Private Banks to Face Legal Action for Evading Stamp Duty

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The Gujarat government is taking a tough stance against private banks, non-banking financial companies (NBFCs), and unorganized players that have been evading stamp duty and registration fees on mortgages. The government has warned that these entities will face strict legal action if they do not comply with the law.

The state finance department has determined that an amendment to the stamp duty and registration act in 2008 mandated all banks, including private banks, NBFCs, and other institutions, to pay registration fees of 0.25% or 0.35% of the mortgaged asset value. However, many of these entities have been evading these payments.

Scheduled banks and co-operative banks that have adhered to these regulations have complained to the government about the non-compliance of private banks, NBFCs, and other institutions. This non-compliance has made their business less competitive and resulted in significant revenue losses for the state.

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Sources within the state government have revealed that the government has taken stringent action because private banks, NBFCs, and other institutions were bypassing government guidelines and not paying taxes. The government has issued stern notices to these entities through various channels, including the State Level Banking Committee, district collectors, and direct notifications. They have been instructed to immediately start complying with the regulations or face legal consequences.

The Reserve Bank of India (RBI) has also taken steps to improve the governance of private sector banks. The RBI has instructed these banks to have at least two whole-time directors (WTDs) in addition to the managing director and CEO. Banks that do not currently meet this requirement must submit proposals within four months. The RBI believes that having two WTDs is necessary due to the increasing complexity in the banking sector. This will also aid in succession planning.

The RBI is also closely monitoring the rise in delinquencies in small-ticket unsecured personal loans. Yes Bank and Kotak Mahindra Bank have reported higher delinquencies compared to last year, particularly in the below Rs 50,000 loan segment. ICICI Bank, on the other hand, has stated that its unsecured portfolio is not facing additional stress as it focuses on existing customers. RBL Bank has also made provisions for potential defaults in its unsecured loan and credit card portfolio.

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