CA Online

SEBI Weighs Custodians to Shield Retail Investors Worried over vanishing share portfolios, regulator also plans tighter rules for trading settlement Defaulting brokers and vanishing share portfolios have prompted the capital market regulator to consider ways to protect the interests of retail investors who are often at the mercy of unscrupulous brokers misusing clients’ shares without consent. The Securities and Exchange Board of India plans to tighten rules for trading settlement and introduce custodians for retail investors, said two people familiar with the matter.These proposals were discussed in the Sebi’s Secondary Market Advisory Committee meeting recently. The details could not be ascertained because the plan is still on the drawing board. Sebi’s plan is to ensure brokers do not misuse clients’ accounts and sell their shares without nod unless the client has defaulted.The market regulator is considering the introduction of custodians for retail investors — akin to int...

Reserve Bank of India to tighten norms for working capital limits Public sector bank executives said the move was expected to provide predictability over cash flow for lenders In a move to instil discipline among large borrowers with working capital facility, the Reserve Bank of India has mooted a proposal that at least 40 per cent of the sanctioned limit should be a term loan component. For borrowers with an aggregate fund-based working capital limit of Rs 1.5 billion and above from the banking system, a minimum level of ‘loan component’ of 40 per cent shall be effective from October 1, 2018, the RBI said in draft norms placed on its website. It has sought feedback from banks and stakeholders till June 26, 2018. The 40 per cent loan component will be revised to 60 per cent with effect from April 1, 2019. For large borrowers, the outstanding ‘loan component’ must be equal to at least 40 per cent of the sanctioned fund-based working capital limit, including ad hoc credit facil...

Authority's orders favour firms for anti-profiteering in times of GST The NAA is currently looking into 50 complaints and will issue the orders in the coming weeks Allaying industry’s apprehensions, all three orders passed by the National Anti-Profiteering Authority under the goods and services tax (GST) regime have so far gone in favour of companies. In its latest order, the five member NAA has dismissed complaint against elevator manufacturer Schindler India for charges of profiteering filed by a Delhi business. The complaint pertained to charging of service tax on the payment made to Schindler India before GST implementation on July 1, 2017 and GST for the payment installments made in July when the installation took place. However, since elevators were delivered to the firm before July 1, the tax had been charged without excluding the pre-GST regime excise duty. Hence, the applicant was charged twice — once on the pre-GST excise duty and subsequently on the full value ...

FinMin extends due date for debt ETF bids from advisers till July 2 The DIPAM had earlier on April 18 issued the RFP for engagement of an adviser for creation and launch of debt ETF asking bidders to submit their bids by May 16The Finance Ministry has extended the deadline for merchant bankers to bid for creation and launch of a debt Exchange Traded Fund (ETF) for PSUs and PSBs till July 2. In the revised request for proposal (RFP) issued on Monday , the Department of Investment and Public Asset Management (DIPAM) has tweaked the eligibility criteria for bidders, clarifying that they can also bid in consortium.Accordingly, market regulator Sebi or banking regulator RBI registered "reputed merchant bankers/investment bankers/ consulting firms/financial institutions/asset management companies, either singly or as a consortium," can bid for creation of the ETF till July 2. In the revised request for proposal (RFP) issued on Monday , the Department of Investment and Publi...

Govt: No Provision of Summer Break for NCLT, NCLAT MCA points to 2016 rules; NCLAT to consider request in July post vacation The government wants National Company Law Tribunals (NCLT) and National Company Law Appellate Tribunal (NCLAT) to work through the summer, without a break, to resolve the corporate insolvency cases that have been piling up.The ministry of corporate affairs (MCA) on June 4 sent separate letters to the NCLAT and the NCLTs saying that there’s no provision for vacation under the rules framed in 2016. The move was sparked by the NCLAT posting a vacation notice on its website announcing a break from June 1to July 1. The NCLTs plan a 15-day break. Responding to MCA’s letter, the NCLAT deputy registrar wrote back on June 5 that the issue had been placed before the full court. The matter will be further examined in the first week of July. Since that will be after the vacation, it could mean these courts taking a break against the wishes of the government. NCLT is ...

Cracking 'bad bank' tough nut, but it's not impossible, say experts The NPA problem and the effect on bank balance sheets has not improved despite the Insolvency and Bankruptcy Code (IBC) process The idea of a ‘bad (loans) bank’ is back on the table as loans gone sour at Indian banks near Rs 10 trillion. Details are sketchy yet on whether the asset reconstruction company (ARC) in this regard would be owned by the government or have non-state participants. Either way, say experts, this is not going to be an easy task. In any case, there are precedents in India, albeit much smaller in scale. A direct example can be found in the Stressed Assets Stabilisation Fund (SASF), formed in 2004 by the Government of India, to recover Rs 90 billion bad debt of the erstwhile Industrial Development Bank of India (later converted into IDBI Bank). The government issued bonds against the debt and the balance sheet was cleaned. For some accounts, the fund did recover a substantial amou...

New Accounting Rules may Deal Rs 20kcr Blow to Builder Realtors will have to write back profits retrospectively on all incomplete projects The implementation of a new accounting standard from this fiscal will force listed real estate companies to write back profits made over the past few years from all projects that are not complete. That could hit the balance sheets of companies, many of which are still recovering from their debt-fuelled spending binges of the past decade or so. Developers have written to the government seeking relief. Under IND-AS 115, in line with international norms, listed real estate companies will have to write back about ?20,000 crore from their net worth in the current fiscal itself, said a top industry executive, asking not to be named. The new accounting standard took effect in April. Real estate companies will have to switch to the Project Completion Method from the existing Percentage Completion Method (POC). Under the previous norm, home buyer p...

  CEOs Expect FY19 GDP to Grow More Than 7%: CII Poll Most of the industry leaders also see a pickup in capacity utilisation due to increased demand Investment in the country is likely to get a strong boost with the economy set to grow past the 7% mark in the current fiscal year, a CII poll of CEOs has indicated. A majority of the CEOs polled expect a pickup in capacity utilisation in industry due to increased demand, as well as creation of more jobs. The economy is in a sweet spot right now as the adjustment process regarding major reforms of the past few years is largely stabilised and industry is ready for a fresh phase of investment while capacity utilisation builds up,” said CII president Rakesh Bharti Mittal said. As much as Rs 50,000 crore of investments have recently been announced, noted the CII. “Industry is looking forward to GDP growth rate picking up to close to 8% over the next couple of years. Fiscal prudence, able macroeconomic management and strong reform...

GST, Infrastructure Status Drive PE Investments in Warehousing Government initiatives such as Make in India, implementation of the Goods & Services Tax and infrastructure status for the logistics sector have been pushing both demand for and investment in warehousing and industrial real estate across the country. The infrastructure status to the logistics sector that includes industrial parks, cold chains and warehousing facilities has been helping in attracting private investments in these sectors. While investors eyed opportunities in this sector in anticipation of the reforms to be implemented by the government, the flow of investment has gained further momentum now. “Warehousing and logistics have emerged as one of the biggest growth areas in recent times. We have seen Rs 15,000 crore private equity investments in warehousing space since 2014. While it made up around 10% of total private equity investment in 2017, the share is now expected to grow further, claiming lar...

Amendment to IBC will Help Small Stakeholders but Delay Resolution Revised Act says corporate debtor can file insolvency petition only if its shareholders pass special resolution The recent amendment to the bankruptcy law — that requires shareholder approval before a company files for insolvency and also mandates that the administrator convince the tribunal that the resolution plan is effectively implementable — will benefit small stakeholders but delay resolution. Last week, the Indian president approved to promulgate the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018, which was cheered for bringing home loan buyers at par with financial creditors besides other changes. The revised Act says the corporate debtor can file insolvency commencement petition only if its shareholders pass a special resolution. “This restricts access to IBC by corporate debtor which is contrary to global best practices,” said Sumant Batra, insolvency expert and managing partner of Kesar ...

GST amendments in Monsoon Session to make returns simpler The proposed GST changes will do away with filing returns under GSTR2 and GSTR3, modify the composition scheme, and eliminate ambiguities in the laws The government is set to table amendments to goods and service tax laws in the monsoon session of Parliament to simplify GST returns filings, modify the composition scheme under which small traders can pay tax based on their revenue, and eliminate ambiguities in the laws. The proposed GST changes will do away with the need for filing tax returns on purchases made by businesses, called GSTR2, and comprehensive returns called GSTR3. At the moment, these returns have been kept in abeyance and businesses only file sales returns, called GSTR1, and GSTR3B summary returns. The GST Council had in May approved a new system where all taxpayers need to file a single return and small businesses need to file quarterly returns, after a six-month transition period, under the composition...