Source Business standard.
| Draft rules ban replacement of life insurance policies |
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The Insurance Regulatory and Development Authority (Irda) said insurers could not replace life insurance policies unless in the interest of policyholders. This was to protect the long- term interest of policyholders and to discourage intermediaries from persuading customers to surrender their policies and take up new ones, Irda said in the exposure draft on rules related to the replacement of life insurance policies released on Wednesday. Feedback on the draft can be given till July 20. The guidelines said insurers should make full disclosure and give transparent information to the policyholder to avoid any possible misrepresentation of financial consequences of replacing a life insurance policy. Irda said these guidelines encouraged fair market conduct and fair business practices among life insurers and insurance intermediaries. Replacement of a life insurance policy means an intermediary, agent or an insurer selling anew policy within six months of surrender of the earlier policy, entailing modification in the terms resulting in reduction of the benefit amount of the existing policy. Irda said the priority of agents and insurers should be to keep the existing life insurance policy in force. In case of replacement of a life insurance/ annuity policy, the agent or intermediary should obtain a written consent from the customer. Insurers have also been asked to place an agreement in the proposal form, advising the customer not to surrender an existing contract for a new one. Irda asked insurers not to withhold any part of the surrender value payable to the policyholder towards the cost of a new policy. A policyholder who is not properly guided by the existing life insurance company has the right to exercise the restoration of the existing policy within seven days from the receipt of the new one. BS REPORTER Mumbai |
Source Business line
A flaw in the CSR design
TULSI JAYAKUMAR
Corporates can undertake social spending only where they are invested. The benefits go to already industrialised regions
Section 135 of the Companies Act 2013 and the resultant Corporate Social Responsibility (CSR) rules 2014, issued by the ministry of corporate affairs came into effect in April 2014. The activities listed which may be included by companies in their CSR policies appear 'confusing'.
They includeeradicating hunger and poverty, promoting education, promoting gender equality and empowering women, reducing child mortality and improving maternal health, and combating HIV virus, AIDS, malaria and other diseases.
For one, these activities are traditionally supposed to be undertaken by a welfare state. Is this then an admission of the Government's abrogation of responsibility?
It has been argued by some economists that such CSR spends are a drop in the ocean of overall government spending on the social sector. The question is: Can this make a difference to the provision of essentially public goods that the Government has so far not delivered?
A more disturbing aspect of Section 135 relates to the linking of a company's profit-making with the development of local areas.
Companies are required to spend 2 per cent of their average net profits in the preceding three years and focus on local areas, around which they operate. This is an absurd proposition.
Local development
This would increase inter-state disparities in social indicators. For instance, states like Gujarat, Maharashtra and Andhra Pradesh (as also Odisha in 2013), with their large number of industrial proposals, are likely to see greater social development on account of higher CSR spend by the private sector.
Odisha was the most attractive state for investment in 2013. It accounted for over one-fifth of project proposals in the first 10 months, valued cumulatively at ₹4.7 lakh crore, according to data from the department of industrial policy and promotion (DIPP).
Of the 30 districts in Odisha, the three relatively more developed districts of Ganjam, Jajpur and Jagatsinghpur, which attracted the largest investors, already have an industrial presence. With literacy rates of 81, 80 and 87 per cent respectively, their development indicators were better.
On the other hand, a ministry of home affairs (MHA) report identifies six districts as Naxal-affected. The most backward — Malkangiri — with a literacy rate of 49 per cent and almost 80 per cent of the population belonging to the SC/ST communities, is not likely to attract investments. What hope is there for communities in such districts?
Dealing with losses
What happens to development projects when companies make losses? According to an estimate, of the 5,138 firms listed on the BSE, the total number of companies qualifying under Section 135 has come down from 1,500 in FY2010 to 1,372 in FY2012. So has the number of total qualifying companies with Profit After Tax greater than zero — from 1,457 to 1,265.
While the total estimated CSR spend of such companies increased over the period (from ₹7,609 crore to ₹8,343 crore), such figures may be misleading. This macro-picture masks the reduced CSR spending on account of the companies concerned running losses.
Also, it is during recessionary times, when the need for such expenditure may be highest among vulnerable groups, that CSR spend may actually be unavailable.
Presently, most companies spend on projects relating to education, health and livelihood. These areas have synergies with business interests and sustainability. The rules in the Companies Act 2013 would make it difficult for companies to pursue strategic CSR — aligned to business strategy — since any expense which can be traced back to financial profits may have to be set aside for CSR as indicated by the law.
We may then see companies preferring to spend on activities specified in the Act which, however, may have a lower long-run social impact --- such as protection of national art, heritage and culture, promotion of sports, and contributing to the Prime Minister's National Relief Fund. But what about addressing the problems of inter-regional inequality?
(The writer is a professor of economics at the SP Jain Institute of Management and Research, Mumbai. The views are personal)
(This article was published on June 18, 2014)
Source Times of India
Sebi set to tweak norms for ESOPs
NEW DELHI: The Securities and Exchange Board of India(Sebi) is all set to announce a new set of ESOP regulations including purchase of shares by employee welfare trusts from the secondary market with adequate safeguards.
The Primary Market Advisory Committee of Sebi has suggested some changes and the market regulator had sought public comments on the recommendations.
The final norms have been prepared after taking into account these suggestions and they would be placed before Sebi's board tomorrow, a senior official said.
The proposed regulations shall be applicable to Employee Stock Options Scheme and Employee Stock Purchase Scheme, generally called ESOP guidelines, as well as on other general employee benefit schemes like in the case of accident, sickness, disability, death and scholarship funds.
If fresh shares are proposed to be issued against the employee benefit schemes, then the company may have the flexibility of either adopting the trust route or implementing it directly, Sebi said.
In case secondary market acquisitions are proposed under the scheme, the same must be implemented through a mechanism of trust.
"The trust route provides for better governance of the schemes. Considering that secondary market transactions necessitate adequate safeguards. Trust route may be made mandatory for schemes to undertake secondary market transactions," Sebi said.
Govt moves proposal to allow 100% FDI in railways
NN | Jun 19, 2014, 03.40AM IST
NEW DELHI: The government is moving swiftly to allow foreign direct investment in railways to upgrade infrastructure for freight and high-speed trains.
The commerce and industry ministry has initiated the exercise to allow 100% FDI in several segments of railways, moving beyond its earlier plan to open select sectors such as high-speed train systems, dedicated freight lines built through the public-private partnership route and in certain areas of suburban rail networks. Currently, there is a complete ban on any kind ofFDI in railways, except mass rapid transport systems.
High-speed trains and dedicated corridors are top agenda items for the BJP government and the intention to upgrade infrastructure was officially announced by president Pranab Mukherjee in his address to the joint sitting of both Houses of Parliament.
In her first interview to any newspaper, commerce & industry minister Nirmala Sitharaman had backed the move. "Railways is desperate for investment. It needs money for expansion. It needs money for safety. It needs money for modernization and for railways the quantum of investment that you need India cannot suffice, so FDI would be a very good opportunity," she had told TOI on Monday.
After defence, where the ministry has proposed allowing up to 100% FDI, this is the second sector in which the Narendra Modi government has begun consultations for allowing greater investment by overseas players. Simpler norms for construction are also on the anvil, even as it is going slow on business-to-business (B2B) e-commerce, which will see the entry of the likes of Amazon into the Indian market in a big way.
Railway minister Sadananda Gowda has said on it needs Rs 5 lakh crore for modernization, a large chunk of which will come from the private sector. Sources said the draft note is for discussion and a final proposal will be moved after consultation with other ministries, led by the Railways. In its election manifesto, the BJP has committed to modernize and upgrade railways and launch Diamond Quadrilateral project of high-speed train network. The UPA government had also tried to relax FDI norms in railways but could not push the proposal because of the general elections.
Company Secretary
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