| RBI clamps on rupee speculation overseas |
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Mumbai, 4 July The Reserve Bank of India ( RBI) has decided to crack down on speculation in the rupee in foreign markets, including the non- deliverable forward (NDF) ones. As part of this, it is targeting the overseas arms of Indian companies as well as foreign companies in which Indian firms have direct equity investments. Even as the Indian currency lost value against the dollar over the past few weeks, the foreign arms of many Indian companies were very active in the NDF market, further pressuring the rupee's exchange rate. NDF is an outright contract in which counterparties settle the difference between the contracted price or rate and the prevailing spot price or rate on an agreed notional amount. However, even before the slide began, RBI had issued a circular on April 25 specifying that foreign entities/ structures with equity participation of Indian firms offering financial products linked to the rupee ( such as non- deliverable trades involving foreign currency, rupee exchange rates, stock indices linked to the Indian market, etc) will have to take its approval. Their activities, if without the central bank's approval, would be treated as violation of the Foreign Exchange Management Act ( Fema), the circular clarified. RBI said the rupee was not fully convertible at present and such products could affect the country's exchange rate management. Though the circular was issued three months back, its implications are sinking in only now. "By issuing this circular, RBI has essentially clamped down on the offshore rupee derivative products offered by foreign subsidiaries, which, because of equity participation from Indian companies, have an indirect currency exposure on their Indian parents," said Khaitan & Co Partner Siddharth Shah. Foreign arms of many Indian firms under lens, have to seek approval to launch certain products The rupee marginally gained to close at 60.13 a dollar on Thursday, after falling sharply following Governor D Subbarao's statement that RBI did not have an exchange rate target. " On the rupee's volatility, I can't say anything more than the standard policy of RBI. It's thatwe employ instruments available to us in order to manage volatility," Subbarao said. 7 > RBI Governor DSubbarao at the RBI headquarters in Chennai on Thursday. PHOTO: PTI Rupee gains after falling on Subbarao comment |
| RBI notifies FDI guidelines on control, transfer of ownership |
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Mumbai, 4 July The Reserve Bank of India ( RBI) on Thursday notified guidelines for foreign direct investment (FDI), defining control over the company and transfer of ownership. Now, a firm will be said to be controlled by non- residents if it has powers to appoint a majority of the directors. The FDI norms become legally enforceable amidst debate over control of Jet Airways post- UAEs Etihad buying stake. Various ministries and department including the market regulators Securities and Exchange Board of India have raised concerns about the ultimate control of Jet once the deal with Etihad goes through. The notifications of Press notes 2 and 3 of the Department of Industrial Policy and Promotion, which has been pending for the last four years, will be used to ensure that foreign direct investments comply with FDI ceilings and other norms. The press notes provides definition of owned or controlled', aterm which is essential to determine whether a company is a foreign firm or a domestic entity. In the Press Notes, a company is considered as ' controlled' by resident Indian citizens if the power to appoint a majority of the directors on its board is held by Indian companies and citizens. On the other hand, a company is considered as owned by resident Indians if more than 50 per cent of the equity is held by the entities in India. Similarly, it would be a foreign company, if over 50 per cent of the equity is held by a non- resident. It further said as regards investments made between February 13, 2009 and the date of publication of the notification, Indian companies are required to intimate, within 3 months, the detailed position where the issue of shares or downstream investment is not in conformity with the regulatory framework now being prescribed. "RBI shall consider treating such cases as compliant with these guidelines within a period of six months or such extended time as considered appropriate by RBI in consultation with Government of India," it said. Akash Gupta, executive director with PWC India said RBI has cut down paper work and put onus on statutory auditors (to corporates) on compliance with the FDI norms. As per the norms, investment in Indian companies can be made by both non- resident as well as resident entities. Any non- resident investment in an Indian company is direct foreign investment. Investment by resident Indian entities could again comprise both resident and non- resident investments. Thus, such an Indian company would have indirect foreign investment if the Indian investing company has foreign investment in it. The indirect investment can also be a cascading investment, that is through multi- layered structure. Various ministries and departments including market regulator SEBI have raised concerns about the ultimate control of Jet once the deal with Etihad goes through. Experts said that the RBIs notification will lead to increase in reporting requirement for an investor. They have increased the reporting requirement for investments made between February 2009 till now and also the scrutiny of compliance of Press Note 2 and 3, said an advisor on FDI with corporate law firm said. Move gains significance at a time when debate rages over control of Jet Airways following stake buy by Etihad The notification of Press note 2 and 3 of the Department of Industrial Policy and Promotion, which has been pending for the last four years, will be used to ensure that foreign direct investments comply with FDI ceilings and other norms |
| Stringent eligibility criteria laid out for DDPs |
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Mumbai, 4 July The Securities and Exchange Board of India ( Sebi) has laid out a stringent eligibility criteria for a designated depository participant ( DDP), the link between foreign investors and the regulator. According to the K M Chandrasekhar committee's suggestions on foreign portfolio investment ( FPI), DDPs will have to be the custodian and depository participant registered with Sebi, an authorised dealer (category- 1 bank), have multinational presence and should demonstrate it has systems and procedures to comply with the FATF (Financial Action Task Force) standards, Prevention of Money Laundering Act, and Sebi rules. The committee's recommendations have been fully accepted by Sebi at its board meeting, which was held on June 25. Sebi made the recommendations public on Thursday. One key recommendation is that foreign investors will not have to register with the Sebi directly but with DDPs. Also, entities registered with Sebi as a foreign institutional investor ( FII), subaccount, and qualified foreign investors ( QFIs) will be merged into one entity to be called FPI. Strict obligations on these market intermediaries are also proposed. DDPs will have to ensure entities having opaque structures, where the details of ultimate end- beneficiary is not known, are not allowed. A DDP will also have to ensure equity shares held by FPIs are free from all encumbrances, including pledge or lien at all times. They will also be required to file the necessary information for the purpose of obtaining a Permanent Account Number ( PAN) and ensure that all the investor- related documents are available. The committee has also suggested 'grand- fathering arrangement' under which existing qualified depository participants ( QDPs) not meeting the DDP eligibility criteria will be given one year to meet the requirements. If a QDP fails to comply, it will have to surrender its authorisations. At present, of the 59 QDPs approved by Sebi, only six have QFI investments and of these six, only three are custodians. To implement a risk- based know your customer ( KYC) system, Sebi has accepted the proposal to decided to divide foreign investors into three categorises. Category- I will comprise systemically important institutions such as sovereign wealth funds, foreign central banks, while Category- II will include asset management companies, pension funds and insurance companies. Category- III will include investors, not covered in the first two categories, primarily individuals and trusts. The committee has said that the broad- based funds managed by investment manag ers will be categorised in the same category of its investment manager, subject to the condition that investment managers take full responsibility for their actions. Some of these funds not regulated in their home jurisdiction would have otherwise come under categoryIII, which would have prevented them from taking positions through participatory notes. Sebi lays out norms for designated depository participants, the link between regulator and foreign investors A DDP will have to ensure equity shares held by foreign portfolio investments are free from all encumbrances |
Source Business Line
I-T Dept may make 'date of birth' proof mandatory for PAN card
PTI
New Delhi, July 4:
As part of its drive against fake Permanent Account Number, the Income-Tax Department is considering making proof of date-of-birth mandatory for issuance of PAN card.
"The Department might ask for proof of date-of-birth for issuing a PAN card. Ration cards and rent receipts might no longer be accepted as proofs of identity and address for issuance of a PAN card," sources in the finance ministry said.
According to officials, in most cases of fraud, people have furnished fake ration cards and rent receipts to get PAN card.
As of now, depository account statement, bank account statement /passbook, ration card, passport, voter identity card, driving licence, property tax assessment order and certain other documents are accepted as proof of identity as well as address.
"We will soon prescribe a format for PAN verification to make the system foolproof and robust," sources said.
The sources further said that a notification regarding streamlining process of PAN verification will be issued soon and it will apply only to fresh applicants.
Recently, the I-T department has found a number of individuals possessing fake PAN cards as identity proof.
According to the official data, 170 million people in India have PAN cards, while only 30 million of them file income-tax returns.
Many people who do not file tax returns get PAN card as it works as identity proof at many places.
The finance ministry had last year brought out a new PAN application form—49A for use of Indian citizens, companies and entities incorporated in the country which allows an applicant to mention his or her Aadhaar number.
New online form to make PF transfer claims easier
Our Bureau
New Delhi, July 4:
The Government on Thursday released a revised online form to make provident fund transfers easier.
The revised form, released by Labour & Employment Minister Sis Ram Ola, can be presented after verification, either through the present employer or previous employer. Earlier, the form could be submitted after verification only through the present employer.
"This form can be submitted online as well as in physical form. The facility of online submission of this form will be given shortly after process of collecting the digital signature of the employer is completed," a Labour Ministry release said.
Moving towards a paperless regime, the Employees Provident Fund Organisation (EPFO) will inform every beneficiary through SMS and e-mail about the stage of process of the claim.
However, the facility to file physical form will continue to cater to the needs of the working class, which does not have internet access, it said.
The EPFO said after introduction of online claim settlement, efforts would be made to substantially reduce the assured time of settlement of transfer claim which, at present, is 30 days.
Ola, who also reviewed the working of EPFO, said timely settlement of claims was the rightful expectation of all beneficiaries.
In 2012-13, a total of 107.62 lakh claims were settled, out of which 88 per cent were processed within 30 days, the EPFO said. Though the percentage of claims settled in time was high, approximately 13 lakh beneficiaries did not get their settlement of claims within the stipulated time, it added.
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Company Secretary, Chennai
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