| RBI moots ways to boost returns on India Inc's foreign investments |
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New Delhi, 21 March The Reserve Bank of India (RBI) has proposed a host of measures to boost the returns on Indian companies' investments in their joint ventures (JVs) and wholly owned subsidiaries abroad. These include exemption of dividend payout from tax, besides credits for corporation tax paid by the arms of JVs in host countries. The proposals assume importance as these returns are part of the country's current account balance, which has been a major source of worry for the government lately. At a meeting of the inter- ministerial committee on overseas investment recently, RBI mentioned that inflows from huge investments made abroad by Indian firms had been minuscule. It mooted the idea to exempt dividend received from the overseas JVs or wholly owned subsidiaries from tax. Budget 2013- 14 has extended the concessional rate of tax ( 15 per cent) on these dividends for another year — up to the 2014- 15 assessment year. In the Budget for 2011- 12, the finance ministry had announced this rate, against 30 per cent payable earlier. The RBI proposals have been sent to the Department of Revenue for consideration. RBI has suggested there is a need to prescribe certain terms and conditions for loans extended by Indian companies to their JVs or wholly owned subsidiaries abroad. These include mandatory and predecided fixed- tenure interest rate and repayment schedule for loans. The central bank has argued such conditions will lead to discipline in respect of loans availed of by overseas entities from their Indian parents and, thereby, commensurate inflow into the country by the way of principal repayment and interest. Another proposal mooted at the meeting includes allowing multi- layer structure for Indian companies overseas. It says firms should be allowed to have structures with step- down subsidiaries as holding companies or specialpurpose vehicles. These structures are currently not allowed under the Foreign Exchange Management Act. Companies prefer multi- layered structures to have flexibility in raising capital, for tax efficiency, ring- fencing of risks, for having more freedom in exiting, mergers and acquisitions and overseas listings. This, the proposal says, would give India Inc a level playing field vis- à- vis its foreign counterparts. While the external affairs ministry agreed to the proposal, the Department of Revenue, under the finance ministry, objected to the idea. The department said these structures should not be encouraged, since these could be used to circumvent India's tax laws through treaty shopping — the practice of structuring a multinational business to take advantage of more favourable tax treaties available in certain jurisdictions. In the first half of this financial year, the country's current account deficit ( CAD) as a proportion of gross domestic product hit an alltime high of 4.6 per cent, against four per cent in the corresponding period the previous year. These returns, known as primary income in the current account balance, were in the negative in the period, RBI data showed. These stood at (-) $ 10.5 billion in April- September, against (-) $ 7.6 billion in the corresponding period of 2011- 12. This meant India received less returns from its investments abroad ($ 5 billion), compared with the returns foreign companies received from their investments in India ($ 15.5 billion) in the first half of the current financial year. The total current account deficit stood at $ 38.7 billion during the period, implying deficit in the primary income accounted for over 27 per cent of CAD. Proposes tax exemption on dividend payouts and credit for corporation tax paid in host country MANAGING CAD Deficit in income from foreign investment has been widening 2008- 09 4.78 7.51 27.79 20.93 27.13 12.57 0.76 1.0 8.20 7.60 10.50 13.30 2009- 10 2010- 11 2011- 12 2012- 13 36.30 38.70 A [1] Current Account Deficit B[1] Deficit in overseas investment income flows ( figures in $ bn) BAs % of A 29.50 ILLUSTRATION: AJAY MOHANTY *Figures for the first six months of each of the financial years Source: RBI |
| MFIN to move Supreme Court against Andhra Act |
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Kolkata, 21 March Micro Finance Institutions Network ( MFIN) plans to move the Supreme Court against the Andhra Pradesh government's ordinance curbing micro- lending activities of private players in the state, according to people familiar with the development. MFIN, the representative body of micro- lenders in India, is also hopeful of getting an interim order allowing its members to resume micro- lending operations in Andhra Pradesh. It currently has 44 microfinance companies as its members across India. Alok Prasad, CEO of MFIN, confirmed the development. The move comes after SKS Microfinance, the only listed micro- lender in the country, received an interim order from the apex court to resume microlending operations in Andhra Pradesh. But, the order is restricted to SKS as it had filed the petition. " As per our understanding, other microfinance companies need to file separate petitions to get similar relief. Since MFIN is the industry association, it can file the petition on behalf of us. MFIN is currently consulting legal advisors before moving the Supreme Court," said a CEO of a microfinance company in Hyderabad. In October 2010, the Andhra Pradesh state government passed an ordinance following allegations that micro- lenders charge exorbitant interest rates and use coercive methods to recover loans from the poor. The Andhra Pradesh Microfinance Institutions ( Regulation of Money Lending) Ordinance, 2010 ( AP Act) mandated that every microfinance firm in the state will need to take a noobjection certificate from the local government and co- borrowers of the self- help group to which it was lending. Also, micro- lenders were asked to recover loans on a monthly basis instead of on a weekly or fortnightly basis. Micro- lenders claim the ordinance prevented them from conducting their businesses in Andhra Pradesh. Consider this: SKS had sent 74,000 applications to the state government for no- objection certificate after the ordinance was passed. Only 58 of those applications were approved. The apex court's interim order allows SKS to lend money to rural poor in Andhra Pradesh without taking a no- objection certificate from the state government, according to microfinance executives. It also permits it to recover loans on a weekly basis that was banned by the state government. Move comes after SKS Microfinance received an interim order from the apex court to resume operations in the state THE MICRO PICTURE |Microfinance companies have been finding it tough to do business in Andhra Pradesh since the introduction of the microfinance ordinance introduced in 2010 |According to the ordinance, micro- lenders need to obtain no- objection certificates from the local government and co- borrowers of the self- help group to which they lend |Micro- lenders allege the tough conditions prevent them from conducting business in the state |Since the interim order is restricted to SKS Microfinance alone, MFIN, the representative body of micro- lenders in India, plans to move the SC on behalf of other micro- lenders SKS: Will resume operations in AP BS REPORTER Hyderabad, 21 March SKS Microfinance, the only listed microfinance institution in the country, today informed BSE it " intends to carry business in Andhra Pradesh". In its interim order on March 18, the apex court had said if SKS complied with an October 22 2010 interim order of the Andhra Pradesh High Court, no coercive step could be taken against the company. |
| 190 listed firms yet to meet minimum public shareholding norms |
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New Delhi, 21 March A total of 190 companies, including 14 PSUs, are yet to meet Sebi- prescribed minimum public shareholding norms, for which they need to sell shares worth an estimated ₹ 30,000 crore. The Securities and Exchange Board of India (Sebi) has initiated consultations with non- compliant companies to resolve issues for ensuring adherence to this requirement, which entails achieving a minimum 10 per cent public holding in PSUs by August 31 and at least 25 per cent in non- PSUs by June 30. Providing the compliance status of listed firms to the minimum public shareholding (MPS) requirement, Corporate Affairs Minister Sachin Pilot today informed the Lok Sabha in a written reply, that shares worth ₹ 29,650 crore, according to valuation on December 31, 2012, need to be divested to meet these norms. " To bring out a plan of action and to resolve all issues for ensuring adherence to the MPS requirement for non- PSU companies, Sebi has initiated a consultation process with the representatives of companies not meeting the MPS requirement," Pilot said. According to Sebi, companies could meet the norms through many routes, including offer for sale, an institutional placement programme, bonus and rights issues to public shareholders. In a circular issued in August 2012, the market regulator had said companies seeking to achieve MPS by ways other than those prescribed, could approach it. |
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Company Secretary, Chennai
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