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 MoreBrand Realty Services Ltd., the Operational Creditor ("Petitioner") filed an application under Section 9 of the IBC against Sir John Bakeries India Pvt. Ltd. ("Corporate Debtor") for initiating a Corporate Insolvency Resolution Process ("CIRP"), in view of the pending dues under an Account Settlement Agreement entered into between the parties on 15 June 2018 ("Settlement Agreement").
Read MoreIn a judgment in the matter of Brand Realty Services Ltd. v. Sir John Bakeries India Pvt. Ltd.1 the NCLT Delhi ("NCLT") clarified that unpaid dues under a settlement agreement cannot be considered as an 'Operational Debt' under Section 5(21) of the Insolvency and Bankruptcy Code, 2016 ("IBC"), as the NCLT "is not a recovery court".
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 MoreThe recent decision of the Supreme Court of India wherein the Hon'ble Court slashed the penalty imposed by the Collector of Stamps from ten times the deficiency in stamp duty to half, i.e. five times, as being sufficient to serve the ends of justice in that matter.
Read MoreSawant Singh, Biswadeep Chakravarty, and Sanjeev Sambasivan throw light on a recent decision of the Delhi High Court which held that the mandatory pre-deposit of the awarded amount under the MSME Act, 2006, does not apply to an award rendered by arbitrator/s appointed under the Arbitration and Conciliation Act, 1996.
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 MoreGujarat High Court in a recent matter decided on the issue of Writ Jurisdiction during the pendency of an arbitration proceeding and reaffirmed the principle of 'kompetenz - kompetenz' along with arbitrability of the simplicitor allegations of fraud.
Read MoreThe Rajasthan High Court's recent decision in the matter of Ultra Tech Nathdwara Cement Ltd. v. Union of India and Ors. where the Hon'ble Court laid emphasis on the 'binding nature' of resolution plans on pending government dues under the Insolvency and Bankruptcy Code, 2016.
Read MoreThe dampening effect of the Covid-19 pandemic on economies compelling governments and regulators to introduce innovative measures to restore confidence in financial markets.
Read MoreAn important ruling of the Hon'ble Supreme Court which held that a question of limitation cannot be decided as a preliminary issue under Section 9A CPC.
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 MoreThe use of cryptocurrency has always been a point of contention with its legality being a mystery to public. Bitcoins are a form of digital currency and are not considered to be legal tender. However, these are capable of functioning as a medium of exchange akin to money. The lack of a traditional government or bank-backed system to regulate its use makes cryptocurrencies the target of several concerns such as it being a conduit for black money or anonymously funding terrorism. Despite the odds, cryptocurrencies have gained popularity worldwide and the cryptocurrency market in India has also been slowly gathering momentum.
Read MoreIn a recent decision1 , the Supreme Court of India ("Supreme Court") reiterated that the burden to prove that a 'property' is a joint property of a Hindu Undivided Family ("HUF"), lies on the person claiming such a property as a HUF property.
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 MoreAs a part of the labour reform initiative, the labour ministry has decided to amalgamate 44 labour laws into four codes: (i) code on wages, (ii) code on industrial relations, (iii) code on social security and safety, and (iv) code on health and working conditions.
Read MoreAfter a battle that lasted approximately 900 days, the Supreme Court of India in the case of Committee of Creditors of Essar Steel India Limited through Authorised Signatory v. Satish Kumar Gupta, paved the way for ArcelorMittal to take over Essar Steel Ltd.('Essar') by upholding the primacy of the Committee of Creditors ('CoC') in distribution of funds of INR 42,000 crore received under the resolution plan submitted by ArcelorMittal.
Read MoreAfter a battle that lasted approximately 900 days, the Supreme Court of India in the case of Committee of Creditors of Essar Steel India Limited through Authorised Signatory v. Satish Kumar Gupta, paved the way for ArcelorMittal to take over Essar Steel Ltd.('Essar') by upholding the primacy of the Committee of Creditors ('CoC') in distribution of funds of INR 42,000 crore received under the resolution plan submitted by ArcelorMittal.
Read MoreWhile the FSP Rules are an ad hoc solution, their notification is welcome as it represents a step in the right direction. These are currently not applicable to all FSPs and are restricted only to "Non-Banking Financing Companies" and "Housing Finance Companies" with asset size of 500 crores or more. All in all, the initiation of the CIRP of DHFL has set the ball rolling for notified FSPs to be liable to undergo a full-fledged CIRP process.
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 MoreWith over 40 central and state laws dealing in labour and employment aspects, it has been the need of the hour to compile and codify these laws. The Second National Commission on Labour (2002) had recommended that the existing labour laws should be classified into broader groups for easier compliance.
Read MoreCompanies Amendment Ordinance 2018 ("Ordinance 2018") issued on November 2, 2018 by the Ministry of Law and Justice brought about significant changes to 31 provisions of the Companies Act, 2013 ("Act"). While Ordinance 2018 got approval from Lok Sabha, it could not be taken up by the Rajya Sabha due to other exigent matters
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. Added to this are the various classifications of “special mention accounts” (SMAs) and the various stages of non-performing assets. The absence of a statute-driven insolvency apparatus justified the need for these mechanisms, but the enactment of the Insolvency and Bankruptcy Code (IBC) rendered their utility moot. Indeed, these mechanisms were unintendedly in conflict with the IBC.
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
Read MoreIndia’s regulatory framework has been uncharitably, if accurately, described as an accumulation of responses to crises, replete with turf squabbles and blind spots, rather than a comprehensive system of parts with a unified purpose. The Ministry of Finance constituted the Financial Sector Legislative Reforms Commission (FSLRC) in March 2011, with a mandate to review and suggest changes to existing laws and regulatory institutions in the financial sector to bring them up to speed with global standards. Two year
Read MoreIndia’s Companies Act, 2013, has had a chequered and a sluggish start. While it received presidential assent on 29 August 2013 and appeared in the official gazette the next day, only 98 of its 470 sections were notified on 12 September 2013. A further 183 sections, along with rules implementing the notified sections, were notified into effect on 1 April 2014. Until all the sections are notified, the provisions of the Companies Act, 1956, that do not contradict the notified provisions of the 2013 act will con
Read MoreAs part of a larger policy move to align India’s financial markets with international standards and to clamp down on the diversion of Indian rupee denominated business to offshore locations such as Singapore and Dubai, the Ministry of Finance issued a concept paper in February 2015 on establishing finance special economic zones (SEZs). The finance SEZs would have more liberal financial laws and a more efficient financial system than elsewhere in India. The government also percei
Read MoreAs part of easing capital account controls on the Indian economy, the Reserve Bank of India (RBI) has gradually been liberalizing regulations on external commercial borrowings (ECBs) from overseas lenders. A report of the Committee to Review the Framework of Access to Domestic and Overseas Capital Markets in February 2015 noted that: (a) ECBs are susceptible to currency fluctuation risk which in turn could affect “systemic stability”; (b) the regulatory framework for ECBs must be consis
Read MoreQuite without warning, the Reserve Bank of India (RBI) notified the framework for issuance of rupee denominated bonds under the overall external commercial borrowing (ECB) framework on 29 September. Unlike other surprises from the RBI, this was a pleasant one, particularly because the framework’s provisions were more liberal than its draft form, which had left much to be desired.
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 MoreTo reduce the stress on banks due to non-performing assets (NPAs), troubled accounts and burgeoning restructurings, the Reserve Bank of India (RBI) has introduced measures over the past 18 months. These include the framework for early detection of potentially stressed accounts before these turn into NPAs, the guidelines on constituting the joint lenders forum (JLF) and the mechanism for putting in place a “corrective action plan” (CAP) for stressed borrowers, and amendments to the guide
Read MoreOne of the villains in the Indian growth story is the poor state of capitalization of India’s public sector banks (PSBs). Most government majority-owned PSBs are among India’s largest banks and also have the largest exposure to stressed assets and sectors. Continued exposure to delinquent borrowers and fraudulent practices by borrowers of the PSBs has contributed to the declining credit quality of the loans made by the PSBs.
Read MoreThe establishment of “international finance centres” – specifically the Gujarat International Finance Tec-City (GIFT) – on par with Singapore and Dubai, received a notable mention in the finance minister’s budget speech on 28 February. The minister also mentioned that regulations for such centres would be issued in March.
Read MoreWith the growing integration of India into the global economy and with the sheer size of the Indian economy, the country’s budget speech has become a keenly anticipated event. Rating agencies, multinational companies and global financial institutions now join Indian companies, financial institutions and individuals in trying to read the “tea leaves” and predict policy changes in the coming budget. The buildup to the 2015-16 budget speech on 28 February was par
Read MoreAn increasing amount of business in Indian rupee denominated financial products and other financial products dependent on the performance of the Indian economy is either being conducted offshore or is being shifted to offshore locations such as Singapore and Dubai. As business in these products not only creates jobs in the financial services sector but also in other sectors that benefit the local economy, successive Indian governments have recognized the importance of establishing an
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 gove
Read MoreThe policy paralysis plaguing India's regulatory system seems to have abated with the notification of the Securities Laws (Amendment) Act, 2014, on 22 August. The act had already enjoyed two terms in force as ordinances promulgated by the president of India.
Read MoreOn 23 June, the Reserve Bank of India (RBI) released timelines within which its approval could be expected for matters such as licences for private banks, the issuance of licences to non-banking financial companies and external commercial borrowings not covered under the automatic route. In parallel, the RBI also placed a “Citizens’ Charter” on its website, providing timelines within which various departments would be able to provide services for matters
Read MoreOn 1 July 2013, the Reserve Bank of India (RBI) disclosed that it had received 26 applications from private sector entities for licences to establish new banks. The applicants included prominent financial and industrial concerns such as Edelweiss, L&T Finance, Reliance Capital, Videocon Group and Tata Sons, although Tata Sons and the Videocon Group later withdrew their applications. After an initial screening of applications by the RBI,the applications were further scrutinized by the High Level Advisory Committe
Read MoreAs part of its policy to tackle the growing incidence of non-performing assets (NPAs) in the Indian financial system, the Reserve Bank of India (RBI) issued a discussion paper on 17 December 2013 which aimed at putting in place a framework that includes incentives for the early recognition of “problem cases” and restructuring of viable accounts.
Read MoreOn 6 November, the Reserve Bank of India (RBI) issued its much awaited framework for the presence of foreign banks in India. The framework envisages that foreign banks will be present in India preferably through wholly owned subsidiaries (WOS) rather than branches, and such WOS will enjoy “near national treatment”.
Read MoreNew rules in the European Union are forcing European banks in India to reconsider their clearing operations based out of India. In response to the financial crisis, the EU adopted the European Market Infrastructure Regulation (EMIR) in August 2012 to increase transparency in the “over-thecounter” (OTC) derivatives market and to mitigate systemic risk by reducing operational as well as counterparty credit risk. Once fully implemented, the EMIR will require certain classes of derivatives to be centrally cleare
Read MoreBy rest ructur ing distressed accounts instead of classifying them as non-performing assets (NPAs), banks skirt around the requirement to provide for NPAs by setting aside a specific portion of their capital to make up for losses that could arise from a potential default. However, the rules of the game changed significantly with the issuance by the Reserve Bank of India (RBI) of a circular dated 30 May, which introduced several changes to the prudential guidelines on restructuring of advances by banks and other
Read MoreThe The Reserve Bank of India (RBI) recently issued guidelines on the licensing of new banks in the private sector and invited applications by 1 July 2013. While the guidelines have been on the anvil since 2010, it is understood that the RBI was keen for certain amendments to be made to the Banking Regulation Act, 1949 – which were brought about by the Banking Laws (Amendment) Act, 2012 – before releasing the guidelines. This article discusses some key features of the guidelines.
Read MoreThe Indian financial sector recently received a fillip with the enactment of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2012. The act aims to remove some bottlenecks observed in the existing regulatory framework for recovery of non-performing assets (NPAs), namely the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB Act), and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002(SARFAESI Act).
Read Morehe year has started on a bright note for the banking sector with the enactment of the Banking Laws (Amendment) Act, 2012, which makes several far-reaching changes to existing banking legislation and increases the ambit of regulatory oversight of the Reserve Bank of India (RBI). It is expected that these changes will pave the way for entry of new players in this field, leading to greater competition, efficiency and wider financial inclusion
Read Moren what is seen as a resounding victory for the banking sector, the Supreme Court, India’s highest judicial body, recently held that banks could consider default in payment obligations under derivative transactions at par with default under other lending facilities, for the purposes of reporting of wilful defaulters.
Read Morehe Indian economy, while having shed much of its socialist bag - gage towards the close of the twentieth century, still believes in closely monitoring certain key components of its monetary system. Management of foreign exchange reserves is one exam - ple of this, with the external commercial borrowing (ECB) policy placing several restrictions, such as limiting permis - sible end uses, on securing loans from abroad.
Read MoreIn recent years, captivated by the Indian growth story, the global investor community has been keen to participate in the Indian capital markets. However, until recently, access to investment opportunities in India was by and large limited to foreign institutional investors (FIIs) and foreign venture capital investors (FVCIs).
Read MoreIndia’s Union Budget projected a growth rate of 7.6% over the fiscal year that started on 1 April. Among the critical sectors having a bearing on the attainment of this target are civil aviation, power, and roads and highways.
Read MoreThe 2012-13 Union Budget presented by India’s finance minister, Pranab Mukherjee, was eagerly anticipated by the global investment community as an opportunity for the government to shake off negative perceptions of policy paralysis by outlining a definitive road map signalling its commitment to sustained growth and creation of a conducive investment climate. This column outlines key budget proposals of interest to foreign stakeholders in the Indian economy.
Read MoreEffective management of working capital is critical to any business enterprise. By receiving funds advanced against invoices, factoring enables a business to free up capital without the need to offer any collateral. Factors also provide other value-added services, such as managing collection of invoices and credit rating of customers, thereby enabling clients to focus on their core activity.
Read MoreThe recently issued draft Microfinance Institutions (Development and Regulation) Bill, 2011, offers a ray of hope for India’s crisis stricken microfinance institutions (MFIs). Over the last couple of years, the industry has been in the headlines for all the wrong reasons: the very public boardroom squabbles of a premier MFI and suicides by poor farmers, allegedly as a result of harassment by loan recovery agents.
Read MoreClose on the heels of the new consolidated FDI policy (which this column discussed last month), comes yet another regulatory change that is impacting deal-making in India with foreign money. The Reserve Bank of India (RBI) has, through a notification issued on 7 April and a circular dated 4 May, amended the manner in which cross-border share transfers and share issues are to be valued. We discuss below the valuation norms for unlisted companies. (For implications of these regulatory changes on M&A transactions,
Read MoreGlobally, there exists a long list of fund houses which are so called “activist investors”. The “activism” is often a reference to either the changes in the management and operations of a company, which the fund houses would like to bring about, or the active participation by such funds in the key decisions of a company, through the exercise of their votes. The end objective of such activism has typically been to ensure that shareholders’ interests especially the minority) are protected and the highest
Read MoreWith the gradual liberalization of exchange control regulations in India during the 1990s, Indian corporates have had the ability to raise funds from global markets. A popular instrument, especially in the past few years, has been the foreign currency convertible bond (FCCB).
Read MoreWhile most of the world was preparing for the holiday season, the Department of Industrial Policy and Promotion (DIPP), without much notice and publicity, released a draft Master Press Note on foreign direct investment in India late on 24 December 2009. The Master Press Note was open to comments from the public until 31 January. While not intended as an in-depth analysis, our column this month takes a look at this policy initiative and what it seeks to achieve.
Read MoreThe Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, in a press release issued in early November, indicated that it would, in the coming months, amend the policy on technology-related payments by Indian firms to foreign persons. Close on the heels of the press release, the DIPP eased the policy on remittance of royalties and similar payments for licensing of trademarks, technology transfers, etc, through Press Note 8 of 2009, dated 16 December.
Read MoreFurther to the announcement made at its board meeting of 22 September, the Securities and Exchange Board of India (SEBI) through a notification on 6 November amended various aspects of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, commonly known as the takeover code or the code. One of the major amendments was to bring American depository receipts/ global depository receipts with voting rights on par with equity shareholdings for the purposes of the code.
Read MoreThe Indian securities market regulator, the Securities and Exchange Board of India (SEBI), issued a circular on 21 July which introduced the new clause 28A to the listing agreement. The provision states: “The company agrees that it shall not issue shares in any manner which may confer on any person, superior rights as to voting or dividend vis-à-vis the rights on equity shares that are already listed.” Unsurprisingly the new clause has generated questions, discussion and debate in the Indian legal, securiti
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