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Indian Accounting Standards (Ind AS) have become mandatory for certain non-banking finance companies (NBFCs) effective April 1, 2018, with the first quarter reporting out for some. This puts to rest the speculation that the transition to Ind AS for NBFCs may get postponed. Transition to Ind AS, while primarily being an accounting change, is expected to have a profound impact on the business of NBFCs.  Ind AS should be as much part of the CEO agenda as it is of the CFO/ Controller’s agenda as it is expected to significantly alter the KPIs and business ratios (cost-to-income ratio, NII, NIM, NPA ratios and provision coverage ratios) based on the choices made. NBFCs are advised to proactively reach out to internal and external stakeholders to highlight impacts of these changes. Some of the significant potential changes in practices that are expected due to Ind AS are as follows: • Upfront fees and loan origination costs such as commission and incentives are incurred by NBFCs. Ind AS

NEW CATEGORIES of schemes and new benchmarks led to fund houses buying more of mid- and large-cap stocks, says a report The Sebi circular on categorisation and rationalisation of mutual fund schemes led to cash inflows into several small-cap funds drying up in an unprecedented portfolio overhaul, says a research note by brokerage Prabhudas Lilladher.  The circular had sought to create uniformity in the mutual fund industry by setting clear definitions of large-cap, mid-cap and small-cap stocks. That would create specific categories of mutual fund schemes, where only one scheme is allowed per category. Small-cap stocks witnessed net selling of about ?22 crore (January-June). About ? 280 crore was sold in April 2018, while ?140 crore was sold even in June 2018. In the same period, ?21,900 crore worth of large-cap stocks were bought, while mid-cap stocks as per the changed definition reported net buying of ?14,500 crore.  The tightening of norms meant that two categories — a new one

GST, INFRASTRUCTURE STATUS PUSH DEMAND FOR LEASING ACTIVITY Leasing was driven by consolidation and expansion moves of e-comm, third-party logistics, retail and engineering & manufacturing cos Policy initiatives including implementation of the goods and services tax (GST) and grant of infrastructure status led to a 45% increase in leasing activity in logistics and warehousing segment in India’s top seven cities in the first half of 2018 from a year ago to 10 million square feet, showed data from CBRE South Asia.  Leasing activity was primarily driven by consolidation and expansion moves of e-commerce, third-party logistics, retail, and engineering and manufacturing companies, which together accounted for more than 75% of the leasing reported during the period.  The rise is attributed to policy reforms that the sector has witnessed over the past two years, particularly the implementation of the GST, as more and more companies in the sector consolidate their operations and loca

BETTER DAYS Lower prices ahead of the festive season will allow companies to up volumes The government’s decision to slash rates of GST on a wide range of consumer goods is being cheered by analysts. Tax rates were cut from 28% to 18% across items, including consumer durables such as washing machines, television sets, vacuum cleaners and refrigerators, apart from sharp cuts in smaller items such as footwear, paints, leather products and textiles. This is expected to spur demand and give a fillip to the consumption theme. Of the 50 items that are under the highest tax slab of 28%, 19 will see a cut in taxes. Rates on select items from other slabs of 18% and 12% have also been lowered. Analysts say this cut will be passed on to consumers through cut in prices in the range of 8-12%. With the festive season round the corner, lower prices of more than 50 items will allow companies to boost volumes, giving a push to the discretionary consumption theme that has been a prominent play in

The Reserve Bank of India (RBI) maintained its stand on the revised norms for stressed assets and stuck to the August 27 deadline for completing resolution proceedings.  The court had on August 2 sought RBI’s reply on the government’s recommendation to extend deadline for completing resolution proceedings by 180 days.  The deadline, as per the RBI circular, expires on August 27. RBI presented its case on Thursday and declined sector specific relaxations. The Allahabad High Court will continue its proceedings on Friday as the hearing could not conclude on Thursday, a source said.  The power industry has pinned hopes on the Allahabad High Court where petitions have been filed against the RBI circular that mandated that in case of a loan default, all lenders must decide on a resolution within 180 days, which expires on August 27, or invoke insolvency proceedings against the defaulter without allowing even a day’s extension.  The government has recommended an extension of 180 more days

In a ruling that may have implications for gold mortgages, gold bonds and commodities derivative trading, Karnataka Authority for Advance Rulings has held that deposit of goods to a custodian with obligation to return on submission of electronic receipts would not be liable for GST.  The ruling came in relation to applicability of goods and services tax in case of a derivative contract in diamonds through Indian Commodity Exchange. The authority held that mere deposit of diamonds with safe vaults acknowledged by electronic vault receipts does not constitute a supply for levy of GST.  It observed that in such a transaction, there is only transfer of possession of diamonds where safe vaults hold them as a bailee with obligation to return them to depositor on submission of EVR. Since there is no consideration involved, the transaction would not qualify as a supply, it said. Derivative contract in e-units would constitute as security and accordingly any transaction in them shall remain

Bank credit growth grew to 12.94 per cent as of the end of June 2018 on a year-on-year basis The International Monetary Fund (IMF) has estimated that bank credit growth to India’s private sector will touch 13.6 per cent by the end of the current financial year.  The IMF’s estimates suggest after that it will decrease by 30 basis points to 13.3 per cent by the end of FY20.  “The corporate sector has been deleveraging slowly and, while debt repayment capacity and profitability appear to have bottomed out, they remain weak in aggregate,” said the IMF in its Article IV report on India.  Bank credit growth grew to 12.94 per cent as of the end of June 2018 on a year-on-year basis.  At the end of FY18, bank credit growth to the private sector stood at 9.8 per cent, as compared to 8 per cent a year earlier. Bank credit to the commercial sector stands at Rs 92 trillion as of July 20, 2018, which is a growth of 11.9 per cent on a year-on-year basis, according to the Reserve Bank of India (