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The Reserve Bank of India has asked the income-tax authorities information on six issues related to tax compliance of the 25 groups that have thrown their hat in the ring for starting a bank.
Faced with the Herculean task of generating tax compliance reports on more than 1,500 entities associated with the groups, including subsidiaries and joint ventures, the authorities say they will be able to give feedback by early February.
Many entities The 25 groups include Aditya Birla Nuvo, Bajaj Finserv, Department of Posts, LIC Housing Finance, L&T Finance Holdings, Reliance Capital, and Shriram Capital.
When Raghuram Rajan took charge as RBI Governor in September 2013, he said he hoped to announce the licences (bank) within or soon after the term of Deputy Governor Anand Sinha, who has been shepherding the process. Sinha’s term expires this month-end.
The central bank, among others, has sought feedback of the Central Board of Direct Taxes (CBDT) on six issues, including whether the groups were subjected to any search and seizure/survey in the past five years; and whether any penalty was imposed for concealment of particulars/furnishing inadequate particulars of income.
The RBI also wants to know whether the entities are facing any prosecution proceedings under the Income-Tax Act and/or whether they were convicted for any offence under the Act.
Besides, the CBDT will give feedback on whether the entities have filed their returns up-to-date; whether any tax dues are outstanding; and whether the entities are complying with the provisions relating to deduction of tax at source.
Should the CBDT raise a red flag on any of the six issues for a group or its entities, then it will get eliminated from the bank licence race.
Besides tax compliance, the RBI has also sought feedback on the applicant groups from other regulators and investigative agencies such as CBI and Enforcement Directorate.
Gaining pace The process of conducting due diligence picked up speed in November 2013. Internal communications of the CBDT, which has been reviewed by Business Line , shows that details of the promoters, non-resident shareholders of the companies have been sought from various sub-divisions within IT Department.
The RBI, in a letter to the CBDT Chairman, said the promoter(s) of the applicant company should have a past record of sound credentials, integrity and successful track record.
The promoters’ business model should not be misaligned with the banking model. The promoters’ business should not put the bank and banking system at risk on account of group activities such as those which are speculative in nature or subject to high asset price volatility.
rahul.wadke@thehindu.co.in
ramkumar.k@thehindu.co.in
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