Tag: banking news

RBI Governor Das urges banks to be investment-ready as recovery gathers pace, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


RBI governor Shaktikanta Das

Shaktikanta Das, governor of Reserve Bank of India, has asked banks to be investment-ready when the private Capex cycle picks up, as the pandemic-battered economy is on a strong recovery path that will demand huge investments to sustain in the long run.

Crediting the faster-than-expected recovery primarily to the improved vaccination pace and the resultant steady fall in the infection caseload, Das said this has led not only to lower extreme health outcomes like mortality/ hospitalisation but also boosted consumer confidence, which was visible in the festival demand.

Addressing an event by State Bank of India, Das said it is heartening to note that the economy is gradually getting back on its feet after the devastating second wave, which is very visible from the numerous high-frequency indicators that suggest that economic recovery is taking hold.

Since contact-intensive services are yet to regain the lost capacity despite rapid improvement in the recent period, it is clear that there still exists a significant gap in private consumption and investment relative to their pre-pandemic levels in FY20.

So, while the economy is picking up pace, it is yet to cover a lot of ground before it gets broad-based and entrenched. This points to the need for sustained impetus so that growth could return to or, better still, exceed the pre-pandemic trend, he said.

The growth triggers

Stating that the country has the potential to grow at a reasonably high pace after the pandemic, Das pointed to the several factors that are stacked in our favour of faster growth.

First, as a developing economy, it has significant potential to catch up with the rest of the world supported by favourable demographics, improving skill base and strong domestic demand.

Secondly, the government is providing necessary support, especially through Capex and reforms in various sectors like infrastructure, manufacturing and telecom, apart from other institutional changes to boost productivity, ease supply constraints and improve the business environment.

Thirdly, he said the pandemic has opened new opportunities for growth in the digital and green technology and also on account of resetting of global supply chains that could be advantageous to us and finally exports have been a bright spot since recent months and are likely to benefit further from global economic recovery.

With such enabling conditions and supportive policies, I have no doubt that we have a unique opportunity to step up growth as we emerge from the pandemic, Das said.

Private consumption

Calling private consumption as the backbone of overall economic growth, he said private consumption contributes the largest share of aggregate demand with around 56 per cent of GDP and is thus critical for inclusive, durable and balanced growth.

There are many signs that consumption demand triggered by the festive season is making a strong comeback. This would encourage companies to expand capacity and boost employment and investment amidst congenial financial conditions, he said, adding the recent tax cuts on petroleum products will give a further fillip to consumption.

Stating that reinvigorating private investment is crucial to realise the growth potential, Das said various policy measures such as a cut in corporate taxes, taxation reforms, the introduction of a performance-linked incentive scheme for 13 major sectors, enhanced focus on infrastructure development and asset monetisation, and proactive liquidity measures by the RBI etc are all leading to investment demand.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , ,

RBI wants open offer exemption for ARCs buying bad assets from banks, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


The Reserve Bank of India has sought open offer exemption from capital markets regulator Securities and Exchange Board of India (Sebi) for equity stake purchases by Asset Restructuring Companies (ARCs).

Under the current Takeover Code rules, commercial banks and public financial institutions are exempt from making an open offer if they acquire shares beyond a threshold by invoking a pledge. ARCs acquire loans that qualify as non-performing assets from banks.

Banks sell bad loans to an ARC for a lower price and cut losses. In this process, all the collateral that was pledged in favour of the bank will be transferred to ARC.

If the collateral exceeds 25% of the total equity of the company, then such pledge invocation will need the ARC to give an open offer to the minority investors.

Takeover code

Sebi’s takeover code is triggered when an entity acquires over 25% stake in a listed company. At this point, the acquirer has to declare an open offer and buy at least 26% more stake from public shareholders.

Until 2019, the open offer exemption was available to all classes of investors undertaking debt restructuring. In 2019, Sebi changed the rules because RBI dissolved all the debt restructuring schemes and instead all the liquidation was being done through the Insolvency and Bankruptcy Code (IBC).

Market participants say the open offer requirement also slows down the resolution process since a lot of minority shareholders would view it as their last chance to cash in on the shares of a company that is most probably going to be liquidated.

Revised norms

In 2018, the RBI revised norms for bad loan resolution. Until then, banks were allowed to recast the corporate debts by converting their debt into equity.

In February 2018, the central bank phased out the debt restructuring schemes and made it mandatory for banks to refer all bad loans to the IBC process after a specific timeline. This circular of RBI prompted Sebi to revise its rules.

The RBI is mulling easier rules for ARCs. Earlier this month, an expert panel led by former RBI executive director Sudarshan Sen submitted its report to the central bank aimed at simplifying regulations for these financial institutions.

What Sudarshan Sen panel says

In the interest of debt aggregation, the scope of Section 5 of the SARFAESI Act, and other related provisions, may be expanded to allow ARCs to acquire ‘financial assets’ as defined in the Act, for the purpose of reconstruction, not only from banks and ‘financial institutions’ but also from such entities as may be notified by the Reserve Bank.

Reserve Bank may consider permitting ARCs to acquire financial assets from all regulated entities, including AIFs, FPIs, AMCs making investment on behalf of MFs and all NBFCs (including HFCs) irrespective of asset size and from retail investors.

ARCs should be allowed to sponsor SEBI registered AIFs with the objective of using these entities as an additional vehicle for facilitating restructuring/ recovery of the debt acquired by them.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , ,

IndusInd Bank launches Indus Merchant Solutions app, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


IndusInd Bank today launched ‘Indus Merchant Solutions’, a mobile application app.

The new application will enable merchants and retailers to undertake activities such as accept instant cashless payments on mobile phones from customers through multiple digital modes, track inventory via in-built dashboards, apply for a Point of Sale (PoS) machine to facilitate card based payments and avail small ticket business loans from the bank in a digital manner.

Current account holders of IndusInd Bank can download the ‘Indus Merchant Solutions’ app.

Soumitra Sen, Head – Consumer Bank, IndusInd Bank said, “Given the sharp rise in the number of consumers as well as merchants, who prefer transacting online, Indus Merchant Solutions is a holistic proposition that will significantly improve merchant engagement, user experience and convenience”

Currently, the app is available on smartphones with Android operating systems. It will soon be available for smartphones using the iOS operating system.

Follow and connect with us on , Facebook, Linkedin



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , ,

Report, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


Mumbai, The domestic capital markets continue to remain on an upward trajectory after a strong performance in FY2021.

The average daily turnover (ADTO) increased to Rs 27.92 lakh crore in FY2021 from Rs 14.39 lakh crore in FY2020, registering an annual growth of 94 per cent. Transaction volumes remain strong in the current fiscal, with the markets clocking an ADTO of Rs 56.36 lakh crore in H1 FY2022.

As per ICRA, the market performance has been supported by favourable liquidity in both domestic and international markets, optimism related to a recovery after the graded reopening of the economy, progress on vaccination rollout and steady retail investor momentum.

Throwing more light, Samriddhi Chowdhary, Vice President & Sector Head – Financial Sector Ratings, ICRA says, “The pool of ICRA-rated bank brokerages reported a strong performance in FY2021 with the estimated average daily turnover (ADTO) increasing 28 per cent Y-o-Y to Rs 1.51 lakh crore from Rs 1.18 lakh crore in FY2020, led by the healthy growth in the retail segment.

Despite the changes in the margin requirements, the performance remained healthy in Q1 FY2022 with an estimated ADTO of Rs 1.64 lakh crore, driven by favourable retail investor sentiment. However, the market share of the sample pool of ICRA-rated bank brokerages in terms of transaction volumes declined in FY2021 and moderated further in Q1 FY2022 as they continue to lose share to discount brokers.”

Bank-brokerages reported a strong uptick in earnings in FY2021 registering a year-on-year (Y-o-Y) growth of 40 per cent in total revenues and 80 per cent in profit after tax. The cost structure and operational efficiency of the bank brokerage companies also improved over the past few years with focus on the rationalisation of branches coupled with cautious efforts towards the transition to a digital business model, thereby improving the operational efficiency across brokerages.

Bank-brokerages have been increasingly looking at other non-broking sources of income, namely capital market lending business, distribution income and investment banking revenue. Bank-brokerages have significantly scaled up the margin funding business over the past fiscal, moving in line with the capital market rally, which has resulted in an increase in their borrowing level.

The retail broking segment has witnessed a significant disruption in the last few years due to the growing prominence of discount brokerages. The competitively priced offerings of discount brokers and the no-frill basic accounts and services have resulted in the realignment of the pricing strategy across the industry.

Adds Chowdhary, “apart from attracting clients from full-service providers, discount brokerage houses have helped expand the market by bringing on board a large number of first-time investors. While the market share for bank brokerages in terms of active clients moderated in FY2021, primarily owing to the faster scaling up of the discount brokerage houses, they reported a strong performance as reflected by the healthy operating metrics and surge in earnings.”

ICRA expects bank brokerages to continue to build their retail franchise and focus more on technology and digital models for customer acquisition. Supported by these factors, bank brokerages are expected to register a healthy growth in client addition as well as transaction volumes, though their share in total active clients would moderate owing to the rapid expansion of the discount broking model. The blended yields are expected to compress going forward, though the focus on fee and fund-based income would support the profitability.

Adds Chowdhary, “Bank brokerages are expected to continue to enjoy better brand recall, trust, higher credibility and financial flexibility by virtue of being a part of banking groups and would, therefore, remain a prominent part of the industry value chain. Bank brokerages are also increasingly looking at the emerging demographic opportunities and new geographical base, which is facilitated through online channels. Going forward, the ability of the bank brokers to effectively ramp up their digital initiatives, attract millennial clients and expand to a newer geographical base such as Tier II and Tier III cities would be critical.”

ICRA expects the net operating income (NOI) of bank brokerages to grow 20-25 per cent year-on-year (Y-o-Y) in FY2022 supported by steady broking income along with an uptick in the margin funding and distribution businesses; the ramp-up of other capital markets related businesses could further support the earnings profile. The net profit for bank brokerages is expected to grow 17-20 per cent during the same period.

The borrowings levels of bank brokerages are expected to increase in the current fiscal to support their margin funding business. The gearing levels of bank brokerages are expected to be in the range of 1.5-2 times in FY2022 at an industry level while the gearing across entities would vary between 1 to 3 times based on the scale of margin funding operations.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , ,

How does RBI’s staff accountability framework on NPAs work?, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


Ahead of a big credit push, the government has moved to remove the bankers’ fears of vigilance in extending small loans with a staff accountability framework.

Bankers fear investigation, hurt to career prospects and retirement if a loan sanctioned by them turns sour. This has made them averse to giving loans, which has led to obstacles in the flow of credit to deserving individuals and firms. The banking system is flush with liquidity but one of the reasons for credit not percolating is the risk-averseness which the new staff accountability norms seek to remove.

Loans up to Rs 10 lakh

Staff accountability need not be examined in NPA accounts with outstanding up to Rs 10 lakh. Most loans up to Rs 10 lakh are “template-based” and do not constitute a major percentage of the NPA portfolio by amount. Such accounts can turn into NPA even due to a slight change in circumstances including a family health crisis or a shutdown, leading to disruption in cash flows.

The credit risk assessment in these kinds of loans is driven by digital algorithms/templates and pre-designed schemes with low human intervention. The borrower community under this tier neither has financial literacy nor credit history.

Loans between Rs 10 lakh and Rs 1 crore

For examining staff accountability, banks may decide on a threshold of Rs 10 lakh or Rs 20 lakh, depending on their business size. These loans are processed at centralised back offices and not specifically at branches. They use lending automation templates, built-in digital algorithms and information drawn from aggregators with low use of discretion.

They have support of empanelled advocates and valuers. The staff accountability is to be examined by a committee formed at regional/controlling offices. For preliminary examination, the controller will submit to the committee a brief report, covering details of the loan and observations in inspection/audit reports for the previous four years.

If the committee finds a case of staff accountability exists, this will be examined by a fact-finding officer. But inspection and audit department staff will not be involved in conducting staff accountability. While conducting staff accountability examination, they should follow RBI guidance/norms. Standard operating procedure is to be followed in carrying out the task. This process will reduce the number of NPAs needing staff accountability examination to a large extent.

Loans between Rs 1 crore and Rs 50 crore

Accounts in this range are mostly credit facilities sanctioned to business units warranting examination by a specialised unit within the banks. NPA accounts in this range should undergo a preliminary examination by a committee constituted at one level higher than the sanction level — an account sanctioned at the regional office will be taken up at the zonal level, those at the zonal level by the circle office or head office, and so on.

The committee should be headed by an official senior to the sanctioning authority. For preliminary examination by the committee, a detailed report should be submitted through the controller. If the committee finds material lapses in any of the processes, the account may be referred at the discretion of the committee to the controlling audit office for a detailed examination of staff accountability.

A detailed report on the account will be submitted to the committee covering the borrower profile with reasons leading to the account turning into NPA. The comments of the internal and external auditors of the last four years and compliance thereof will also be submitted to the committee. Preliminary examination by the committee will be based on all monitoring, follow up, compliance of observations of the auditors.

If the committee finds material lapses in the stages of sanction, disbursement, monitoring and follow up, the committee may at its discretion refer the NPA account to the controlling audit office/audit vertical for detailed staff accountability examination. The audit vertical will rely upon the observations/remarks of the external/internal auditors of the last four years and after the conclusion of analysis shall submit a report to the committee for taking a final view.

For loans above Rs 50 crore

In the large accounts, after examining staff accountability, the vigilance and non-vigilance angle is to be identified by the Internal Advisory Committee (IAC).

Recommendations of IAC, where staff accountability is established, will be referred to the chief vigilance officer (CVO) for vetting. For banks with business of up to Rs 10 lakh crore, the cases of Rs 10 crore and above are to be sent to CVO. Banks with business of between Rs 10 lakh crore and Rs 25 lakh crore can refer cases of Rs 30 crore and above. Banks with business of over Rs 25 lakh crore may refer cases of Rs 50 crore and above.

Banks will have to complete an accountability exercise within six months from the date an account is classified as NPA. Depending on the banks’ business size, the guidelines suggest threshold limits for scrutiny of the accountability by the chief vigilance officer. If NPA is caused by external factors — such as change in government policy, natural calamities, non-release of government subsidy/grant — it should not attract a staff accountability examination, according to the framework.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,

JP Morgan, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


A full-scale, multiple central bank digital currency (mCBDC) network could potentially save global corporations up to $100 billion in transaction costs annually, according to a joint research report from Oliver Wyman and JPMorgan.

The report estimates that of the nearly $24 trillion in wholesale payments that moved across borders via the correspondent banking network each year, global companies incur more than $120 billion in total transaction costs. This excludes potential hidden costs in trapped liquidity and delayed settlements. “The case for CBDCs to address pain points in cross-border payments is very compelling. The bulk of today’s wholesale cross-border payments process remains suboptimal due to multiple intermediaries between the sending and receiving banks, often resulting in high transaction costs, long settlement times, and lack of transparency on the status of the payments,” said Jason Ekberg, partner, corporate and institutional banking at Oliver Wyman.

Critical elements

The research specifically outlines four critical elements required for mCBDC implementation, which include (i) the building blocks, from minting and redeeming of CBDCs to FX conversion and settlement; (ii) the roles and responsibilities of central banks, commercial banks, and service providers; (iii) the key design considerations covering data, technology, privacy, and credit extension; and (iv) the governance framework.

Naveen Mallela, global head of coin systems at Onyx, said: “Central banks around the world who are at various stages of CBDC development are considering how to build an infrastructure where systems operate and work together with the necessary controls in place. In this report, we put forward robust design considerations for a successful mCBDC network and demonstrate how it can be practically implemented, using ASEAN corridors as an example.”

Opportunities for participants

Acknowledging that a mCBDC network challenges traditional correspondent banking systems, the report cites opportunities for participants – commercial banks, payment operators, market makers and liquidity providers – to add new capabilities, and welcomes new stakeholders like technology providers and other third-party service providers.

“The development of CBDCs brings new tangible opportunities such as subscription-based mCBDC corridor access or smart contract-enabled cash management services. The ability to pivot effectively and quickly is key, and ultimately we aspire for a cross-border payments system that is transparent, inclusive and efficient for all parties across central banks, corporates, and commercial banks,” Mallela said.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,

A lookback on bank chiefs behind the bars, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


The arrest of Pratip Chaudhary, former chairman of State Bank of India, has shocked the industry, since there was no notice or formal summons in the 14-year-old loan case of a hotel project in Jaisalmer, Rajasthan.

Rajnish Kumar, Chaudhary’s predecessor, had told the ET that the arrest was a “case of high handedness”. As of now, Chaudhary has been admitted to Jawahar Hospital, Jaipur, due to restlessness, and his bail plea had been rejected.

Over the years, many top bank officials have been arrested, some of which have been proven to be guilty. Here’s a lookback:

1.Sushil Muhnot and Ravindra Marathe, Bank of Maharashtra


Sushil Muhnot, former chairman of Bank of Maharashtra, along with six persons, including Ravindra Marathe, who was the managing director and chief executive officer of the bank at the time, had been arrested in 2018 for allegedly misusing powers while extending loans to the fraud-accused DS Kulkarni group in violation of norms. Muhnot, in 2016, was abruptly removed as the chairman as he allegedly occupied two houses.

2. Rana Kapoor, YES Bank

Rana Kapoor, founder of YES Bank and former CEO, was arrested last year in March over allegations of money laundering to the tune of Rs 4,300 crore. In the latest development, Kapoor has moved Bombay High Court challenging a special court’s order from August that had remanded him to police custody for a week.

3. Waryam Singh and Joy Thomas, PMC Bank

Former SBI chairman Pratip Chaudhary arrest: A lookback on bank chiefs behind the bars
Waryam Singh, former chairman of Punjab and Maharashtra Cooperative Bank, was arrested by the Economic Offences Wing of Mumbai Police last year, in connection with the alleged bank scam to the tune of Rs 4,355 crore. Joy Thomas, former managing director, was also held for his connection to the bank scam.

4. Sudhir Kumar Jain, Syndicate Bank

Former SBI chairman Pratip Chaudhary arrest: A lookback on bank chiefs behind the bars
Sudhir Kumar Jain, former chairman and managing director of Syndicate Bank, was arrested in 2014 for an alleged bribery case of Rs 50 lakh. In 2018, Jain was dismissed from service.

5. Yogesh Aggarwal, IDBI Bank

Former SBI chairman Pratip Chaudhary arrest: A lookback on bank chiefs behind the bars


Yogesh Aggarwal, former chairman and managing director of IDBI Bank, had been arrested in 2017 for having shown “undue favours” to the now-defunct Kingfisher Airlines, owned by Vijay Mallya.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , ,

Hiring in banks up 25% to cater to rising loan demand, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


Banks are stepping up hiring to cater to the growing demand for home loans. Hiring has gone up 22-25% in the last few months across urban and rural markets as demand for home loans has surged, according to various reports.

About 90 per cent of the requirement is in the sales function, with starting salaries of Rs 15,000 to Rs 20,000, along with incentives. Hiring is across the board at NBFCs, small finance banks and non-banking finance companies, and hiring costs are rising as employees are shifting jobs within the sector.

NBFCs

Shriram Group is hiring 5,000 across its many companies, while ICICI Home Finance is looking to onboard 600 employees by December.

The Shriram Group is recruiting mainly in south and north India, across tier 3-4 cities. Shriram City Union Finance is expanding its gold loan business,

while Shriram Housing Finance is expanding primarily in Andhra Pradesh and Telangana.

Banks

HDFC Bank is aiming to reach 200,000 villages in the next 24 months, and plans to hire more than 2,500 people in the next six months.

The bank aims to double its presence in the next 18-24 months through a combination of branch network, business correspondents, business facilitators, CSC (common service centres) partners, virtual relationship management and digital outreach platforms.

The bank will hire 500 relationship managers to expand the coverage of its Micro, Small and Medium Enterprises (MSME) vertical to 575 districts or more by the end of this fiscal. Out of these, half will be for the small and medium sub-vertical, which already has a headcount of 975. This hiring will take the private bank’s MSME vertical headcount to 2,500. India’s largest private sector lender had an employee strength of around 1.23 lakh as of June.

Credit Suisse has plans to hire over 1,000 staff in India this year for a technology innovation office, while Deutsche Bank is looking to hire 1,000 people in India, including 300 graduates and 700 lateral hires. Meanwhile, Kotak Mahindra Bank has resumed its hiring process, and has reached near pre-Covid levels.

Data analysts

From banking to FinTech companies, data analysts are in demand. These companies are looking for professionals who can handle data using technology and glean relevant information from it.

FinTechs are also beefing up marketing and sales teams and are looking beyond commerce and engineering backgrounds with a background in data analysis, artificial intelligence and exceptional soft skills. They are looking to pay higher salaries who have Big Data, advanced analytics and financial skills.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , ,

Ten steps for overhaul of ARCs as competition for bad bank arrives, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


In a bid to streamline the functioning of asset reconstruction companies (ARCs), a Reserve Bank committee has come out with a host of suggestions including the creation of an online platform for the sale of stressed assets and allowing ARCs to act as resolution applicants during the IBC process.

Amortise loss

To incentivise lenders to sell their financial assets to ARCs at an early stage of stress, the RBI panel has recommended a dispensation to lenders, on an ongoing basis, to amortise the loss on sale, if any, over a period of two years. To optimise upside value realisation by lenders, it recommends a higher threshold of investment in security receipts (SRs) by lenders, below which provisioning on SRs held by them may be done on the basis of Net Asset Value (NAV) declared by the ARC instead of IRACP norms.

Online platform

An online platform may be created for sale of stressed assets and infrastructure created by the Secondary Loan Market Association (SLMA) may be utilised for this purpose. For all accounts above Rs 500 crore, two bank-approved external valuers should carry out a valuation to determine the liquidation value and fair market value and for accounts between Rs 100 crore to Rs 500 crore, one valuer may be engaged. Also, the final approval of the reserve price should be given by a high-level committee that has the power to approve the corresponding write-off of the loan.

Acquiring financial assets

In the interest of debt aggregation, the scope of Section 5 of the SARFAESI Act, and other related provisions, may be expanded to allow ARCs to acquire ‘financial assets’ as defined in the Act, for the purpose of reconstruction, not only from banks and ‘financial institutions’ but also from such entities as may be notified by RBI. RBI may consider permitting ARCs to acquire financial assets from all regulated entities, including AIFs, FPIs, AMCs making investment on behalf of MFs and all NBFCs (including HFCs) irrespective of asset size and from retail investors. ARCs should be allowed to sponsor SEBI registered AIFs with the objective of using these entities as an additional vehicle for facilitating restructuring/ recovery of the debt acquired by them.

Binding on lenders

If 66% of lenders (by value) decide to accept an offer by an ARC, the same may be binding on the remaining lenders and it must be implemented within 60 days of approval by majority lenders (66%). 100% provisioning on the loan outstanding should be mandated if a lender fails to comply with this requirement. Given that the debt aggregation is typically a time-consuming process, the planning period is elongated to one year from the existing six months. In cases where ARCs have acquired 66% of debt of a borrower, the Act should provide for two years of moratorium on proceedings against the borrower by other authorities. The Act should also provide that Government dues including revenues, taxes, cesses and rates due to the Central and state governments or local authority will be deferred in such cases.

Equity sale

For better value realisation for originators and enhancing the effectiveness of ARCs in recovery, even the equity pertaining to a borrower company may be allowed to be sold by lenders to ARCs which have acquired the borrower’s debt. The Committee recommends that ARCs may be allowed to participate in the IBC process as a Resolution Applicant either through a SR trust or through the AIF sponsored by them.

Allowing HNIs to buy SRs

For giving impetus to listing and trading of SRs, the list of eligible qualified buyers may be further expanded to include HNIs with minimum investment of Rs 1 crore, corporates (Net Worth-Rs 10 crore & above), all NBFCs/ HFCs, trusts, family offices, pension funds and distressed asset funds with the condition that (a) defaulting promoters should not be gaining access to secured assets through SRs and (b) corporates cannot invest in SRs issued by ARCs which are related parties as per SEBI definition.

Minimum SR investment

The interest of investors and investing lenders should be weighed against the need for distribution of risk among the willing investors. Therefore, it recommends that for all transactions, per SR class/ scheme, the minimum investment in SRs by an ARC should be 15% of the lenders’ investment in SRs or 2.5% of the total SRs issued, whichever is higher.

Credit rating agencies

Recognising the critical role of Credit Rating Agencies (CRAs) in the valuation of SRs and, therefore, the need for continuity in engagement of CRAs, the Committee recommends that ARCs must retain a CRA for at least three years. In case of change of a CRA, both parties must disclose the reason for such change.

Tax pass through

In the matter related to taxation of income generated from investment in SRs issued by ARCs, the possibility of a ‘pass-through’ regime for AIF investors may be looked into by the Central Board of Direct Taxes (CBDT). The CBDT may consider clarifying on the tax rate applicable to FPIs.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , ,
1 2 3 4 5 6 … 12