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The Reserve Bank of India (RBI) will, for the time being, leave it to individual banks to decide how best to deal with corporate loan defaulters, and the  government will exercise its majority shareholder rights to nudge staterun banks to take insolvent companies to bankruptcy courts, a government official  said on Wednesday.  The official’s statement came after the Supreme Court on Tuesday quashed a central bank circular instructing lenders to take defaulters to bankruptcy  resolution after 180 days of the default. The government’s approach in the wake of the apex court ruling is to use its ownership rights to ensure that  defaulters are firmly dealt with under the bankruptcy code. The central bank will examine the implications of the Supreme Court decision and come up with a considered response, which may take some time. “These things take time. The RBI may not immediately come up with specific guidelines or comments regarding restructuring of loans,” said the official who  did n

India and US will be signing an information-sharing agreement before the end of the fiscal year. Companies headquartered in the US but having operations and  taxability in India now need not file country-by-country (CbC) reports in India, according to a pact signed between India’s tax department and the US  authorities.  In a press release, the Central Board of Direct Taxes (CBDT) has clarified that for such international companies, filing CbC reports in the US would be  sufficient.  These would then be shared with the Indian tax authority, the CBDT, under an information-sharing agreement which will be signed between the countries before  the end of the fiscal year. This will reduce the compliance burden on firms. The deadline for furnishing the CbC report was earlier extended. The Business Standard, 4th April 2019

Lenders also have the option of restructuring the loans Lenders to companies which are under stress could now have three options to deal with them if they  default on loans: take a haircut as part of a one-time settlement, restructure the loans for a longer tenure as they did when corporate debt restructuring  schemes were allowed, or go to the Insolvency and Bankruptcy Code (IBC) for redress.  These changes in the options available to lenders come, according to PE funds and bank lawyers who are involved in the IBC process, in the wake of the  Supreme Court on Tuesday setting aside the 12 February RBI circular, which allowed a 180-day window to banks to resolve a company default. But they can still find a resolution. According to a Reserve Bank of India circular, a loan becomes a non-performing asset when banks cannot find a way of  recovering their money in 90 days. In short, banks still have a window to resolve the default. Lenders can take a haircut as part of a one -time settle

The experience of banks with IBC cases so far has been mixed with banks taking an average haircut of 50% With the Supreme Court striking down the Reserve Bank of India's (RBI's) February 12, 2018, circular, the resolution of default accounts, which were filed in various tribunals under the Insolvency and Bankruptcy Code (IBC) after the circular was released, will get delayed further. For erring promoters, it comes as a shot in the arm as they will get an opportunity to resolve their accounts with the banks.  “The SC order puts into question everything the banks have done pursuant to the February 12 circular, including any case filed for insolvency proceedings. It gives all of them (default accounts) another lease of life, but the RBI needs to clarify under what guidelines these debt resolutions will be considered," said Sanjiv Krishnan, partner & leader (deals), PwC India. It would appear that all the restructuring mechanisms such as S4A (Scheme for Sustainable Str

The Securities and Exchange Board of India has proposed a self-regulatory body for distributors and advisors of mutual funds products.  The regulator said the distributors of mutual fund products and investment advisers are becoming important players in the market and growing in number.   There are about 1.24 lakh distributors of mutual fund products as on February 28, 2019 and 1,136 investment advisers registered with Sebi as on March 19,  2019.  “Therefore, their direct supervision by Sebi would be challenging. Hence, some form of a first-level regulator is required to have an oversight on them,”  Sebi has stated in a discussion paper on Monday seeking public comments by April 21, 2019. “Further, the same (SRO) may be extended to suchother   intermediariesor other market participants as may be notified by Sebi from time to time.”  The regulator has sought feedback on whether there should be a single or different SROs for different classes of regulatees and on enhancing the net wo

The Reserve Bank of India (RBI) has made life a little easier for banks by tweaking the rule on bad-loan divergence disclosures.  Banks’ disclosure of divergences, mandated by the RBI, aims at improving the transparency in asset classification and preventing under-reporting of bad  loans. The central bank on Monday appears to have diluted the rule a bit without compromising the intent.  “Some banks, on account of low or negative net profit, are required to disclose small divergences, which is contrary to the regulatory intent that only  material divergences be disclosed,” RBI said. It told banks to disclose divergences when the additional provisioning for bad loans assessed by the RBI exceeds 10% of the reported profit before   provisions and contingencies for the reference period, instead of the earlier rule of 15% of the published net profits after tax.  There was no change in the second condition: That additional gross NPAs identified by RBI exceed 15% of the published increment

The Reserve Bank of India (RBI) will conduct its second dollar-swap auction in a month to inject $5 billion (about Rs 34,500 crore) of liquidity into the  banking system, marking a new trend in balancing the economy’s cash needs and ensuring speedier transmission of policy rate actions.  “In order to meet the durable liquidity needs of the system, the Reserve Bank has decided to inject Rupee liquidity for longer duration through long-term  foreign exchange Buy/Sell swap in terms of its extant Liquidity Management Framework,” RBI said Monday.  The central bank will conduct the auction on April 23.  “The US Dollar amount mobilised through this auction would also reflect in RBI’s foreign exchange reserves for the tenor of the swap while also reflecting  in RBI’s forward liabilities,” said the RBI note. This is how the swap mechanism would work: High-street banks would sell dollars to the RBI at a dollar-rupee exchange rate fixed by the central bank. Three  years later, the banks would