Partners Sawant Singh and Aditya Bhargava at Phoenix Legal, discuss the Reserve Bank of India's proposed disclosure framework on climate-related financial risks for regulated entities and its potential impact on promoting climate discipline in the financial sector.
Read More"Phoenix Legal partners Sawant Singh and Aditya Bhargava gauge the effectiveness of the revised regulatory framework for ARCs, and whether this could have been better conceptualised."
Read MoreOn 6 July 2022, the Reserve Bank of India (RBI) issued a press release setting out measures it proposed to introduce to “mitigate volatility and dampen global spillovers” caused by “high risk aversion” gripping financial markets amid “recession risks”. This press release followed months of the RBI’s Sisyphean efforts to defend the currency in a climate of tightening monetary policy rates and increasing inflation.
Read MorePhoenix Legal partners Sawant Singh and Aditya Bhargava present their viewpoint on the RBI's guidance on board-approved pay and compensation policies, and how this is a positive governance step.
Read MorePhoenix Legal's Sawant Singh and Aditya Bhargava deliberate on the RBI's recast of the microfinance framework, and how these consolidate and align the regulatory framework for microfinance.
Read MorePhoenix Legal partners Sawant Singh and Aditya Bhargava on recent RBI regulations to implement the Factoring (Amendment) Regulation Act, 2021, and encouraging greater participation in the factoring sector.
Read MoreOur Partners, Sawant Singh and Aditya Bhargava discuss the extension of the Prompt Corrective Action (PCA) framework to non-banking financing companies (NBFCs), another sign of the steady march forward towards aligning the regulatory frameworks for banks and NBFCs.
Read MoreIn May 2021, the Securities and Exchange Board of India (SEBI) issued a discussion paper on the consolidation of the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008, and the Securities and Exchange Board of India (Issue and Listing of Non-convertible Redeemable Preference Shares) Regulations, 2013, with the intent to ease compliance obligations, and to harmonise and ensure consistency with other listing related regulations.
Read Moren May 2021, the Securities and Exchange Board of India (SEBI) issued a discussion paper on the consolidation of the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008, and the Securities and Exchange Board of India (Issue and Listing of Non-convertible Redeemable Preference Shares) Regulations, 2013, with the intent to ease compliance obligations, and to harmonise and ensure consistency with other listing related regulations.
Read MoreThe Reserve Bank of India’s (RBI) comprehensive regulatory framework for microfinance prescribes requirements such as the nature of borrowers, maximum disbursement amounts and ceilings on interest rates and other charges. However, this framework applies only to non-banking financial companies – microfinance institutions (NBFC-MFIs), which reportedly provide only about 30% of microfinance loans in India. The disparity in the regulatory framework between NBFC-MFIs and banks has led to disgruntlement among NBFC-MFIs, as a leading view is that they are in the vanguard of microfinance lending, and often do the heavy lifting in developing new markets.
Read MoreIn November 2016, the Securities and Exchange Board of India (SEBI) issued a circular, requiring credit rating agencies to put in place policies on assigning provisional ratings. To “standardise and strengthen the policies on provisional ratings”, after consultation with stakeholders SEBI issued directions in its circular of 27 April 2021 to further regulate the assigning of provisional ratings by rating agencies to debt instruments. The 2021 circular also prescribes specific provisions on ratings for Real Estate Investment Trusts and Infrastructure Investment Trusts.
Read MoreIn November 2020, the Securities and Exchange Board of India (SEBI) issued a circular on due diligence to be carried out by debenture trustees on security for listed debentures. The circular prescribed additional obligations and compliance requirements for trustees and issuers of secured debentures. The implementation of this circular was brought forward to 1 April 2021.
Read MoreThe Reserve Bank of India (RBI) introduced draft directions in December 2020 on call, notice and term money markets with “the objective of bringing consistency across products in terms of issuers, investors and other participants” and to “rationalize existing regulations covering different money market products”. Following feedback from market participants in April 2021, the RBI issued master directions on call, notice and term money markets. Call money means borrowing or lending in unsecured funds on an overnight basis; notice money is borrowing or lending in unsecured funds for up to fourteen days, and term money is borrowing or lending in unsecured funds for more than fourteen days and up to one year.
Read MoreNon-banking financial companies (NBFCs) have grown rapidly, and are increasingly interconnected to capital markets and other components of the financial system. The dominance of NBFCs in the fintech space and the reliance that retail users place on payments systems that NBFCs manage and operate has led to increasing concern on systemic risks they pose. The ongoing liquidity crisis and the covid-19 pandemic has brought into focus the need for an updated governance framework for NBFCs. The RBI saw “a need to review the regulatory framework in line with the changing risk profile of NBFCs” and issued a discussion paper for feedback.
Read MoreSawant Singh and Aditya Bhargava discuss the progressive changes proposed for one-year NCDs.
Read MoreSawant Singh and Aditya Bhargava on RBI's proposed directions on dividend distribution by NBFCs, and whether this is part of a broad-based move by the RBI to systematize governance for NBFCs.
Read MoreSawant Singh, Aditya Bhargava, and Sristi Yadav appraise SEBI's recent changes for listed debt securities and consider if a more nuanced approach is required.
Read MoreOur partners Sawant Singh and Aditya Bhargava along with associate Sristi Yadav discuss RBI's directions to banks to regulate instances in which current accounts and cash credit (CC) or overdraft (OD) accounts may be opened.
Read MoreOur partners Sawant Singh and Aditya Bhargava along with associate Sristi Yadav discuss the RBI's measures announced on 6 August that provides a limited window for the resolution of loans to individual and corporate borrowers that are stressed due to the #covid19 pandemic.
Read MoreHousing finance companies (HFCs) have traditionally occupied a staid corner of the financial sector, providing loans to homeowners and for the development of the housing industry. As a sector, housing finance has also been a “safe investment” as loans secured against mortgages are considered among the least risky assets. However, adverse liquidity conditions for non-banking financial companies (NBFCs) and the crisis at Dewan Housing Finance led to stakeholders reconsidering their views of HFCs.
Read MoreA "black swan event" such as the current COVID-19 crisis is beyond the risk management capabilities of financial institutions as well as regulators such as central banks that oversee them. In such situations, it is sensible for regulators to provide a certain degree of flexibility to allow financial institutions to continue to function so that they do not seize up. Such moves also provide confidence to the financial sector and curtail bear market tendencies.
Read MoreSawant Singh and Aditya Bhargava provide a ringside view on the great escape in a recent bank crisis.
Read MoreIn a move that reflects well-reasoned foresight, on 10 February, the Reserve Bank of India (RBI) released a draft framework for the establishment of new retail payment systems operators.
Read MoreThe enactment of the Payments and Settlement Systems Act, 2007 (PSS Act), was a laudable and farsighted move as it not only created a regulatory framework for payment and settlement systems, but also provided guidelines to foster the growth of such systems. The PSS Act designated the Reserve Bank of India (RBI) as the regulatory and supervisory authority, and sections 30 and 31 of the PSS Act enable the RBI to impose penalties and compound offences, respectively.
Read MoreUntil recently, proceeds of external commercial borrowings (ECB) were not allowed to be used for working capital or general corporate purposes, or for the repayment of rupee loans except where an ECB with a minimum average maturity of five years was obtained from a foreign equity holder. ECBs for on-lending for such purposes was also not permitted by the ECB directions.
Read MoreIn June 2018, in what might have been considered a period of relative stability (given the events that transpired thereafter), the Reserve Bank of India (RBI), in its statement on developmental and regulatory policies, proposed the issuance of directions that would prevent abuse in markets regulated by the RBI.
Read MoreThe Reserve Bank of India's (RBI) statement on developmental and regulatory policies for December proposed "rationalizing" the external commercial borrowing (ECB) framework "with a view to improving the ease of doing business". While the statement served as a forewarning, no draft regulations were placed on the RBI's website for public comments.
Read MoreThe government and the financial sector regulators (Reserve Bank of Indian (RBI) and the Securities and Exchange Board of Indian (SEBI)) has brought in various measures to ease investment and related rules for foreign portfolio investors (FPIs).
Read MoreThe government has often voiced its desire to shift Indian borrowers to the capital markets from banks that are reeling from the burden of non-performing assets. Not only are capital markets better placed to price and absorb risk in varied sectors, but the inherent tradability of a debt instrument also makes it an attractive option for entities whose role in the capital markets is limited to temporary placement of treasury funds until they need to be used. This ensures greater availability of funds for borrowers.
Read MoreTo reduce the burden on banks for financing infrastructure projects, and to promote the use of the corporate bond market for this purpose, the Reserve Bank of India (RBI) permitted banks to provide partial credit enhancements (PCEs) to corporate bonds in 2015. PCEs were intended to enhance the credit rating of bonds, thereby encouraging long-term investors such as insurance funds and pension funds to invest in such bonds.
Read MoreThe regulatory environment for investment in corporate debt by foreign portfolio investors (FPIs) has been turbulent with sweeping changes introduced by the Reserve Bank of India (RBI) in April 2018, followed by other changes introduced on 15 June by both the RBI and the Securities and Exchange Board of India (SEBI). Unlike global financial regulatory rule-making practices, these changes were introduced without the issuance of consultation papers seeking feedback of market participants. These developments, and their manner of introduction, created anxiety among issuers, FPIs and other market participants.
Read MoreThe foreign portfolio investor (FPI) framework introduced in 2014 was welcomed as a prime example of regulatory streamlining. However, the framework has presented challenges, particularly for investments in Indian corporate debt. Until recently, corporate debt investments by FPIs were regulated by a series of circulars issued by the Reserve Bank of India (RBI) in 2015. The 2015 circulars were recast by circulars issued by the RBI on 27 April and 1 May.
Read MoreAlong with sweeping changes in federal and state taxation, the goods and services tax (GST) introduced in 2017 also impacted how business was done, particularly in the financial services sector. With the intent of ensuring "smooth roll-out" of GST, the GST Council constituted 18 sectoral working groups to consider issues and problems relating to 18 sectors in June last year. The objectives of these groups included interacting with and examining representations from trade and industry bodies, highlighting specific issues on the application of GST, and providing sector-specific guidance. On 3 June, the Central Board of Indirect Taxes and Customs (CBIC) issued a compilation of 91 "frequently asked questions" (FAQs) on the application of GST to the financial services sector.
Read MoreCirculars on corporate bond investments by foreign portfolio investor (FPIs), issued by the Reserve Bank of India (RBI) on 27 April and 1 May, disconcerted the financial services sector, particularly the provisions restricting investment by a single FPI in a particular bond issue to 50% of the amount of the issue, and limiting the exposure of an FPI to a single body corporate to 20% of the overall corporate bond portfolio of the FPI. FPIs were also perturbed by the lack of clarity and conflicting interpretations of certain provisions.
Read MoreCirculars on corporate bond investments by foreign portfolio investor (FPIs), issued by the Reserve Bank of India (RBI) on 27 April and 1 May, disconcerted the financial services sector, particularly the provisions restricting investment by a single FPI in a particular bond issue to 50% of the amount of the issue, and limiting the exposure of an FPI to a single body corporate to 20% of the overall corporate bond portfolio of the FPI. FPIs were also perturbed by the lack of clarity and conflicting interpretations of certain provisions.
Read MoreThe Reserve Bank of India (RBI) offers an array of mechanisms for dealing with stressed assets. At last count, these included corporate debt restructuring, strategic debt restructuring, the scheme for sustainable structuring of stressed assets, and joint lenders forums with corrective action plans.
Read MoreFollowing the Insolvency and Bankruptcy Code, 2016, which applies to individuals and non-financial entities, the Financial Resolution and Deposit Insurance Bill, 2017, aims to provide a resolution regime for financial sector entities. The bill was introduced in parliament in August, and currently is pending examination by a joint committee of parliament.
Read MoreIn a move that few noticed, the Reserve Bank of India (RBI) in its statement on developmental and regulatory policies of December announced that overseas branches of Indian banks would soon be permitted to refinance external commercial borrowings (ECBs). Such refinancing would be limited to Indian bodies corporate rated "AAA" and public sector undertakings (PSUs) that are classified as "Navratna" and "Maharatna".
Read MoreOn 20 July, foreign portfolio investors (FPIs) and investors in rupee denominated bonds (RDBs) got an unwelcome surprise in the form of a circular from the Securities and Exchange Board of India (SEBI) that effectively halted the subscription of corporate debt by FPIs and other foreign investors. But twin late-September moves by SEBI and the Reserve Bank of India (RBI) have restored some level of certainty for FPIs and foreign investors as well as Indian borrowers.
Read MoreWith the last throes of the demonetization saga closely nipping at the government's heels, much theatre and fanfare accompanied the introduction of its 2017-18 budget. Tension was heightened as the union budget was merged with the railway budget, reportedly for the first time in 92 years.
Read MoreWith ever increasing levels of non-performing assets (NPAs) in the banking system, the Reserve Bank of India (RBI) has been seeking ways to reduce the burden of providing credit on banks. In particular, the RBI has emphasized shifting long-term credit requirements such as project loans, and credit to borrowers with a large exposure to the banking system, to the bond market. Following its monetary policy announcement in April, the RBI released a discussion paper on facilitating "credit supply" for "large borrowers" through the bond market.
Read MoreAs part of its ongoing putsch against stress in the banking system, the Reserve Bank of India (RBI) issued guidelines on sale of stressed assets by banks on 1 September. The guidelines continue the RBI's various efforts since 2014 to put in place a regulatory framework to identify and tackle stress in the banking system before loans are classified as non-performing assets (NPAs), and clean up banks' balance sheets. The guidelines are detailed and cover a vast swathe including when stressed assets should be sold, valuation, investment in security receipts by selling banks, and mode of sale (including a right of first refusal to be offered by the selling bank).
Read MoreIn its monetary policy statement for 2014-15 on 1 April 2014, the Reserve Bank of India (RBI) announced that it would work on a framework for granting licences "on tap" to universal banks, and for granting of differentiated bank licences with the intent to "to expand the variety and efficiency of players in the banking system while maintaining financial stability". This statement had been preceded by a policy paper in August 2013, which recommended reviewing the then prevailing policy of granting licences for establishment of banks on a "stop and go" basis, and instead put in place a continuous authorisation policy.
Read MoreWhile the Indian corporate bond market has become more active in the private placement segment in the past few years, the market’s overall development has been ad hoc. This situation seems set for a much needed change, with the Reserve Bank of India (RBI) under its current governor, Raghuram Rajan, actively promoting the migration of long-term infrastructure debt and structured debt from the loan markets to the bond market.
Read MoreFollowing up on the government's initiative to encourage Indians to move to electronic payment methods, the Reserve Bank of India (RBI) has issued guidelines on the use of "prepaid payment instruments" (PPIs). A PPI facilitates the purchase of goods and services against value stored on it.
Read MoreUnlike jurisdictions such as Singapore, India did not (until very recently) have differentiated licensing for banks, i.e. granting licences for conducting a specific line of banking business. The prevalence of universal banking licences coupled with the burden of fulfilling increasingly stringent prudential norms meant that banks that received licences rarely ventured outside Indian cities which were their main profit centres. Consequently, the avowed goal of successive central governments to make basic banking services available to all citizens was not fulfilled.
Read MoreThe master circular on wilful defaulters issued by the Reserve Bank of India (RBI) defines a "wilful default" as occurring when: a "unit" defaults in its payment/repayment obligations to a lender even though it has the capacity to make such payments; a unit defaults in its payment/repayment obligations to a lender
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