COMPANIES (INDIAN ACCOUNTING STANDARDS) AMENDMENT RULES, 2019
In exercise of the powers
conferred by section 133 read with section 469 of the Companies Act, 2013 (18
of 2013), the Central Government, in consultation with the National Financial
Reporting Authority, hereby makes the following rules further to amend the
Companies (Indian Accounting Standards) Rules, 2015, namely:—
1. Short title and
commencement.-
(1) These rules may be
called the Companies (Indian Accounting Standards) Amendment Rules, 2019
(2) They shall come into
force on 1st day of April, 2019.
2. In the Companies
(Indian Accounting Standards) Rules, 2015 (hereinafter referred to as the
principal rules), in the Annexure, under the heading B. Indian Accounting
Standards (Ind AS),-
I. in Indian Accounting
Standard (Ind AS) 101
(i) for paragraph 30, the
following paragraph shall be substituted, namely:-
_30 If an entity uses fair
value in its opening Ind AS Balance Sheet as deemed cost for an item of
property, plant and equipment, an intangible asset or a right-of-use asset (see
paragraphs D5 and D7), the entity’s first Ind AS financial statements shall
disclose, for each line item in the opening Ind AS Balance Sheet:_
(a) the aggregate of those
fair values; and
(b) the aggregate
adjustment to the carrying amounts reported under previous GAAP.;
(ii) for paragraph 39AB,
the following paragraph shall be substituted namely:-
_39AB Ind AS 116, Leases,
amended paragraphs 30, C4, D1, D7, D8B, D9 and D9AA, deleted paragraph D9A and
added paragraphs D9B–D9E. An entity shall apply those amendments when it
applies Ind AS 116._
(iii) in Appendix C, in
paragraph C4, for item (f), the following item shall be substituted, namely:-
(f) If an asset acquired,
or liability assumed, in a past business combination was not recognised in
accordance with previous GAAP, it does not have a deemed cost of zero in the
opening Ind AS Balance Sheet. Instead, the acquirer shall recognise and measure
it in its consolidated Balance Sheet on the basis that Ind ASs would require in
the Balance Sheet of the acquiree. To illustrate: if the acquirer had not, in
accordance with its previous GAAP, capitalised leases acquired in a past
business combination in which acquiree was a lessee, it shall capitalise those
leases in its consolidated financial statements, as Ind AS 116, Leases, would
require the acquiree to do in its Ind AS Balance Sheet. Similarly, if the
acquirer had not, in accordance with its previous GAAP, recognised a contingent
liability that still exists at the date of transition to Ind ASs, the acquirer
shall recognise that contingent liability at that date unless Ind AS 37,
Provisions, Contingent Liabilities and Contingent Assets, would prohibit its
recognition in the financial statements of the acquiree. Conversely, if an
asset or liability was subsumed in goodwill/capital reserve in accordance with
previous GAAP but would have been recognised separately under Ind AS 103, that
asset or liability remains in goodwill/capital reserve unless Ind ASs would
require its recognition in the financial statements of the acquiree. ;
(iv) In Appendix D,
(a) in paragraph D1, for
item (d), the following item shall be substituted, namely:-
(d) leases (paragraphs D9,
D9AA and D9B-D9E);
(b) in paragraphs D7,
after item (a), the following item shall be inserted, namely:-
(aa) right-of-use assets (Ind AS 116, Leases);
and;
(c) for paragraph D8B, the
following paragraph shall be substituted, namely:-
_D8B Some entities hold
items of property, plant and equipment, right-of-use assets or intangible
assets that are used, or were previously used, in operations subject to rate
regulation._
The carrying amount of
such items might include amounts that were determined under previous GAAP but
do not qualify for capitalisation in accordance with Ind ASs. If this is the
case, a first-time adopter may elect to use the previous GAAP carrying amount
of such an item at the date of transition to Ind ASs as deemed cost. If an
entity applies this exemption to an item, it need not apply it to all items. At
the date of transition to Ind ASs, an entity shall test for impairment in
accordance with Ind AS 36 each item for which this exemption is used. For the
purposes of this paragraph, operations are subject to rate regulation if they
are governed by a framework for establishing the prices that can be charged to
customers for goods or services and that framework is subject to oversight and/or
approval by a rate regulator (as defined in Ind AS 114, Regulatory Deferral
Accounts).;
(d) for paragraph D9, the
following paragraph shall be substituted, namely:-
_D9 A first-time adopter
may assess whether a contract existing at the date of transition to Ind ASs
contains a lease by applying paragraphs 9-11 of Ind AS 116 to those contracts
on the basis of facts and circumstances existing at that date._
(e) paragraph D9A shall be
omitted;
(f) for paragraph D9AA,
the following paragraph shall be substituted namely:-
_D9AA When a lease
includes both land and building elements, a first time adopter lessor may
assess the classification of each element as finance or an operating lease at
the date of transition to Ind ASs on the basis of the facts and circumstances
existing as at that date._
(g) after paragraph D9AA,
the following paragraph shall be inserted, namely:-
D9B When a first-time
adopter that is a lessee recognises lease liabilities and right-of-use assets,
it may apply the following approach to all of its leases (subject to the
practical expedients described in paragraph D9D):-
(a) measure a lease
liability at the date of transition to Ind AS. A lessee following this approach
shall measure that lease liability at the present value of the remaining lease
payments (see paragraph D9E), discounted using the lessee’s incremental
borrowing rate (see paragraph D9E) at the date of transition to IndAS.;
(b) measure a right-of-use
asset at the date of transition to Ind AS. The lessee shall choose, on a lease-by-lease
basis, to measure that right-of-use asset at either:-
(i) its carrying amount as
if Ind AS 116 had been applied since the commencement date of the lease (see
paragraph D9E), but discounted using the lessee’s incremental borrowing rate at
the date of transition to Ind AS; or
(ii) an amount equal to
the lease liability, adjusted by the amount of any prepaid or accrued lease
payments relating to that lease recognised in the Balance Sheet immediately
before the date of transition to Ind AS.
(c) apply Ind AS 36 to
right-of-use assets at the date of transition to Ind AS.
For Details visit
Circular...
http://www.egazette.nic.in/WriteReadData/2019/201161.pdf
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COMPANIES (INDIAN ACCOUNTING STANDARDS) SECOND AMENDMENT RULES
2019
In exercise of the powers
conferred by section 133 read with section 469 of the Companies Act, 2013 (18
of 2013), the Central Government, in consultation with the National Financial
Reporting Authority, hereby makes the following rules further to amend the
Companies (Indian Accounting Standards) Rules, 2015, namely:—
1. Short title and
commencement.-
(1) These rules may be
called the Companies (Indian Accounting Standards) Second Amendment Rules, 2019
(2) They shall come into
force on 1st day of April, 2019.
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GOVT NOTIFIES NEW ACCOUNTING STANDARD, LEASE RULE TO IMPACT
AIRLINES
The government has
notified a new accounting standard Ind AS 116 that will bring in more
transparency in recognition and disclosures about leases in companies' balance
sheets, a senior official said Sunday. The Indian Accounting Standard (Ind AS)
116 is expected to have a significant impact on various industries including
aviation where airlines mostly operate planes on lease. Ind AS 116 -- to be
effective from April 1 -- sets out the principles for recognition, presentation
and disclosure of leases. Lessors will need to re-look at their accounting
policy of recognising lease income on transition to Ind AS 116 and it may have
significant impact on ongoing recognition and measurement of rental income in
the financial statements, Sandip Khetan said.
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INSOLVENCY LAW'S OBJECTIVE IS REORGANISATION OF DEFAULTING
FIRMS, NOT RECOVERY: IBBI CHIEF M S SAHOO
Asserting that the
insolvency law's objectives are reorganisation and resolution of a defaulting
company, IBBI Chairperson M S Sahoo said that if creditors recover their dues
one after another or simultaneously, the company would bleed to death. Significant
amounts of recoveries have been made from defaulting firms since the
implementation of the Insolvency and Bankruptcy Code (IBC) which provides a
robust framework for market-driven and time-bound resolution process. Sahoo,
who is at the helm of the Insolvency and Bankruptcy Board of India (IBBI),
noted that the code does not rule out recovery, but it must be incidental to
reorganisation Recovery should happen ideally from future earnings of the
reorganised firm, he told. As per various estimates, more than Rs 5 lakh crore
has been the direct and indirect realisation on account of the IBC. Out of the
total estimated amount, around Rs 2 lakh crore has been recovered before the
cases were admitted for resolution under the code, while recovery through
resolution plans is pegged at over Rs 1 lakh crore. Sahoo emphasised that the
code is for reorganisation and insolvency resolution of a defaulting firm. The
objective is reorganisation and not recovery. If the creditors, one after
another or simultaneously, recover their dues, the firm will bleed to death. The
question is, does recovery facilitate reorganisation? If not, it is not
contemplated in the IBC, he said. Sahoo said that the committee of creditors
(CoC) of a company undergoing insolvency proceedings should be guided by feasibility
and viability of the plan and not how much the creditors are realising under
the resolution plan or how the realisation is shared among different categories
of creditors. The code specifically tells what shall be considered while
approving a resolution plan, he said, adding that to him, the key job of the
CoC is to distinguish between a viable and an unviable firm. If it is a viable
(company), it must be rescued, and it is the duty of the CoC to rescue it. If
it is not viable, the CoC should allow its closure. If you rescue an unviable
firm or close a viable firm, it is dangerous for the economy. The law expects
the CoC, as an institution of public trust, to rescue a viable firm and allow
closure of unviable one, he said.
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IBBI ISSUES GUIDELINES APPOINTMENT OF INSOLVENCY PROFESSIONALS
AS ADMINISTRATORS UNDER SEBI
The Insolvency and
Bankruptcy Board of India has issued guidelines to be followed while appointing
Insolvency Professionals as Administrators under the Securities Exchange Board
of India (SEBI). The IBBI and the SEBI have mutually agreed upon to use a Panel
of IPs for appointment as Administrators for effective implementation of the
Regulations. The IBBI shall prepare a Panel of IPs keeping in view the
requirements of SEBI and the Regulations and the SEBI shall appoint the IPs
from the Panel as Administrators, as per its requirement in accordance with the
Regulations. A Panel shall be valid for six months and a new Panel will replace
the earlier Panel every six months. For example, the first panel under these
Guidelines will be valid for appointments during April – September, 2019, the
next panel will be valid for appointments during October- March, 2020, and so
on. An IP will be ineligible to be included in the Panel of the IPs if any
disciplinary proceedings are pending against him or he has been convicted by
any Court of in the last three years or he expresses his interest to be
included in the Panel for the relevant period; and he undertakes to discharge
the responsibility as an Administrator, as and when he may be appointed by the
SEBI. The IBBI shall invite expression of interest from IPs in Form A to act as
Administrator by sending an e-mail to IPs at their email addresses registered
with it. The expression of interest must be received by the IBBI in Form A by
the specified date. For example, the IBBI shall invite expression of interest
by 26th March, 2019 from IPs for inclusion in the Panel for April – September,
2019. The interested IPs shall express their interest by 2nd April, 2019. The
IBBI will send the Panel to SEBI by 9th April, 2019. It must be explicitly
understood that an IP, who is included in the Panel based on his expression of
interest, must not
(a) _withdraw his interest
to act Administrator_ or
(b) _decline to act as
Administrator, if appointed by SEBI_ or
(c) _surrender his
registration to the IBBI or membership to his IPA, during the validity of the
Panel._
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LENS ON SHADY BANK DEALS IN SHELL COMPANIES
The tax department has
launched an intensive drive to verify suspicious bank transactions in companies
struck off from the official records post-demonetisation for not carrying out
any business activity. Sources said tax field formations have been ordered to
carry out strict verification of the bank transactions in such companies as the
government clamps down on shell companies as part of its overall fight against
black money. Bank records will be scrutinised and the details to be matched
against the companies. This is to make sure that these companies are not using
the banking channel. Officers across the country have been asked to verify the
records, said an official, who did not wish to be identified. The official said
this was part of the overall strategy of shutting out shell companies. The tax
department wants to make sure that the banking system is still not being used
to park illegal funds. All transactions will be scrutinised and matched against
record of the companies, said the official, detailing the drive, which has been
undertaken. The banking channel had been misused during the demonetisation
period to park illegal funds and tough action had been taken against several
offenders.
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UNLOCKING BANKRUPTCY CODE
In India it has the
characteristics of both a mule and a tortoise. The Insolvency and Bankruptcy
Code (IBC) is a shining example. Legislated in December 2016, it was seen as a
panacea for banks’ chronic NPA problem Sadly, it hasn’t lived up to its early
promise. A recent judgement delivered by a bench of the National Company Law
Appellate Tribunal (NCLAT), comprising Justices SJ Mukhopadhaya and Bansi Lal,
introduced an additional speedbreaker in a process that has already been
bedevilled by delays. The judgement places statutory dues of income-tax and GST
squarely within the preview of operational creditors. Worse, the judgement will
have retrospective effect throwing the bankruptcy process into disarray. This
is what the two justices ordered (the) income tax department of the central
government and the sales tax department(s) of the state governments and local
authority who are entitled for dues arising out of the existing law are
operational creditors within the meaning of section 5 (20) of the Insolvency
and Bankruptcy Code. Senior counsel tasked to help the NCLAT bench arrive at a
clear judgement on the issue had concluded that tax dues cannot be defined as
falling within the ambit of operational creditors. Counsel representing various
companies involved in the case had advanced the same argument. The justices
were unmoved and wrote in their order: If the company is operational and
remains a going concern, only in such a case the statutory liability, such as
payment of income tax, VAT, etc. will arise. As income tax, VAT and other
statutory dues arising out of the existing law arises when the company is
operational, we hold such statutory dues have a direct nexus with operations of
the company. The NCLAT judgement will delay the resolution process in a raft of
pending cases. Settled cases may now be reopened. The income-tax department had
wanted first charge on debt. That, however, has been denied in the NCLAT
verdict. Inevitably the order will be challenged in the Supreme Court, creating
further hurdles. The apex court has played a positive role so far in
maintaining the sanctity of the IBC process. In a key judgement in January
2019, a bench of the Supreme Court comprising Justices RF Nariman and Navin
Sinha wrote forcefully: We are happy to note that in the working of the code,
the flow of financial resources to the commercial sector in India has increased
exponentially as a result of financial debts being repaid. The provisions of
Section 29A are intended to ensure that, among others, persons responsible for
insolvency of the corporate debtor do not participate in the resolution process
Parliament rectified a loophole which allowed a backdoor entry to erstwhile
managements in the resolution process. The justices added: It will be seen that
the reason for differentiating between financial debts, which are secured, and
operational debts, which are unsecured, is in the relative importance of the
two types of debts when it comes to the object sought to be achieved by the
Insolvency Code. We have already seen that repayment of financial debts infuses
capital into the economy inasmuch as banks and financial institutions are able,
with the money that has been paid back, to further lend such money to other
entrepreneurs for their businesses. This rationale creates an intelligible
differential between financial debts and operational debts. The essence of the
IBC is speed. But the IBC had not accounted for the ingenuity – more
accurately, cussedness – of Indian promoters. Every time an insolvency case
nears resolution by banks and institutional lenders, promoters launch
counter-bids, often after the deadline. The Arcelor Mittal-Essar Steel case is
an example of how the IBC can be subverted. Fortunately, the Supreme Court has
kept an eagle eye out for such dilatory tactics. But it has a heavy work load
and the multitude of cases before the NCLT and NCLAT benches makes micro
supervision by the apex court itself a cause for delay. Conscious of this, the
apex court in its recent judgement directed the government to set up NCLAT
circuit benches across India within six months. The IBC was meant to take the
NPA crisis head on. Huge bank debts were piled up by Indian corporates in the
boom years of 2005-08. But lax Reserve Bank of India (RBI) rules kept most of
these debts off bank balance sheets. Complicit bank managements rolled over bad
debts to keep NPAs artificially low. The toxic cycle was finally broken in 2015
when the RBI introduced strict new rules to recognise bad loans. Within a year,
NPAs shot up as banks were forced to clean up their balance sheets. The IBC was
legislated to stop promoters treating bank loans cavalierly Under the code,
promoters stood to lose their companies if they didn’t pay up. Indeed, the IBC
has helped resolve many cases even before the code kicks in as the fear of
losing their firms forced promoters to settle out of court with banks accepting
varying degrees of haircuts. But as the IBC lumbers on, the paucity of NCLT and
NCLAT benches, poor infrastructure and legal speedbreakers threaten to damage
what was till recently regarded as one of the most progressive financial
legislations of the NDA government. The task now for all stakeholders –
lenders, creditors, resolution professionals, promoters and NCLT benches – is
to protect the integrity of the IBC process. If delays occur due to artificial
legal hurdles from defaulting promoters or intervention by statutory
authorities, the very purpose of the IBC will be defeated. Promoters have for
too long milked the banking system The IBC instilled fear in them. Capricious
borrowing stopped and repayments surged as promoters fought to retain control
of their companies. Bank NPAs, for the first time since 2015, have begun to
witness a decline. But if you give a defaulting promoter an inch, he will take
a mile. That must not be allowed to happen or the IBC’s sanctity and the
financial discipline it imposes will be lost forever.
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‘IBC CHANGED INDIA INC’S VIEW ON DEFAULT’
Before the Bankruptcy
Code, lot of businesses were playing coin toss with the banks and that imposed
a significant cost on the economy said Krishnamurthy Subramanian, on Friday.
Subramanian said that such defaults have resulted in high cost of capital,
because the banks’ credit spread are driven by anticipated probability of
default and loss given default. Even if you have few bad fish in the pond, all
the fish are thought to be bad, Subramanian said, and added that banks have put
the anticipated probability of default on those without a credit record,
primarily the small and medium firms. Noting that the attitude of the companies
have changed after the Insolvency and Bankruptcy Code (IBC), Subramanian said
borrowers are now coming forward to settle their dues, fearing loss of control
over their business. Highlighting the credit culture that prevailed in India
for a long time, the Chief Economic Adviser cited the doctrine of pious
obligation from the Hindu law, under which sons are held liable to discharge
their father’s debts based on religious considerations. On the state of Indian
economy, Subramanian said that the average annual growth recorded in the last
five years is higher than the growth rate recorded under any other government
since liberalisation. We have recorded an average growth rate of 7.5 per cent
despite slow credit growth and headwinds against globalisation which dampened
our exports, said Subramanian. Referring to the recent controversies over the
GDP data, Subramanian said: Given the number of touch points for policy in
India, it is very hard to create a narrative that is far from the truth. He
also lauded the Goods and Services Tax (GST) as a ‘path-breaking achievement’
of the government, adding that, No path-breaking change achieves perfection
immediately but let’s recognise the fact that it has changed India as one
market and not 30-odd markets. Rakesh Bharti Mittal said that the industry body
has set ‘inclusiveness’ as this year’s agenda. He also highlighted the need to
engage the youth through various employment opportunities by launching
vocational training centres at the school-level. Mittal also suggested leasing
out farm lands to the private sector for higher agricultural production.
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75 POWER COMPANIES HAVE DEBT OF RS 2.24 LAKH CRORE
As many as 34 power
companies have accumulated Rs 1.4 lakh crore of NPA for Indian banks while 41
corporates across sectors, including those from infrastructure, textile,
telecom, sugar, steel, energy, power and fertilisers have Rs 84,000 crore piled
up NPAs which have taken the bad loan total to astronomical Rs 2.24 lakh crore,
petitioners opposing RBI's February 12 circular on resolutions of debts have
submitted to the Supreme Court. Quoting a report of the 37th Standing Committee
on energy giving NPA details of 34 power plants, the petitioners said these
plants which have number of banks ranging from 2-19, have accumulated over Rs
1.40 lakh crore . The power companies are seeking Supreme Court intervention in
setting aside or quashing an RBI order of February 12 last year where the apex
bank laid down strict norms for NPA resolutions within 180-days among other
rules. 75 companies have a debt of Rs 2.24 lakh crore the petitioners stated.
The RBI has already contested the claims of these corporates's petitions saying
180 days is a reasonable period for achieving implementation of Resolution
plan. Power, shipping and sugar companies have challenged the Reserve Bank of
India's (RBI) February 12 circular which has identified about 30 companies,
which have loans over Rs 2,000 crore and are stressed. Many of them were power
companies and they have already challenged the RBI's circular in various
courts. The prominent corporates where payments are due are Adani Power
Maharashtra (Rs 9,463.29 crore), Damodar Valley Corpora (Rs 9,756.42 crore),
Jaiprakash Power Ventures (Rs 8,719.16 crore), KSK Mahanadi Power Company (Rs
14,165.12 crore), Jindal Thermal Power (Rs 5,594.21 crore), Prayagraj Power
Generation (Rs 9,883.28 crore), Jaiprakash Power Ventures (Rs 8,719.16 crore),
GNR Chhatishgarh Energy (Rs 5,325.28 crore) and DB Power (Rs 5,930.56 crore)
among a host of others. Among the consolidated NPA list of other corporates
VOVL, an oil company having a 17-bank consortium of lenders owes Rs 21,657.54
crore to them. Matrix Fertiliser and Chemicals owes 11 bankers Rs 4135.12
crore. Essar Bulk Terminal, an infra company owes Rs 1,088.82 crore and Rolta
India has a debt of Rs 3,400 crore.
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JBF PETRO DRAGGED TO NCLT AS KKR DEAL FALLS THROUGH
Banks have decided to drag
the debt-laden JBF Petrochemicals to the bankruptcy court after a deal by
private equity fund KohlbergKravis Roberts & Co (KKR) to take majority
stake in the company stalled three people familiar with the plan said. KKR was
supposed to infuse more funds and take a controlling stake in
JBF’sMangalore-based subsidiary JBF Petrochemicals under a deal reported in
July last year. However that was dependent on JBF promoters restructuring their
Singapore-based subsidiary JBF Global Pte and paying back Rs 450 crore of intra
corporate deposits. Both these conditions have note been met, stalling the KKR
infusion. We have been waiting for the KKR funds to come. Looks like that is
not going to happen, so recovery process has been initiated. We have filed a
case in NCLT but it is yet to be admitted, said one of the persons cited above.
There are 14 other lenders the company is indebted to and its exposure to
Indian banks exceed Rs 6,000 crore.
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NBCC READY TO BUY MORE STRESSED REALTY ASSETS
State-run construction
major NBCC is open to acquiring more distressed assets in the real estate
sector, provided there are no corporate governance issues, chairman Anoop Kumar
Mittal has said. NBCC has already bid for Jaypee Infratech, which is being
resolved through the corporate insolvency process. There are a few other
projects where we have been approached. We are examining the commercial
viability but we won’t take up projects where there are corporate governance
issues, Mittal said, refusing to name the projects the firm is interested in.
NBCC has been directed by the Supreme Court to complete the stalled projects of
Amrapali Group on the project management consultancy (PMC) model. After
surveying all the projects of the group, the developer had informed the court
that it would require Rs 8,500 crore to complete them. According to an
executive aware of the developments, some banks have approached the state-run
firm to take over assets of companies whose promoters are unable to service
their loans. It may be the case that NBCC would take on other projects
depending on how the negotiations go in case of Jaypee Infratech, said the
executive quoted above.
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NCLT ORDERS INSOLVENCY PROCEEDINGS FOR IDEB PROJECTS
The National Company Law
Tribunal (NCLT) has ordered corporate insolvency resolution process for IDEB
Projects, an engineering and construction firm that worked as a sub-contractor
to metro rail projects in Bengaluru and Delhi, for defaulting on loans. Based
on a petition filed by Oriental Bank of Commerce (OBC) under the Insolvency and
Bankruptcy Code, the Tribunal on Friday appointed Valayudham Jayavel as the
interim resolution professional to carry out the proceedings. A consortium of
lenders had lent Rs 380 crore to IDEB Projects as working capital. OBC told the
tribunal that the company failed to pay it Rs 36.2 crore.
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NPA RECOVERY TARGET IN JEOPARDY ON ESSAR STEEL
The delay in actual
realisation from the resolution of the big-ticket cases like Essar Steel has
put the non-performing assets (NPAs), or bad loans, recovery target by banks of
Rs 1.8 lakh crore in jeopardy. A section of the Finance Ministry, however,
believes the target of Rs 1.8 lakh crore could be deemed to have been achieved
as the decision of National Company Law Tribunal (NCLT) on the sale of the
Essar company to ArcelorMittal for Rs 42,000 crore was taken in the current
fiscal. A senior ministry source said the public sector banks (PSBs) have
recovered close to Rs 1.33 lakh crore by the third week of March, leaving a gap
of Rs 47,000 crore in meeting this year's target. The achievement of Rs 1.8
lakh crore mainly depended on the resolution of the Essar Steel insolvency case
before March 31, which has happend, but the distribution of the funds to
financial creditors has not taken place as operational creditors have taken up
the issue of their dues in the appellate tribunal (NCLAT).
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BANKS FACE HIGHER PROVISIONS ON RESOLUTION DELAYS TO
BIG-TICKET NCLT CASES
Four big-ticket National
Company Law Tribunal (NCLT) cases — Essar Steel, Bhushan Power and Steel,
Jaypee Infratech, and Alok Industries — will see their resolution getting
pushed to the next financial year (2019-20), increasing the provisioning burden
on lenders. It will also postpone the benefit of reversal of money set aside as
provisions. These cases were in advanced stages of resolution, and their
settlement was expected by the end of the March quarter of 2018-19. This would
have brought relief to lenders in the form of release of provisions made, which
could have been used for some other stressed accounts. Instead, many banks will
now have to make extra provisions, said senior public sector bank executives.
These accounts, part of the RBI’s first list, were classified as non-performing
assets (NPAs) in March 2016, and were taken to the NCLT in 2017-18 for
insolvency proceedings. In the normal course, lenders would have to make 100
per cent provisions in four years. The aggregate provisions for these were
about 70 per cent, according to ICRA's estimates. Banks with exposure to Essar
Steel were expecting significant write-backs on account of the account’s
resolution by March 31, 2019. However, if the account remains unresolved, they
would need to increase the provisions, affecting their balance sheets.
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SEBI CONSIDERS LIMITED REVIEW AND AUDIT REPORTS OF LISTED
ENTITIES
Sebi Friday came out with
procedure and formats to be followed for limited review and audit report of
listed entities. This would be also applicable for entities whose accounts are
to be consolidated with the listed entity. The markets watchdog had decided to
amendments in regulations for group audit after taking into consideration
recommendations made by Uday Kotak-led panel on corporate governance. A new
sub-regulation has been inserted in LODR (Listing Obligation and Disclosures
Requirements) norms. It requires the statutory auditor of a listed entity to
undertake a limited review of the audit of all the entities/ companies whose
accounts are to be consolidated with the listed entity as per AS (Accounting
Standard) 21. This has to be done in accordance with guidelines issued by the
board. Insurance companies would follow formats as prescribed by insurance
sector regulator IRDA, as per the circular. The Institute of Chartered
Accountants of India (ICAI) may consider issuing necessary guidance to
Chartered Accountants ensure compliance with the circular, Sebi said.
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GUIDELINES FOR APPOINTMENT OF INSOLVENCY PROFESSIONALS AS
ADMINISTRATORS
In terms of the said
Guidelines, the Board shall prepare a Panel of Insolvency Professionals (IPs)
for appointment as Administrator and share the same with the Securities and
Exchange Board of India (SEBI). For this purpose, the Board shall invite
expression of interest (EOI) from IPs, by the specified date, in Form A
(enclosed for reference, to be filed online) by sending an e-mail to IPs at
their email addresses registered with the Board. Accordingly, an e-mail has
been sent to your ID registered with the Board, seeking EOI for appointment as
an Administrator during the period 10th April 2019 to 30th September
2019 (6 months) as per said guidelines. In this connection, it is advised that
EOI to act as an Administraor be submitted through online mode. EOI submitted,
if any, through any other mode (viz. e-mails/fax/physical mode/others etc) /
Unsigned EOIs, being not consistent with the aforesaid guidelines stands/shall
stand. Tampering with the format / uploading of tampered document / furnishing
wrong information etc. shall tantamount to rejection of your EOI and may also
attract suitable disciplinary action.
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SEBI PROBES POTENTIAL VIOLATIONS OF DISCLOSURE NORMS AT YES
BANK
The Securities &
Exchange Board of India (Sebi) is probing potential violations of disclosure
norms including insider-trading rules, at Yes Bank after it faced allegations
of selective revelations from a central bank review on the private-sector
lender’s asset quality. Sebi is examining whether Yes Bank breached any of the
laws dealing with securities trading and these would include disclosure
violations, two people aware of the development told. The regulator’s
investigations relate to disclosures by Yes Bank on the matter of ‘nil
divergence’ from central bank assessments on bad assets. Sebi has looked at
disclosures and asked the company to explain the matter said a source.
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SAT SETTLES SEBI-BROKER DISPUTE OVER INTEREST CALCULATION
The tribunal, which had
heard and disposed many complex regulatory matters, was forced to calculate
simple interest in a matter after the Securities and Exchange Board of India
(SEBI) and broker Prebon Yamane (India) failed to arrive at a consensus on the
manner and the amount on which simple interest had to be calculated. We find
that parties are not clear as to how simple interest at relevant bank rate is
to be calculated, said the SAT bench comprising Presiding Officer Justice Tarun
Agarwala and members C. K. G. Nair and Justice M. T. Joshi, adding that simple
interest was required to be calculated which the parties have failed to
calculate in the correct perspective. In 2004, SEBI had raised a demand of ₹4.64
crore against Prebon Yamane (India) towards principal amount and the interest
as fees under the broker regulations. Prebon Yamane, however, challenged the
demand at the tribunal that directed the regulator to refund the money that was
already paid by the broker. Meanwhile, SEBI challenged the tribunal’s order at
the Supreme Court that allowed the broker to withdraw the amount deposited with
the tribunal till the matter was pending at the Apex court. As per the Apex
Court’s direction, the broker withdrew ₹6.20 crore that included
the principal amount and the interest accrued. In December 2016, the Supreme
Court ruled in favour of SEBI and hence the demand raised in 2004 became
payable along with interest. Thereafter, the capital markets regulator directed
the broker to deposit ₹11.60 crore that was disputed by the brokerage that said it
was liable to pay only ₹6.20 crore along with simple interest and hence deposited ₹8.15
crore. SEBI, however, informed that the broker was liable to pay a balance
amount of ₹1.10 crore which was challenged by the broker at the tribunal.
Based on the tribunal’s order, while Prebon Yamane deposited ₹56.61
lakh, SEBI said that the brokerage needed to pay an additional ₹39.03
lakh. Since there was a conflict on calculation of rate of interest, the
brokerage filed a miscellaneous application at the tribunal for clarification. While
disposing the matter, the tribunal directed the market intermediary to deposit ₹10
lakh before April 30, failing which the SEBI would be allowed to recover the
entire amount of ₹39.03 lakh.
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RBI NORMS ON BANK EXPOSURE COME INTO EFFECT FROM MONDAY
New guidelines on bank
exposure to large borrowers take effect on 1 April, even as the Indian Banks’
Association (IBA) has made a last-ditch attempt to defer the deadline The new
guidelines cap a bank’s exposure to a group of connected companies at 25% of
its core capital, and to an individual company at 15%. However, three years
after the Reserve Bank of India came out with these guidelines, many banks are
still struggling to comply because of capital constraints. These banks may look
at cancelling the existing sanctioned limit of borrowers to meet the cut-off. The
problem is with non-performing accounts (NPA) where banks already have a
sanctioned limit and are waiting for repayment. Videocon is one such case. In
such cases, we will have to report to RBI, the head of a public sector bank
said on condition of anonymity. The National Company Law Tribunal (NCLT)
admitted Videocon Industries Ltd for insolvency proceedings in January. The IBA
has sought extension of the deadline by another one to two years chief
executive V.G. Kannan said. We have taken up the matter on extension of the
deadline and clarification. The extension is primarily for smaller banks. IBA
has also sought clarification on whether exposure taken against letters of
credit or bank guarantees issued by the parent entity of the local foreign bank
be allowed to be kept outside the purview of the regulations. It has also
sought clarification on the calculation of group exposure on account of
dependent and joint venture companies. For instance, in the case of joint
venture companies, banks are uncertain whether the exposure should be
calculated for each of the companies or both combined.
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ESSAR STEEL: UPSET WITH NCLAT, BANKS TO MOVE COURT
Lenders to Essar Steel
have decided to move the Supreme Court in the event the National Company Law
Appellate Tribunal pressures them to pay unsecured financial creditors more
than they are inclined to. It is unfair that CoC (committee of creditors) be
repeatedly asked to reconsider commercial decisions which we have taken with
all stakeholders’ interest in mind and which, most importantly, has already
been approved by the tribunal, a banker with a state-owned lender said. Banks
could approach SC before April 9 with a plea that proceedings in the Essar
Steel case be expedited. The NCLAT has directed lenders to consider a higher
payout to unsecured financial creditor Standard Chartered. As of now, the
foreign bank is set to receive only Rs 60.71 crore or 1.7% of the admitted
claims under the approved ArcelorMittal resolution plan. Lenders will vote on
Saturday on whether to set aside of Rs 1,000 crore from their receipts for
operational creditors. Most lenders are understood to be in favour of this move
by which the amount will be distributed pro rata to operational creditors on
basis of their admitted claims, bankers aware of the development told.
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SHIPBUILDERS’ BODY MOVES APEX COURT TO QUASH CENTRE AND RBI
ORDERS ON STRESSED ASSETS
The Shipyards Association
of India (SAI) has dragged the Centre and the RBI to the Supreme Court, seeking
special provisions to resolve the acute financial stress facing the
shipbuilding industry. In a petition filed before the apex court, the 20-member
group — that includes L&T Shipbuilding Ltd and Reliance Naval and
Engineering Ltd — has sought the court’s direction to quash and set aside
circulars issued by the Finance Ministry in 2017 and the RBI in 2018 on the
resolution of stressed assets outside the mechanism of the Insolvency and
Bankruptcy Code (IBC). The legal challenge comes days after the collapse of two
of India’s top private yards — Bharati Defence and Engineering Ltd and ABG
Shipyard Ltd. While a bankruptcy court in Mumbai had ordered the liquidation of
Bharati in January, a similar process is under way in a court in Ahmedabad for
ABG. The adverse impact on the shipbuilding industry is expected to also have a
cascading effect on the ancillary industries including direct and indirect
employment. SAI has challenged the government’s powers to authorise the RBI to
issue directions to any bank to initiate insolvency proceedings as per IBC, and
the RBI’s powers to issue directions to any bank for the resolution of stressed
assets. These are ultra vires Article 14 of the Constitution, since they confer
unfettered powers upon the Central government to authorise the RBI to issue any
directions, leading to arbitrariness and abuse of power, said the petition.
With the RBI circular not providing any limitation on the reasons for refusal
that can be given by a lender, any lender with minimum exposure can derail the
entire process since the consent of all lenders is required under the RBI
circular, the Association contended, according to court papers. It further said
lenders of the respective companies have not come forward before the court,
objecting to and opposing its petition. This itself shows that they are still
attempting to resolve the debt outside IBC. But the RBI circular has coerced
the lenders to approach the NCLT, failing which, appropriate action would be
taken by the RBI, it added.
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AMRAPALI'S COLLAPSE NOT DUE TO MARKET CONDITIONS BUT BECAUSE
OF WILFUL CRIMINAL ACTIONS OF OWNERS: AUDITORS TO SC
Seven months after the
Supreme Court ordered a forensic audit of Amrapali group to track misuse of
homebuyers' money the final report said illegal diversion of over Rs 3,000
crore led to the financial collapse of the group, leaving thousands of
investors stranded. The auditors, Ravi Bhatia and Pawan Aggarwal, filed a
voluminous report running into more than 2,000 pages in the SC. They said the
group set up more than 100 shell companies in the names of its officials,
including one in which a peon was inducted in a senior position, to divert
money which was used for personal gain of directors, officials and their
relatives. The report made it evident that the collapse of the Amrapali group
was not due to a change in market conditions or investment decisions gone bad
but because of the wilful criminal actions of the group's proprietors. The
court had directed a forensic audit in September last year. Justice Arun
Mishra, who along with Justice UU Lalit is hearing the plea of thousands of
homebuyers, informed their lawyer ML Lahoti on Thursday that the auditors had
filed their report and the court would examine it on April 9. Around 46,000
people had invested in Amrapali's housing projects but were not given flats.
The buyers sought the SC's protection after the lender bank initiated
insolvency proceedings against the company. The court then decided to supervise
construction and assured buyers that their interest will be protected and
sought a forensic audit of 46 registered companies to track funds and
beneficiaries. The court's apprehension that the group siphoned off homebuyer
money proved correct with the forensic report finding documentary evidence to
show that funds were transferred to more than 100 shell companies outside
Amrapali group through dubious transactions. The money was invested in mutual
funds, LIC policies and for expansion of business other than construction
activity. The auditors also gave a list of dubious and benami homebuyers in
whose names flats worth lakhs of rupees were booked on payment of paltry sums.
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GOVERNMENT FILES APPLICATION FOR FINAL RBI NOD
On Friday, state
government submitted its application -along with a report on the fulfilment of
19 clauses - to RBI, through Nabard, to get its final nod for the proposed
Kerala Bank. Though the application for the proposed merger of district
cooperative banks (DCBs) was submitted after leaving out Malappuram DCB (where
the proposal failed to earn a simple majority), the government is hopeful of
securing RBI nod. Cooperation department officials have cited precedence in the
case of Jharkhand State Cooperative Bank where Dhanbad central cooperative bank
(the district bank) opposed the creation of two-tier cooperative credit
structure. It was on October 3, 2018 that RBI gave its in-principle approval
for Kerala Bank, while setting March 31, 2019 as the deadline to submit the
final application All clauses, except the one on core banking system, have been
complied with. And there is a guarantee to establish core banking system in
time for which procedures like IT training for employees are on, said an
official. The final application was submitted to a team of Nabard officials led
by Kerala region chief general manager R Srinivasan by state cooperative bank
MD E Devadas in the presence of minister for cooperation Kadakampally
Surendran.
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NSE TO HAVE SGX’S NIFTY TRADE ROUTED VIA GIFT CITY SOON
The National Stock
Exchange (NSE) and the Singapore Exchange (SGX) have finalised an agreement
that will result in trades done in Nifty and Bank Nifty futures contracts in
the island nation being executed in International Financial Services Centre
(IFSC), Gift City, Gujarat. Both the exchanges have submitted their plans to
the capital market regulators of India and Singapore and are expecting their
proposals to be cleared in the next one month, said two people privy to the
development. As per the arrangement, SGX will enrol as a client of NSE in Gift
City. SGX will start a special purpose vehicle (SPV) that will register as a
broker with NSE’s subsidiary at Gift City and all the Nifty trade orders being
placed from SGX will be routed to Gift for execution. The arrangement is first
of its kind and hence needs several regulatory exemptions. For instance, a
broker acts as an interface between the client and the exchange in normal
cases. However, in the proposed arrangement there would be additional interface
since the exchange SGX will act as a broker while NSE IFSC will act as the
exchange. The agreement puts to rest the two-year tussle between NSE and SGX
over trading of Indian derivative products on the Singapore platform.
Initially, both the exchanges had proposed to establish an inter-exchange
connectivity in-line with Shanghai-Hong Kong stock connects. However, both the
market regulators, the Securities and Exchange Board of India (Sebi) and
Monetary Authority of Singapore (MAS) have expressed reservations about the
proposal prompting the exchanges to restructure the arrangement.
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SEBI SLAPS RS 94 LAKH FINE ON 17 ENTITIES FOR FRAUDULENT TRADE
PRACTICES
Capital markets regulator
Sebi slapped Rs 94.5 lakh penalty on 17 entities for indulging in fraudulent
trade practices in illiquid stock options segment on the BSE. The regulator,
during the course of investigation between April 2015 and September 2015, found
that 81.38 per cent of all the trades executed in the stock options segment
involved reversal of buy and sell positions by the clients and counter-parties
in a contract on the same day. These entities were among those whose reversal
trades involved squaring off transactions with significant difference in sell
value and buy value of the transactions, Sebi said in similarly worded separate
orders on Friday. It further said trades of the entities are non-genuine as
they are not executed in normal course of trading, lack basic trading
rationale, lead to misleading appearance of trading in terms of generation of
artificial volumes, and are hence deceptive & manipulative.
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IPO ACTIVITY SEES A SLUMP IN FY19; FUND RAISING VIA IPOS DOWN
82%
The initial public
offering (IPO) market witnessed a huge slump in 2018-19 (FY19). Fund raised by
way of IPOs were down 82 per cent year-on-year to Rs 14,674 crore. The number
of issues that hit the market in FY19 were just 14—lowest since FY15—compared
to 45 last year. The slump in primary market activity comes even as the
benchmark indices gained the most in four years at 17 per cent in FY19. Last
financial year, was a record year for primary market activity with a record Rs
81,553 crore getting mobilized through IPOs. While the returns for the
benchmark indices in FY18 were lower than the current financial year, the
market upmove was broad-based and far less volatile. In FY19, nine companies,
collectively looking to raise Rs 6,495 crore, were not able to launch their
IPOs despite having all the approvals in place. Currently, there are 64
companies with regulatory approval for IPOs worth a cumulative Rs 63,000 crore,
according to Prime Database. Another eight companies, looking to raise Rs 7,600
crore, have filed their offer document with market regulator Sebi and are
awaiting its nod. “This pipeline can vanish quickly in case markets are
volatile,” said Haldea. The secondary market has seen a sharp 10 per cent
rebound from its 2019 lows touched on February 19. The surge has come on the
back of foreign inflows worth nearly Rs 50,000 crore. The huge liquidity has
given a boost to share sales at listed companies. Since February, over Rs
20,000 crore worth of share sales have taken place by way of block deals, offer
for sale (OFS) and qualified institutional placements (QIPs).
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TANTALLON FUND PAYS OVER RS 55 LAKH TO SETTLE CASE WITH SEBI
OVER ALLEGED FII NORMS VIOLATION
The Tantallon Fund has
settled a probe by markets regulator Sebi into alleged violation of foreign
institutional investors norms by paying over Rs 55 lakh towards settlement
charges. The company in its meeting with the regulator's internal committee in
November 2018 proposed to pay settlement charges. Thereafter, Sebi's High
Powered Advisory Committee recommended the case for settlement on the payment
of Rs 55.02 lakh which was subsequently approved by the regulator's panel of
whole-time members.
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MARKET SEES FOREIGN FUND OUTFLOW WORTH RS 44,500 CRORE IN
2018-19
Despite heavy fund
infusion by FPIs over the past two month, the domestic financial market
suffered a foreign fund outflow of over Rs 44,500 crore on net basis in the
fiscal 2018-19 as macroeconomic headwinds weighed on investor sentiment through
the year. Hike in rates by the US Federal Reserve, depreciating rupee, rise in
crude oil prices, worsening current account deficit, concerns over fiscal
deficit and current account deficit target, coupled with trade tiff between the
US and China dampened the mood in emerging markets, experts said. In financial
year 2018-19, foreign portfolio investors (FPIs) pulled out a net sum of Rs
1,629 crore from equities and Rs 42,951 crore from the bonds market, taking the
total net outflow to Rs 44,580 crore, the depositories data showed. In
comparison, FPIs had infused a net amount of Rs 25,634 crore in the equities
and over Rs 1,19,035 crore in the debt market, a total net investment of Rs
1,44,669 crore in the previous fiscal. After two years of good foreign fund
inflows, Indian market witnessed reversal in the trend. We received Rs 48,411
crore and Rs 1,44,682 crore in the year 2016-17 and 2017-18, respectively.
Global and domestic causes alike have prompted the flows of funds in 2018-19 from
the markets and both the equity and debt segments have witnessed outflows, Alok
Agarwala, Senior VP and Head Investment Analytics, of Bajaj Capital said. FPIs
remained net sellers almost throughout the recently concluded fiscal except for
the past couple of months. October emerged as the month of steepest outflow
with FPIs pulling out a massive Rs 38,900 crore from the market. However, fresh
fund infusion was witnessed in the last two consecutive months of the fiscal,
with March alone accounting for a net infusion of Rs 45,981 crore including a
net Rs 33,980 crore in equities and Rs 12,001 crore in debt.
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SENSEX ENDS FY19 WITH THE BIGGEST GAIN IN 4 FISCAL YEARS
Indian equities
outperformed other asset classes in Fiscal Year 2018-19, the last trading
session of which was on Friday. Gaining 17.30% in FY19 benchmark index Sensex
fared the best in four financial years. In FY18 and FY17, Sensex jumped 11.30%
and 16.88%, respectively. The 50-share index Nifty rose 14.93% in FY19 and
10.25% in the previous fiscal year. However, it was a dismal year for smaller
stocks as BSE Midcap and Smallcap indices saw a fall of 3.03% and 11.57%,
respectively, in FY19 after a stellar run in the previous two fiscals. Steep
valuations and slow earnings growth of mid-cap and small-cap stocks led to
sharp corrections in these stocks. Most analysts, however, believe that midcap
and smallcap stocks are poised to see a strong rally soon as their valuations
have moderated considerably. Historical analysis of midcaps reveals that there
have never been two consecutive years of negative returns, and the positive
returns in the year after negative returns have always exceeded the negative
returns. Based on this observation, we expect the return from midcaps to exceed
15% in 2019 as against -15.3% in 2018, said Elara Securities (India) Pvt. Ltd
in a note on 22 March. It believes that with the midcap-largecap premium wiped
out, valuations support a midcap recovery. FII money was missing from India for
most of FY19, but they were net buyers of Indian equities worth $162.29
million. Domestic institutional investors (DIIs), including mutual funds and
insurance firms, were net buyers of shares worth ₹72,109 crore, which was
lower than the ₹114,452 crore in the previous fiscal. The rupee was at a
three-year low. It weakened 5.74% after a fall of 0.51% in the previous year.
In FY19, gold gave negative returns for the first time in four years. Gold
prices were down 2.28% in FY19 after a rise of 6.06% in FY18. Crude prices rose
5.27% after a sharp increase in the first half of the fiscal.
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EXPECT COMMODITIES MARKET TO SEE RAPID EXPANSION AFTER RECENT
SEBI MOVES
The growth in the economy
gets reflected in the financial market. Despite seesaw movements in major
financial markets, Indian equity is touching new highs reflecting the optimism
on the economy. The entire world seems to be accepting this growth story and
India is projected to grow at 7.4 per cent during 2018-19 and further at 7.6
per cent next financial year. This growth is being driven mainly by robust
private consumption, major reforms initiated by the government and major
capital inflows. In line with the growing economic activities, commodities
trade has increased, although it is not reflecting in the commodities futures
market. In the early days of launch of this market, volumes grew multi-fold.
However the turnover figures came down gradually amid competition from better
performing equity. Some speed breakers such as regular government interventions
and imposition of CTT came in the way and dried up volumes. Currently, this
market is facing some other issues. Despite the lucrative profit in
commodities, investors are keeping an arm length distance from this asset class
to avoid churning of money on the counter. The markets regulator gave its nod
to NSE and BSE, two biggest exchanges of the market, to participate in the
commodities market. Both the exchanges have seen a decent start and are working
hard to enhance reach. This has created good arbitrage opportunities as Sebi’s
guidelines on contract specification for same commodities in different
exchanges are same; which makes trading easier. In an effort to bring the
Indian market in line with global markets, Sebi has directed commodity
exchanges to align trading lot sizes with delivery lot sizes to remove barriers
in physical delivery of commodities and adhere to global standards. Thus, a lot
of developments and brainstorming are going on among Sebi, exchanges, brokers
and market participants to expand this market and I am very confident that with
all these efforts, the commodities market will soon have a strong foothold and
become a favourite trading destination for domestic market participants and a
price setter for the entire world. It is expected that different steps taken by
Sebi will ensure more credibility, liquidity and ultimately better price
discovery for the market and its participants.
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IOB HOPES TO COME OUT OF RESERVE BANK’S PCA
Public sector Indian
Overseas Bank (IOB) is hopeful of a good performance this financial year and
come out of the Prompt Corrective Action (PCA) framework of the Reserve Bank of
India, said a top official. We are working towards this goal and will be
achieving it soon, said R. Subramaniakumar. Last month, we bagged excellence
awards for financial inclusion and digitisation, he said. There were visible
improvements in the third quarter and this will follow in the fourth quarter,
too. More information can be shared during the Q4 results, he said. On
Thursday, IOB shareholders approved a special resolution granting permission to
the board to issue 269.54 crore shares at an issue price of ₹14.12
a share on a preferential basis to the Centre for the capital infusion of ₹3,806
crore received in February. After the infusion of funds, the government holding
will increase to 92.52% from 89.39%, he said. The funds will be used for
strengthening lending to RAM (retail, agriculture, MSME) sector against
corporate sector lending, he added. Two years back, IOB’s exposure to RAM was
44% and now, it will increase to 66%, he said. Asked about the bank’s
performance, Mr. Subramaniakumar said IOB was working towards reducing
non-performing assets and improving return on assets.
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RBI NOT YET PROVIDED ANY CLARIFICATION, TIMELINE ON INTEREST
RATE LINKING, SAYS IBA
The Reserve Bank of India
in its December 2018 policy meeting said it will issue guidelines asking banks
to link interest rates to external benchmarks, but the central bank has not yet
provided any clarification to the banks, said V G Kannan. He further said that
no banks have taken any steps yet to link rates to external benchmarks Big
changes will be ushered in banking system starting on April 1. A major change
being exposure to a conglomerate to be capped at 25 percent of its capital
while to an individual company it will be at 20 percent of the bank's capital.
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SENSEX HITS RECORD HIGH ON RATE CUT HOPE, FII INFLOWS
The benchmark Sensex
surged to a record high on the first day of the fiscal year 2019-20 and hit the
39,000-mark for the first time on Monday supported by continued foreign capital
inflows and liquidity ahead of 2019 Lok Sabha elections due this month. The BSE
Sensex advanced as much as 355.76 points to 39,028.67 in the early trade,
surpassing the previous record high of 38,989, hit in August 2018. The boarder
Nifty also rose 91.75 points to a high of 11,715.65, just 44.55 points shy of
its record high of 11,760.20. In March, foreign institutional investors (FII)
infused a net Rs 45,981 crore, including a net Rs 33,980 crore in stocks and Rs
12,001 crore in debt. In February, FIIs invested a net amount of Rs 11,182
crore in the capital markets. Investor sentiment was also upbeat over hopes
that the Reserve Bank of India (RBI) may cut key lending rates by another 25
basis points (bps) on April 4 to boost economic activities amid fears of global
slowdown impacting domestic growth prospects. One basis point is a hundredth of
a percentage point. For FY19, the Sensex rose nearly 17 percent, while the
Nifty50 increased by 15 percent. For both the indices, this was the highest
growth in any fiscal since FY 2009-10. Investors' wealth surged Rs 8.83 lakh
crore during 2018-19, with the market capitalisation of BSE-listed companies
hitting Rs 15,108,711.01 crore.
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RBI SETS UP PCR TO SOLVE SME, MSME BANK LOAN ISSUE
In order to tackle the
credit availability issue of the MSMEs and startups, RBI has recently decided
to establish a Public Credit Registry (PCR) that will facilitate access of
financial institutions to the entire profile, including past loan details, and
also regular income flows of borrowers. Enabling efficient credit risk
assessment, such a registry can also offer attractive interest rates to good
borrowers and higher interest rates to defaulters. The ultimate aim of this
move is to foster transparency and promote financial inclusion for a sector
that is widely acknowledged as the backbone of the Indian Economy. Kalyan Basu
- CEO and MD of A.TReDS told Implementation of PCR would be a landmark
initiative in the lending landscape of India. It would not only give a boost to
our raking on ease of doing business but would also have a deep and positive
impact on Financial Inclusion, especially for the MSME segment. It would help
the Financial Institutions immensely in terms of identifying the good borrowers
and monitor over borrowing and loan staking more effectively thus reducing
credit risk and bringing down the credit cost and ultimately leading to lower
cost for the borrower and higher credit growth. Hailing the RBI move Rajeev
Chawla, Chairman, said, It would make the financial institution more stable in
terms of credit quality and thus help the Indian economy in achieving higher
growth. He said it would definitely have a positive impact on the Indian Prime
Minister Narendra Modi's one of the most ambitious 'Startup India' programme.
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FLIPKART WILL NEGATIVELY IMPACT PROFITS IN FY20 AS WELL, SAYS
WALMART
The world’s largest
retailer Walmart has said the acquisition of e-commerce firm Flipkart for $16
billion negatively affected its net income in FY19 and it will continue in FY20
as well. We began consolidating Flipkart’s results in the third quarter of
fiscal 2019, using a one-month lag. The ongoing operations negatively affected
fiscal 2019 net income and this will continue in fiscal 2020, Walmart said in
its annual financial report. The Arkansas-based firm, which competes with US
rival Amazon, posted $514 billion in revenue for FY19 compared to $500 billion
in the previous financial year, growth of 2.8 per cent. However, the growth was
slower when compared with the previous financial year when the company grew 3
per cent. The gross profit rate decreased 18 basis points in FY19. The decrease
was due to the mixed effects of Walmart’s growing e-commerce businesses, the
consolidation of Flipkart and its plan-pricing strategy, and increased
transportation expenses. Also, Walmart’s effective income tax rate was 37.4 per
cent for FY19 compared to 30.4 per cent in the previous year. Although the US
statutory rate was lowered due to the tax cuts and Jobs Act of 2017, Walmart
saw an increase in effective income tax rate owing to various factors,
including the sale of the majority stake in Walmart Brazil. As a result,
Walmart reported $7.2 billion in consolidated net income in FY19 as compared to
$10.5 billion in FY18, a decrease of $3.3 billion. The earnings per share (EPS)
was $2.26 in FY19 compared to $3.28 in FY18.
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RBI CLEARS ₹19,240 CRORE CCL FOR PUNJAB FOR RABI
MARKETING SEASON
The Reserve Bank of India
(RBI) Friday cleared ₹19,240.91 crore towards Cash Credit Limit (CCL) for Punjab for
the purchase of wheat in the Rabi marketing season. With this, the bulk of the
CCL sought by the state government for the purchase of 130 lakh tonne of wheat
for this season has been released by the central bank, an official release said
here. The release of the CCL would facilitate the state government in making
timely payments to farmers against purchases of food grains in the current
season, which would begin from April 1 and culminate on May 25, it said. The
central government has fixed the minimum support price (MSP) of wheat at ₹1,840
per quintal, hiking it by ₹105 from last year's ₹1,735 per quintal.
#For Source of Information copy and paste the heading in google.
Thanks & Regards,
CS Meetesh Shiroya
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