saw a sharp drop from the 0.42 percent in AY18, said the report.

Its neighbouring state Jharkhand was next at 0.09 percent cases picked up for scrutiny in AY19. It saw a decline from 0.3 percent in AY18, the report stated.

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The government and corporates must work together for a quick economic recovery, State Bank of India Chairman Rajnish Kumar said, adding that investment in infrastructure, in particular, should be stepped up.

“The government and corporates have to open up their wallets to invest … their actions should go hand-in-hand for a quick economic recovery since the vital middle class remains cautious amid ongoing unlocking of the economy,” 

Kumar added that increase in expenditure by both parties is “important” as money brought into the system will give consumption demand and infrastructure investment a boost. He also noted that direct benefit transfer schemes had put money directly in the hands of people, thus boosting rural demand.

“The middle class also plays a pivotal role, and for that segment to spend, the fear of COVID-19 has to go away,” he said.

The state lender's chief added that since the loan moratorium achieved its limited purpose, the Reserve Bank of India (RBI) now has to look at providing banks with restructuring relief “which would then determine who would qualify for a loan recast.”

“There is growing consensus that moratorium may not be needed, but there should be flexibility in loan repayments through restructuring and relaxing of provisioning norms for such rejig,” he noted and pointed out that the industry and bankers are keen to revive cash-strapped businesses and “future course of action should be left to the bank and the borrower.”

While economists have forecasted up to 10 percent contraction in GDP, Kumar was optimistic, stating that June saw fairly good recovery and many industries have “come back 75-80 percent of capacity utilisation levels.”

He, however, acknowledged that the lockdown has disrupted supply chains as some sourcing units may be in containment areas. “Overall, I believe we are in a much better position than where we were in April and May,” he said.

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The dollar was down on Friday morning, touching two-year lows and on its way to posting its biggest monthly decline in a decade as fresh doubts over the U.S economy’s recovery from the COVID-19 pandemic creep in.

These doubts have led investors to question the dollar’s strength. Data released on Thursday showed that the U.S. economy contracted by 32.9% in the second quarter and that 1.434 million unemployment claims were submitted in the week ending July 25.

On the political front, Republicans and Democrats are also no closer to reaching consensus on the latest stimulus measures, with only one more day left before some earlier measures expire on Friday.

Ever-rising numbers of COVID-19 cases also continue to pose a challenge to the U.S.’ economic recovery. The country reported almost 4.5 million cases as of July 31, according to Johns Hopkins University data, and continues to hold the dubious honor of recording the highest number of COVID-19 cases globally.

“At the root of the dollar’s weakness is the fact, which was highlighted by Fed Chairman (Jerome) Powell the other day, that U.S. coronavirus cases started to increase in mid-June, curbing consumption and sending the economy downhill,” Daisuke Uno, chief strategist at Sumitomo Mitsui (NYSE:SMFG) Bank, told Reuters.

Meanwhile, U.S. President Donald Trump added to the dollar’s woes on Thursday after he floated the idea of delaying the U.S. presidential elections, currently scheduled for November 3. But the proposal was immediately rejected by Congress, the sole governmental authority that could make such a change.

“The mere suggestion by Trump of a delay does play to concerns that the election result will be challenged in November (should Trump lose), and that, because of the likely larger than usual share of votes via mail in ballots due to the pandemic, we might not now (get) the result on election night itself,” Ray Attrill, Head of FX Strategy at National Australia Bank (OTC:NABZY), told Reuters.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies slipped 0.28% to 92.645 by 9:53 AM ET (2:53 AM GMT).

The USD/JPY pair was down 0.45% to 104.25.

The AUD/USD pair gained 0.34% to 0.7218 and the Dow Jones New Zealand (USD) pair was up 0.04% to 0.6701.

The USD/CNY pair slid 0.30% to 6.9870. The country’s National Bureau of Statistics said that the official manufacturing purchasing managers’ index (PMI) for July was 51.1, indicating expansion in factory output.

The GBP/USD pair gained 0.29% to 1.3131.

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