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Source Business Line
New rule for company secretaries: Ministry trying to find a way out
KR SRIVATS
But relief will take time with model code in force, say observers
NEW DELHI, APRIL 10:
The Corporate Affairs Ministry is hoping to find a solution to the structural problem that company secretaries are facing, after the notification of rules under the new company law.
The rules had completely exempted a private limited company (irrespective of its paid-up capital) from the requirement of having key managerial personnel (KMP).
"We are trying to find a way out of this structural problem," an official source said, while largely placing the blame for this situation at the doors of the company secretaries institute.
Exclusion of KMP, a new concept, for private companies has resulted in a knotty problem for company secretaries, while not adding to their compliance cost.
While the earlier regime required certain private companies to employ a company secretary, the new regime has done away with the appointment of any such professional.
This has led to a threat of job losses for thousands of company secretaries employed in private companies and has dimmed the future of lakhs of students pursuing company secretary courses.
Different solution
One solution that could be of comfort for the aggrieved company secretaries and the private companies is the aspect of having a separate set of rules for such companies, say corporate observers.
The separate rules for private companies could provide for having KMP in the form of only the company secretary.
But there are mixed views on this, with some legal experts raising concerns of any such rule overriding the intent of the original enactment.
"Section 203 of the Companies Act, 2013 does not give any liberty to pick and choose the KMP out of the KMPs listed in Section 203. The section requires certain categories of companies to have all (and not some) of the listed KMPs at the same time, namely, to have a managing director or CEO or manager or a whole-time director and a company secretary and a CFO.
If the Ministry wants to provide that a certain classes of private companies will only have a company secretary and not other KMPs, it will not be within the Ministry's rule-making powers to do so unless Section 203is amended or Section 462 is invoked, said Lalit Kumar, Partner, J Sagar Associates, a law firm.
Even if the Ministry wants to amend the situation to provide some relief to the anguished company secretaries, it could take some time.
The Ministry may have to again approach the Election Commission (EC) for its approval to amend the rules when the model code of conduct for elections is in force.
"The EC approval was taken for notification of the rules. But if we are now going to again amend those rules, then a fresh approval from poll panel will be required," a source in the Ministry said.
Tricky issue
Another tricky issue is a new rule from the Cabinet Secretary that all proposals seeking EC approval should be first sent to the Cabinet Secretariat.
This advice has been sent to all line Ministries.
(This article was published on April 10, 2014)
Source Business standard
| RBI issues fresh norms to curb customer discrimination |
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Mumbai, 10 April The Reserve Bank of India ( RBI) has come down heavily on banks for charging different interest rates to customers with similar profiles, saying such discrimination cannot be accepted. To study credit pricing, RBI had formed a working group headed by Anand Sinha, former deputy governor of the central bank. The panel's report, made public on Thursday, has suggested stringent norms to make loan pricing more transparent. "The working group recommends the spread charged to an existing customer cannot be increased except on account of deterioration in the customer's credit risk profile," RBI said. Often, banks offer lower interest rates, especially on home loans, to new customers, while old customers continue to pay high rates. The committee has said while banks raise interest rates across the board immediately after a rate rise, they tend to resist a cut in interest if the monetary policy is accommodative. Acknowledging factors such as competition and customer relationship are taken into account while deciding the spread, banks have been asked to adopt a boardapproved policy delineating these components. "The board of a bank should ensure any price differentiation is consistent with the bank's credit pricing policy, factoring riskadjusted return on capital," the panel said. Also, banks should be able to demonstrate to RBI the rationale of the pricing policy, it added. The group also recommended banks' internal policies must specify the rationale for, and range of, the spread in the case of a borrower, and the delegation of powers, in case of loan- pricing. To correct the downward rigidity on base rate, a benchmark reference rate for all loans, the committee suggested banks consider a marginal cost of funds while computing the base rate, especially if a lender's average maturity of deposit was on the lower side. "This may result in more transparency in pricing, reduced customer complaints, better transmission of changes in the policy rate and improved asset liability management at banks," RBI said. The committee recommended the floating rate loan covenant have interest rate reset periodicity and the resets be done on those dates alone, irrespective of the changes to the base rate within the reset period. However, State Bank of India, India's largest lender, has said any change in base rate has to be passed on to customers. Asking banks to refrain from charging customers higher spreads and processing fee when they shifted their loans from the erstwhile benchmark prime lending rate ( BPLR) to base rate, the committee recommended asunset clause on BPLR- linked loans. Highlighting the need to evolve a separate benchmark for floating loans, especially housing loans, the Indian Banks' Association has been mandated to evolve a base rate, IBA base rate, which all banks could follow to fix interest rates. IBA has also been asked to prepare a standard terminology to be used by all banks to help customers compare loan rates and charges across banks. IBA has also been asked to evolve aset of guidelines for easier and quicker transfer of loans, particularly mortgage/ housing loans. The panel has recommended penalties for banks that do not cooperate with borrowers who want to transfer loans. The working group also recommended banks provide arange of annual percentage rate ( APR), representing the total cost of credit on a loan on an annualised basis. This will allow customers to compare the costs associated with borrowing across products and/ or lenders. In the case of retail loans, the committee emphasised on customers having a choice of " with exit" and " sans exit" options at the time of signing the contract. "The exit option can be priced differentially, but reasonably. It should be easily exercisable by the customer, with the minimum notice period and without impediments. This will address the issues of borrowers being locked into contracts, serve as a consumer protection measure and help enhance competition," it said. PRESCRIPTION FOR BETTER CUSTOMER SERVICE – RBI WORKING GROUP'S RECOMMENDATIONS |For calculating base rate, the marginal cost of funds be factored if average maturity of deposit is lower |Go by board- approved policy to decide spread |Spread can only be increased if credit risk profile of customer deteriorates |Floating rate loan covenant to have interest- rate reset periodicity and resets allowed on those dates only |Sunset clause for benchmark prime lending rate, no extra spread/ fees when customer shifts to base rate |IBA to develop new benchmark for floating loans |Publish interest rates, fees and charges on websites |Provide annual percentage rate (APR) representing the total cost of credit on an annualised basis |Uniform terminology to be used by all banks |Standardised loan format for retail customers covering terms and conditions |Benefit of interest reduction while pre- payments to be given on the day the money is received by bank and not to wait for the next |
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