Tag: approval

Zerodha gets Sebi’s approval to set up an AMC, BFSI News, ET BFSI

Banking & Finance

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Zerodha has received a licence from capital markets regulator, the Securities and Exchange Board of India (Sebi), to set up an Asset Management Company (AMC).

The in-principle approval from Sebi will allow the Bengaluru-based startup to launch its own mutual funds, founder and chief executive Nithin Kamath tweeted on Wednesday.

Zerodha is India’s largest retail broker by registered users.

“So, we just got an in-principle approval for our AMC (MF) license. I guess now comes the hard part (sic),” Kamath tweeted.

Zerodha had applied to the capital market regulator in February 2020, just months after Sebi allowed fintech firms to enter the MF business.

A spokesperson for Zerodha did not offer comment.

Flipkart cofounder Sachin Bansal’s fintech venture Navi has also received regulatory approval to launch its own AMC.

In December 2019, Sebi eased regulations for fintech startups planning to enter the MF industry. It said entities with a net worth of Rs 100 crore and five years of being profitable were eligible to sponsor MFs.

AMCs should also maintain their minimum net worth continuously and not only towards the end of the year.

Earlier, entrants needed to have five years of experience in the financial services business and demonstrate three years of profitability, as well as maintain a net worth of Rs 50 crore.

“It’s a great move, no question. Zerodha had also applied for a licence, but Covid-19 slowed the market. We need more players to come to this market to foster innovation,” Kamath told ET in an interview in January, on Sebi’s relaxations.

“The entry barrier has stopped many (from entering the MF industry). The problem with mutual funds today is that they are very complex for retail investors. With newer players coming in, I think the products will become simpler and innovative,” Kamath had said.

The move comes at a time when Sebi has given approvals to firms such as Bajaj Finserv and discount broker Samco to launch MFs.

Navi recently applied to Sebi to launch as many as 10 new MFs, all of which are set to be passively managed. These funds mirror the performance of an underlying index and typically do not need a fund manager.

Zerodha has led the pack of new-age fintech brokers including Groww, Upstox and Paytm Money, which have seen strong traction on their platforms by retail investors as millions of Indians flocked to stock investments, attracted by the Nifty and the Sensex recording peaks repeatedly since the onset of the Covid-19 pandemic.



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RBI grants in-principal SFB approval to Centrum Financial Services, BFSI News, ET BFSI

Banking & Finance

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The Reserve Bank of India (RBI) has recently announced its decision to grant ‘in-principle’ approval to Centrum Financial Services Limited (the applicant) to set up a small finance bank under general “Guidelines for ‘on tap’ Licensing of Small Finance Banks in the Private Sector” dated December 5, 2019.

RBI would consider granting a licence for commencement of banking business under Section 22 (1) of the Banking Regulation Act, 1949, on being satisfied that the applicant has complied with the requisite conditions laid down by RBI as part of “in-principle” approval.

This approval has been accorded in specific pursuance to Centrum Financial Services Limited’s offer dated February 1, 2021 in response to the Expression of Interest notification dated November 3, 2020, published by the Punjab & Maharashtra Co-operative Bank Ltd. in Mumbai.

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RBI guidelines require banks, UCBs and NBFCs to appoint auditors for 3 years

Banking & Finance

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The Reserve Bank of India (RBI) on Tuesday issued guidelines for appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) in commercial banks, urban co-operative banks and non-banking finance companies from FY22 onwards, whereby they will have to appoint SCAs/SAs for a continuous period of three years.

RBI guidelines regarding appointment of SCAs/SAs will be implemented for the first time for urban co-operative banks (UCBs) and non-banking finance companies/NBFCs (including housing finance companies) from FY 2021-22.

However, UCBs and NBFCs will have the flexibility to adopt these guidelines from H2 (second half) of FY 2021-22 in order to ensure that there is no disruption.

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Non-deposit taking NBFCs with asset size (total assets) below ₹1,000 crore have the option to continue with their extant procedure.

Commercial banks (excluding Regional Rural Banks/RRBs) and UCBs will be required to take prior approval of RBI (Department of Supervision) for appointment/reappointment of SCAs/SAs on an annual basis.

RBI tightens internal audit framework for NBFCs, UCBs

While NBFCs do not have to take prior approval of RBI for appointment of SCAs/SAs, all NBFCs need to inform RBI about the appointment for each year.

For entities (commercial banks. UCBs, and NBFCs) with asset size of ₹15,000 crore and above as at the end of previous year, the statutory audit has to be conducted under joint audit of a minimum of two audit firms [Partnership firms/Limited Liability Partnerships/LLPs].

All other entities have to appoint a minimum of one audit firm (Partnership firm/LLPs) for conducting statutory audit.

Entities need to ensure that joint auditors do not have any common partners and they are not under the same network of audit firms.

Asset size and numbers

The RBI said the entities should decide on the number of SCAs/SAs based on a board/local management committee (LMC) approved policy by taking into account factors such as the size and spread of assets, accounting and administrative units, complexity of transactions, level of computerisation, availability of other independent audit inputs, identified risks in financial reporting, etc.

The central bank prescribed that an entity with an asset size up to of ₹5 lakh crore can have a maximum of 4 SCAs/SAs; above ₹5 lakh crore and up to ₹10 lakh crore: maximum of 6 SCAs/SAs; above ₹10 lakh crore and up to ₹20 lakh crore: 8 SCAs/SAs and above ₹20 lakh crore: 12 SCAs/SAs.

In case of any concern with the management of the entities, such as non-availability of information/non-cooperation by the management, which may hamper the audit process, the SCAs/SAs are required to approach the Board/Audit Committee of the Board/Local Management Committee of the entity, under intimation to the concerned Senior Supervisory Manager (SSM)/Regional Office (RO) of RBI.

Concurrent auditors of the entity should not be considered for appointment as SCAs/SAs of the same entity.

The central bank emphasised that the audit of the entity and any entity with large exposure to the entity for the same reference year should also be explicitly factored in while assessing independence of the auditor.

Tenure and rotation

In order to protect the independence of the auditors/audit firms, the RBI said that entities will have to appoint the SCAs/SAs for a continuous period of three years, subject to the firms satisfying the eligibility norms each year.

Further, commercial banks (excluding RRBs) and UCBs can remove the audit firms during the three-year period only with the prior approval of the concerned office of RBI (Department of Supervision), as applicable for prior approval for appointment.

NBFCs removing the SCAs/SAs before completion of three years’ tenure have to inform the concerned SSM/RO at RBI about it, along with reasons/justification for the same, within a month of such a decision being taken.

An audit firm would not be eligible for reappointment in the same entity for six years (two tenures) after completion of full or part of one term of the audit tenure. However, audit firms can continue to undertake statutory audit of other entities.

The RBI said one audit firm can concurrently take up statutory audit of a maximum of four commercial banks [including not more than one PSB or one All India Financial Institution (Nabard, SIDBI, NHB, Exim Bank) or RBI], eight UCBs and eight NBFCs during a particular year.

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