Regulatory Updates

RBI Circular – Discontinuation of Reports and Returns Under FEMA

The Reserve Bank of India (“RBI”) on November 13, 2020, issued a circular regarding the discontinuation of certain Reports & Returns under the Foreign Exchange Management Act, 1999. This initiative has been taken on account of ease of doing business and to reduce the cost of compliance for concerned entities. A total of 17 reports and returns have been discontinued with immediate effect.

The said Reports and Returns are as follows:

  1. A category-wise transaction where the amount exceeds $5000 per transaction.
  2. Category-wise, transaction-wise statement where the amount exceeds $25,000 per transaction.
  3. Statement of Purchase transactions of $10,000 and above (including transactions of their franchisees).
  4. Extension of Liaison Offices (LOs).
  5. Extension of Project Offices (POs).
  6. FII/FPI daily: Daily inflow/outflow of the foreign fund on account of investment by FPIs.
  7. FII/FPI Return (Monthly): Data relating to actual inflow/outflow of remittances on account of investments by Foreign Institutional Investors (FIIs) in the Indian Capital market.
  8. FVCI reporting: Inflows/outflows of remittances on account of investments by Foreign Venture Capital Investor (FVCIs) and Market value of Investments made by FVCIs.
  9. Reporting of Inflow/Outflow details in respect of Mutual Fund by Asset Management Companies.
  10. Market value of FII Investment in India on fortnightly basis.
  11. Market value of FII Investment in India on Monthly basis.
  12. FII holdings as a percentage of floating stock.
  13. Form DRR for Issue/transfer of sponsored/unsponsored Depository Receipts (DRs) -only Hardcopy filing is being discontinued.
  14. ADR/GDR Movement Report – two-way fungibility.
  15. Repatriation of Sales proceeds of underlying shares represented by FCCBs/GDRs/ADRs.
  16. GDR/ADR underlying shares issued, redeposited, and released monthly reporting.
  17. Monitoring of disinvestments by Overseas Corporate Bodies.

To read the full RBI circular, please click on the link

RBI circular on Co-Lending by Banks and NBFCs to Priority Sector

The Reserve Bank of India (“RBI”) on 05th September 2020 issued a circular directed to all Scheduled Banks and Non-Banking Financing Companies regarding joint contribution of credit by both the lenders. This is in continuation of the RBI circular issued on September 21, 2018 on co-origination of loans by Banks and NBFCs.

The 2018 scheme has now been revised to provide improved flow of credit to the unserved and undeserved sector of the economy so as to make the funds available to them at a lower cost, by availing benefits from both the lending channels.

The Scheme has permitted banks to co-lend with all registered NBFCs including the Housing Finance Companies where banks have been advised to take their share of the individual loans on a back-to-back basis in their books. However, NBFCs have been advised to retain a minimum of 20% share of the individual loans on their books.

Both the lenders have been advised to formulate policies in the regard and make the same available on their websites. Based on the board approved policies, a Master Agreement shall be entered into between the parties which shall outline all the details of such an arrangement between the two partner institutions including the terms and conditions, partner selection criteria, areas of operation etc. It shall also contain full disclosure of the arrangement between the two parties and shall clearly specify the manner of appropriation between the co-lenders, contain necessary clauses on representation and warranties etc.

Some Key Pointers:

  • Banks shall not be allowed to enter into co-lending arrangement with an NBFC belonging to the promoter Group.
  • This new co-lending model shall not be applicable to foreign banks, including Wholly Owned Subsidiaries, with less than 20 branches.
  • The NBFCs shall be the single point of interface for the customers.
  • Customer’s explicit consent to be taken after full disclosure, under this co-lending model.
  • The co-lending banks and NBFCs shall maintain each individual borrower’s account for their respective exposures.

To read the full RBI circular, please click on the link.

To read the 2018 RBI circular, please click on the link.

RBI CIRCULAR ON INTEREST SUBVENTION SCHEME

RBI CIRCULAR ON INTEREST SUBVENTION SCHEME FOR MSMEs

The Reserve Bank of India (“RBI”) on October 07, 2020 issued a circular directed to all Co-operative Banks wherein the RBI has provided some relief to the Micro Small and Medium Enterprises by extending Interest Subvention Scheme on loans extended by co-operative banks.

It has been specifically outlined that decision has been taken to include Co-operative Banks as eligible lending institutions effective March 03, 2020. The Scheme provides an interest relief of 2% p.a. (two percent per annum) to eligible MSMEs on their outstanding fresh or incremental term loan or working capital during the period of its validity, which is limited to all term loans or working capital to the extent of Rs.100 lakhs. That is to say that any amount beyond Rs.100 lakhs shall not be covered under this Scheme.

The loan amounts to be eligible for this relief, should not have been declared as a Non-Performing Asset. No interest subvention shall be admissible for any period during which the account remains NPA.

The Interest Subvention Scheme for MSMEs, 2018 that was issue by the RBI on November 02, 2018 has been modified by the Government as below:

  • The validity of the Scheme has been extended till March 31, 2021.
  • Fresh or incremental term loan or working capital limit extended by co-operative banks with effect from March 03,2020 shall be eligible for coverage under the Scheme.
  • Acceptance of claims in multiple lots for a given half-year by eligible institutions shall be permitted.
  • Requirement of Udyog Aadhaar Number (UAN) may be dispensed with for units eligible for GST. However, units that are not required to obtain GST may either submit Income Tax PAN or their loan account must be categorized as MSME by the concerned bank.
  • Trading activities have also been allowed to be covered under the scheme without UAN.

It has been specified that Small Industries Development Bank of India (SIDBI) shall be the single national level nodal implementation agency for this Scheme. Nodal office of eligible lending institutions shall submit half-yearly claims to SIDBI as per guidelines laid down in that regard.

Co-operative Banks have been advised to take necessary and appropriate actions for the successful implementation of the Scheme.

To read the full detail, please find link to the RBI Circular.

RBI Circular On Regulatory Framework On COVID-19 Stress

The Reserve Bank of India (“RBI”) on 07th September 2020 issued a circular directed to all Banks and NBFCs wherein the RBI has issued some key ratios which all the lending institutions shall consider while finalizing the resolution plans in respect of eligible borrowers.

The Key Ratios defined are:

  • Total Outside Liabilities/Adjusted Tangible Net Worth
  • Total Debt/EBITDA
  • Current Ratio
  • Debt Service Coverage Ratio
  • Average Debt Service Coverage Ratio

Sector-specific ratio thresholds (ceilings or floors, as applicable) have also been outlined by RBI for about 26 sectors.

Sectors for which thresholds have not been specified, lending institutions are advised to make their own assessments regarding “Total Outside Liabilities/Adjusted Tangible Net Worth” and “Total Debt/EBITDA”. However, the Current Ratio” and “Debt Service Coverage Ratio” shall, in all cases, be 1.0 and above, and “Average Debt Service Coverage Ratio” shall be 1.2 and above. In spite of providing the specific ratios, lending institutions are advised that the resolution plans shall take into account the pre-COVID-19 operating and financial performance of the borrower and impact of Covid-19 on its operating and financial performance at the time of finalizing the resolution plan, to assess the cash flows in subsequent years, while stipulating appropriate ratios in each case.

Lending institutions have also been allowed to consider other financial parameters along with these key ratios and sector-specific thresholds.

Lending institutions are expected to ensure compliance with TOL/ATNW agreed as per the resolution plan at the time of implementation itself.

To read the full detail, please find the link to the RBI Circular.

Clarification On Extension In Holding AGM

MCA has via its circular dated 17 August 2020 issued a clarification on the extension of the Annual General Meeting for the year ended 31 March 2020. This circular is an extended clarification to the General Circular dated 05 May 2020 regarding holding of Annual General Meeting through video conferencing or other audio-visual means for the calendar year 2020.

The Ministry has hereby re-iterated that companies that are unable to hold their AGM even through video conferencing or any other audiovisual means can file applications for extension of time for holding the AGM, in e-form GNL-1, for the financial year ended 2020. The applications are to be submitted with the concerned Registrar of Companies on or before 29 September 2020.

The Ministry has also advised the Registrar to consider the applications liberally and grant an extension for the period applied by the company, up to a maximum of 3 (three) months.

Link to Circular

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