[aaykarbhavan] Source Business standard and Business line updates

​Source  Business  Standard

Payment banks cannot launch other financial operations

MANOJIT SAHA Mumbai, 16 June The Reserve Bank of India ( RBI) has accepted the Nachiket Mor committee's recommendations on introducing payment banks —specialised banks to provide services to small businesses — after making some significant changes to the proposed characteristics of these entities. To begin with, the central bank will set the initial capital requirement at ₹ 100 crore, compared with the ₹ 50 crore the Mor panel had suggested. For computing the capital adequacy ratio, unlike full- service banks, payment banks will only factor in operational risk, and not market risk and credit risk. However, while existing banks might be allowed to create subsidiaries for payment banks, such banks would not be allowed to undertake any other activity apart from accepting deposits and offering payment services. The payment banks would not even be allowed to undertake lending activities. This is a departure from the principle the regulator follows at present — that an activity a bank can undertake departmentally is allowed to be undertaken as a subsidiary as well. For example, RBI has in the past five years or so allowed insurance or mutual funds to operate as subsidiaries but not granted fresh licences for opening subsidiaries for home loans or infrastructure loans. The central bank will come out with norms for payment banks shortly. This will be the first in the list of RBI's stated objectives of bringing niche bank licences. Most of the existing banks had received universal or full- fledged banking licences. While non- banking financial companies will be allowed to open payment banks, mainstream NBFCs engaged in financial activities like lending and broking might find the guidelines hard to accept, as they have to exit all other activities to be eligible for payment banks. Additionally, sources indicate, the fit- and- proper criteria will also be judged rigorously while granting licences. Payment banks will only be involved in activities related to retail payment and remittance and will focus on unbanked areas. They have to maintain a cash reserve ratio and all their deposits will have to be invested in government securities. The maximum deposit a payment bank can take from one individual will be capped. The Mor committee had suggested the cap at ₹ 50,000. Payment banks are also aimed at catering to migrant workers in metros or Tier- I cities who need to send money to their families at their native places. These banks will also offer services like utility bill payments. Pre- paid instrument providers are seen forming these payment banks. These entities have relaxed know- your- customer norms, while the value of transactions is capped. The norms on payment banks will also pave the way for the country's postal department, India Post, to enter the niche banking segment. Sources indicate the norms will allow India Post to apply for a payment bank licence. India Post had applied for a universal bank licence when RBI invited applications in 2013. While the telecom ministry had backed India Post's ambition to become a fullfledged bank, the finance ministry was not keen, given the government's financial burden. Focus to be on unbanked areas; initial capital set at ₹ 100 cr; India Post can apply SETTING THE RULES Likely guidelines for payment banks Initial capital: ₹ 100 crore, double the ₹ 50 crore proposed by the Mor committee Retail focus: Focus to be on retail payment and remittances; lending not permitted Deposits: All deposits have to be invested in govt bonds; deposits from each individual will be capped Eligibility: India Post to be eligible to apply; NBFCs might find it difficult Condition: To have CRR stipulations Payment banks were proposed as specialised entities by the Mor panel to provide services to small businesses

 

RBI reviewing NBFC regulations: Dy Guv BS REPORTER Chennai, 16 June The Reserve Bank of India ( RBI) was in the process of reviewing the regulatory framework for non- banking financial companies (NBFCs) in the context of recent developments, including the Nachiket Mor committee report, said R Gandhi, deputy governor, RBI. After delivering the 33rd Frank Moraes Memorial Lecture, organised by the United Writers Association and the Frank Moraes Foundation here on Monday, he told reporters, " We are working on certain statutory changes relating to the NBFC sector. We are working with the government for making certain statutory amendments to tighten the regulation, especially the definition of regulation." "We want to make it more tight, so that it will be easy for everybody to understand what is a deposit, who can and who cannot accept it. That clarity we want to bring in." He said a schedule for the new regulations couldn't be stated. RBI would also evolve a mechanism to gather information about the activities of nonbanking firms and new developments. "We are addressing regulatory arbitrage concerns, while not forgetting the uniqueness of the NBFC sector," said Gandhi, who was talking on ' Role of NBFCs in financial sector: Regulatory challenges'. Gandhi said there was a demand for all kinds of NBFCs to be permitted to act as banking correspondents and RBI was examining this. " We will shortly take a call on this. It is certainly on the anvil," he said. He added an exchange to support small and medium- scale companies to get funds earlier was also under consideration. RBI's constant endeavour was to enable prudential growth of the sector, keeping in view the multiple objectives of financial stability, consumer and depositor protection, and need for more players in the financial market, addressing regulatory arbitrage concerns, while not forgetting the uniqueness of the NBFC sector, said Gandhi. He urged companies not to stop on financial innovation and to have adequate risk management procedures in place. "Empowering law and gathering intelligence by themselves are not sufficient. Enforcement of the law was a challenge and this was primarily because of the various agencies involved in regulating the non- banking financial activities of the entities," said Gandhi, while calling for cooperation of all stakeholders, starting from central ministries and agencies. He felt the law as it stood at present was inadequate to deal with issues related to "erring" NBFCs. " To correct these and initiate action against violations, we need to bring suitable amendments to the statutory provisions. Reserve Bank is working with the government for such improvements," said Gandhi. NBFCs, being financial intermediaries, engaged in bringing the saving and investing communities together. In this, they played a complementary role to banks rather than as competitors, considering a major portion of the population was yet to have access to mainstream financial products and services, including abank account, he noted. RBI Deputy Governor R Gandhi   Incubation centre for electronics start- ups gets nod SURABHI AGARWAL New Delhi, 16 June To boost domestic manufacturing of electronics and encourage entrepreneurship, the department of electronics and information technology ( IT) has approved an incubation centre for product companies in the sector. Termed the Electropreneur Park, it will be anchored by Software Technology Parks of India ( STPI), which played a role in incentivising and nurturing the IT services sector in its initial years. The centre will be either set up in Delhi University's south campus or in STPI's Gurgaon office. Business Standard had reported last week that such a centre was likely to be approved. An official in the know said it would take at least four months for the centre to come up. " We are preparing the framework for it in consultation with our stakeholders," said the official. The project is being set up by STPI along with Delhi University ( DU) and India Electronics and Semiconductor Association IESA). There will be a governing body which will have representation from IESA, DU and STPI. This body will further deliberate on setting up a selection committee, which will identify the entrepreneurs who need to be supported and the mentors. " It will be a muchacclaimed committee comprising the whos who of the IT industry, since they will be doing the crucial job of selecting the entrepreneurs. We will make sure the doyens of industry are on board," added the official quoted above. The strength of the board and who will be on it is yet to be decided. With a target of nurturing 10 companies every year over the next five years, the incubation centre is aimed at providing budding entrepreneurs with tools and technologies that are generally very expensive. The centre will provide the infrastructure and enable access to domain experts, mentors, shared consultants and services. It will also help innovators seek funding from foreign investors, venture capitalists and angel investors. Under its National Electronics Policy, the government has launched various schemes to push domestic manufacturing. According to estimates, India would require $400 billion worth of electronics annually by 2020, most of which would be imported if domestic manufacturing is not incentivised. In which case, the country's electronics import bill will exceed that of oil. Termed as the Electropreneur Park, the project will be anchored by Software Technology Parks of India With a target of nurturing 10 cos every year over the next five years, the incubation centre is aimed at providing budding entrepreneurs with tools and technologies that are generally very expensive HC notice to Union govt on challenge to Sebi ordinance TE NARASIMHAN Chennai, 16 June The high court here has issued notices to the Union government on a public interest suit seeking to strike down the re- promulgated ordinance giving extra powers to the Securities and Exchange Board of India (Sebi) to crack down on illicit money collection schemes. A city- based lawyer, Prashaanth Balasubramaniam, has contended the ordinance's provisions are " utter violation of constitutional principles". The court has directed Sebi and the Union ministries of law and corporate affairs to respond to the petition within three weeks. The ordinance was promulgated in July last year; it is yet to be replaced by a legislation. It was re- promulgated in September and then in March this year. An official Bill to convert its provisions into law was tabled in the Lok Sabha in March; it is scheduled for passage in Parliament's session to begin next month. Sebi's board meets in Delhi later this week to discuss finer details of the Bill. The ordinance gives Sebi power to search any building, vessel or aircraft or break open the lock of any door or safe to accomplish the objectives (of coming down on any money collection scheme which had mobilised more than ₹ 100 crore). It also gives the market regulator powers akin to the income tax department, to attach properties and disgorge illgotten gains. The petitioner, apart from contesting such provisions, has also argued that promulgation of an ordinance is supposed to be only done when " immediate action is of the necessity" and this condition does not exist. The petition also asks the HC to look into the power of the President to re- promulgate an ordinance. As for some of the provisions, says the petition, these go beyond the legislative mandate. " The fact that these powers are extended to any aircraft or vessel, not necessarily limited to Indian vessels, would mean foreign vessels are open to being searched. This is not only a violation of the sovereignty of nations but beyond the mandate of the legislature," it states. Sebi says the new powers gained from the ordinance have enabled it to initiate a little over 300 attachment proceedings in about 60 cases, to recover about ₹ 2,000 crore from violators. Defenders of the ordinance say the Bill giving Sebi more powers is necessary, especially from the point of view of cracking down on ponzi schemes, which operate in a regulatory grey area. A public interest suit has questioned the provisions, saying they violate constitutional principles Sebi says the new powers gained from the ordinance have enabled it to initiate a little over 300 attachment proceedings in 60 cases, to recover about ₹ 2,000 crore from violators   Source  Business  Line Avoid retro tax law as a principle: Shome panel OUR BUREAU   NEW DELHI, JUNE 16:   Retrospective amendment to tax laws should be avoided as a principle, the Parthasarathi Shome commission on tax reforms has suggested. The Commission's view on retrospective tax amendment comes at a time when efforts are on to restart conciliation between the Government and Vodafone over the ₹20,000-crore tax dispute. The UPA Government, while presenting the Budget for 2012-13, had brought in a retrospective amendment to the Income Tax Act in order to nullify the verdict of the Supreme Court which was in favour of Vodafone. The BJP manifesto also promises to provide a non-adversarial, conducive tax environment. In its report, the Tax Administration Reform Commission (TARC) also endorsed the recommendations given by the 1992 committee on tax reforms headed by Raja J Chelliah for abolishing the post of Revenue Secretary in the Ministry of Finance. It feels that the functions of the Revenue Department should be allocated to the Central Board of Direct Taxes and the Central Board of Excise and Customs. The commission has submitted its first report to Finance Minister Arun Jaitley. It further said that the administrative decisions and tax policy are neither based on any analysis nor have any international standards. "Pre-budget discussions are usually back-of-the-envelope calculations of revenue impact. The impact on a taxpayer is considered in a cursory manner, if at all. Retrospective amendments clustered during 2009-12 may reflect this lackadaisical approach. In turn, this reflects complete lack of accountability at any level except on grounds of lagging behind in revenue collection," the report said. On abolishing the post of the Revenue Secretary, it said: "This would empower the tax departments to carry out their assigned responsibilities efficiently." Currently, the post of Revenue Secretary is held by an Indian Administrative Service Officer, while the Chairmen of two boards, CBDT (for handling issues related with Personal Income Tax, Corporate Tax, STT & CTT and Wealth Tax) and CBEC (for handling issues related with Custom Duty, Central Excise Duty and Service Tax) are Indian Revenue Service officials. The commission argued that an IAS officer is likely to have little experience or background in tax administration at the national level and little familiarity with tax, including international tax, issues that are increasingly taking the centre stage. "Yet she/he is the final signatory on decisions on tax policy and administration matters prior to their arrival for the Finance Minister's consideration," the Commission observed. The Commission has recommended that the two Boards embark on selective convergences immediately to achieve better tax governance, and, in the next five years, move towards a unified management structure with a common Board for both direct and indirect taxes, called the Central Board of Direct and Indirect Taxes. Tax boards rejig It suggested the setting of a Governing Council, headed in rotation by the chairpersons of the two Boards and with participation from outside the government, to oversee the functioning of the two Boards. (This article was published on June 16, 2014)

 ​

--

A.Rengarajan

Company  Secretary

Chennai

93810  11200

"Positive belief in yourself will give you the energy needed to conquer the world and this belief is the power behind all creation." 
― Stephen Richards, Think Your way to Success: Let Your Dreams Run Free

CS Benevolent Fund is a collective effort towards extending the much needed financial support to the community of Company Secretaries in times of distress  Let us lend support and join for noble cause.

SHARING KNOWLEDGE SKY IS THE LIMIT

This mail and its attachments (if any) are confidential information intended for persons to whom the email is planned for delivery by the sender. If you have received this mail in error please notify the sender of the error by forwarding the email and its attachments (if any) and then deleting the mail received in error and the relevant email trail in this connection without making any copies or taking any prints.

__._,_.___

---

Posted by: CS A Rengarajan <csarengarajan@gmail.com>

---

receive alert on mobile, subscribe to SMS Channel named "aaykarbhavan"
[COST FREE]
SEND "on aaykarbhavan" TO 9870807070 FROM YOUR MOBILE.

To receive the mails from this group send message to aaykarbhavan-subscribe@yahoogroups.com

Visit Your Group

• Privacy • Unsubscribe • Terms of Use