Monday, 8 April 2019

CORPORATE UPDATES 08.04.2019





MCA

Revised version of the eForm INC-35 -AGILE (Application for Goods and services tax Identification number, employees state Insurance corporation registration pLus Employees provident fund organisation registration) which is filed as linked form with SPICe for incorporation of a Company is available on MCA21 Company Forms Download page. The revised form contains fields relevant to EPFO notified vide the Companies (Incorporation) third Amendment Rules, 2019 dated 29th March 2019. Stakeholders may take note and refer instruction kit for more details.
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RELAXATION OF ADDITIONAL FEES AND EXTENSION OF LAST DATE OF FILING E­ FORM CRA-2

The Ministry has received several representations about extension of last date for filing e-form CRA-2 without additional fees where the company has been mandated to get its cost records audited for the first time under Companies Act, 2013 on account of Companies (Cost Records and Audit) Amendment Rules, 2018 as notified vide G.S.R. 1157(E) dated 03.12.2018. The matter has been examined and it has been decided to extend the last date for filing of e-form CRA-2 in the above mentioned cases without payment of additional fees upto 31.05.2019.
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GOVT KEEN TO USHER IN REFORMS IN THIRD PHASE OF MCA-21 PROJECT

The Corporate Affairs Ministry will look to introduce Artificial Intelligence (AI) in MCA-21 when the third phase of the crucial portal is rolled out in the coming days, a top Government official said. Injeti Srinivas, said: We have a vision that we will have AI in MCA-21 in version 3. While the first phase of the e-governance initiative of the Corporate Affairs Ministry was implemented by Tata Consultancy Services, the second phase is being implemented by Infosys for the period January 2013-July 2021. Srinivas said the Ministry will look to rationalise all the forms follow the principle of single source of truth so that one is not required to fill in known details again (as it will get filled automatically). We will also interlink databases — Income Tax Department, GSTN, RBI and FIU so that routine enforcement is done 24x7 on an autopilot basis. We (MCA) should be concerned with only major issues of violations. For all others, we would like to have an online adjudication system with penalties and liberal compounding system, he said. Srinivas also said the Government was contemplating introduction of deferred prosecution agreements and consent settlements. Srinivas urged India Inc to improve the level of corporate governance and match them to the best in the world. That is the only way we can become a $10 trillion economy. We will have to establish strong credentials in corporate governance in terms of fairness, transparency, accountability and responsibility. That is the job of Corporate India, he said. On the Government’s part, Srinivas said the Centre is equally bound to put in place trust based non-discretionary regulatory environment with minimum human interface. Srinivas rued that there has been a general decline in corporate governance standards in India At the same time, he said India overall had a positive story line on the corporate governance front. About 70 per cent of companies are compliant — that is adequate critical mass for us to embark on higher trajectory of corporate governance, he said. Srinivas also said that building trust is the core issue of building governance, whether it is corporate governance or corporate regulation. If India has to occupy its rightful place in the world, we should start thinking like team India and acting like team India. if you have to act in unison, you should have strong level of trust. You cannot progress when there is trust deficit, he said.
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SIGNIFICANT BENEFICIAL OWNERSHIP RULES TO HELP IDENTIFY ENTITIES CONTROLLED FROM OVERSEAS

The new rules on significant beneficial ownership have put in place a clear regulatory framework that would help identify entities which might be controlled from outside the country according to the corporate affairs ministry. Amid continuing efforts to curb illicit fund flows, the ministry in February amended the significant beneficial ownership rules under the companies law. Injeti Srinivas has said the new rules provide more clear definitions for determining whether an individual or an entity has significant beneficial ownership and all forms of control that could be exercised in the affairs of a company are being captured. The new SBO (Significant Beneficial Ownership) rules put in place a clear regulatory framework that would also help identify entities that might be controlled from outside the country, he said in a message in the ministry's newsletter for the month of February. Under the new norms, the whole principle of proportional calculation has been done away with and provisions are in place to identify significant beneficial owners under various circumstances. The changes to the rules will supplement the government's continuing efforts to clamp down on corporate entities suspected to be used as conduits for illicit fund flows, Srinivas said in the newsletter posted on the ministry's website. Besides, the secretary said the ministry has notified the Specified Companies (furnishing of information about payment to micro and small enterprise suppliers) order. The order, which seeks to address the concerns of small businesses over delayed payments, makes it mandatory for all companies to file half-yearly returns detailing outstanding dues to MSME suppliers. The companies also have to assign reasons in case the delay is for more than 45 days. Directors of companies delaying payment for supplies made by MSME may have to face imprisonment up to 6 months or pay fines between Rs 25,000 and Rs 3,00,000, Srinivas said.
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CRUCIAL TO SHOW BENEFICIAL OWNER-BENAMIDAR TIES

The Income Tax (I-T) Department has hit a wall in a case of alleged benami deals involving troubled housing finance company DHFL and entities and persons linked to the promoter group, controlled by the Wadhawan family. Tax officials’ attention was drawn to certain transactions in 2017 when DHFL funded the purchase of properties from individuals and firms run by persons who were employees of Wadhawan Group. The buyer of the properties (in Khar West, Mumbai) was Manpreet Estates, which is part of realty group Midcity that had dealt with DHFL. The I-T Department pointed to the fact that the 10 property sellers — five individuals and five companies — transferred funds received from Manpreet, either directly or through intermediaries, to different concerns controlled or managed by RKW Developers, which again was connected to Wadhawan group. The department alleged that the sellers — the five individuals and five companies’ directors, all of whom were employees of RKW — were dummies, unaware of the dealings. The transactions were in reality handled by two accountants of RKW who were employees of Wadhawan Group, tax officials had said. The department’s contended that Manpreet Estates was a ‘benamidar’ (front) and RKW Developers the ‘beneficial owner.’ In other words, the I-T Department alleged that the listed DHFL had routed loans to a company related to the promoter group through Manpreet. However, a week ago, this claim was shot down by the Appellate Tribunal hearing cases under laws to curb benami transactions and money laundering, among other things. Under the Benami Transactions (Prohibition) Amendment Act which came into effect from November 2016, I-T officials check whether the official owner – on whose name a property, land, or any asset is registered – is also the ‘real owner.’ If not so, they often invoke the new law, which allows them to confiscate property, demand penalty equivalent to a quarter of the market value of the asset, and even put the real owner as well as the benamidar behind bars. But the court ruled that merely because Manpreet was funded by DHFL and DHFL was related to RKW, it cannot be held that the consideration was provided by the alleged beneficial owner (or RKW) particularly, in light of evidence that the loan from DHFL was a genuine transaction and was done at arm’s length, said advocate Ashwani Taneja, a former member of the I-T Appellate Tribunal, who represented Manpreet. With a view to uphold the sale/conveyance deed executed between the parties, support was taken from Sections 91 and 92 of the Indian Evidence Act. (These sections deal with exclusiveness of documentary evidence.) Significantly, sales deeds of the 10 flats were not challenged by tax officials, though the department suspected the sellers were simply dummies acting on instruction of trusted Wadhawan employees.
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SUPREME COURT RULING DOES NOT DISTURB CREDITORS' RIGHTS TO INSOLVENCY PROCEEDINGS, SAYS SAHOO

The Supreme Court's judgement on the RBI circular does not disturb the rights of creditors to insolvency proceedings and would bring in behavioural changes, making creditors more responsible for their actions and inactions, IBBI chief M S Sahoo has said. In view of this judgement, a bank-creditor now needs to ask itself when it should initiate the proceeding and justify itself why it is initiating or not initiating the proceeding in case of a default. This will bring in behavioural changes among the creditors, making them more responsible for their actions and inactions, he told PTI. According to Sahoo, the pressure of non-performing assets has lightened due to behavioural change among debtors and creditors that has been due to the Code. It (the behavioural change) is due to the IBC. Now the debtor knows that if it crosses the red line, it will be in this (insolvency) process and getting under that process means that the company may go out of the hands of promoters forever, he noted.
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RCOM MISSES YET ANOTHER PAYMENT OF SPECTRUM DUES

Reliance Communications missed its second straight spectrum payment, this time of about 281 crore, which fell due on April 5. However, the company is banking on a case in the appellate tribunal to stop the Department of Telecommunications from cancelling its licences and withdrawing the airwaves. RCom has missed its payments for the second time but we will await the court’s order to see if we need to challenge or find any other way of recovering the dues. Our hands are tied till then, a senior DoT official said, asking not to be identified. The official was referring to a dispute between DoT and RCom over spectrum dues, which the National Company Law Appellate Tribunal (NCLAT) is scheduled to hear on Monday.
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PSBS CONTINUE WITH 180-DAY FRAMEWORK TO RESOLVE JET

Public sector banks, led by State Bank of India, have given themselves 180 days to resolve the Jet Airways account even though the time limit has become irrelevant post Supreme Court order that quashed an earlier RBI circular on debt resolution. Official sources in the Finance Ministry said that banks have informed the ministry that they were not ready to wait endlessly to restore health of the beleaguered airline and if attempts to bring in a strategic investor fails or is not completed by June 30, lenders may immediately initiate bankruptcy proceedings against Jet. All attempts are being made to see that Jet Airways does not fail and its operations are maintained albeit on a smaller scale. Banks, including SBI and Punjab National Bank (PNB) have already decided to provide interim funding support of Rs 1,500 crore to Jet, a source in the finance ministry said. Now effort is on to bring in a strategic investor. But if there are no satisfactory bids, banks would not wait anymore and refer the airline to National Company Law Tribunal (NCLT) for resolution, the source added. Meanwhile, the lenders on Saturday invited expression of interest (EoI) from investors looking to pick up majority stake in Jet. The EoI would have to be submitted by April 9. Extensions could be considered, if bids are not satisfactory.
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PLEA AGAINST VALECHA UNIT FOR RS 105-CR DEFAULT

The dedicated bankruptcy court has admitted an insolvency plea filed by India’s third largest private sector lender Axis Bank against Valecha LM Toll, a subsidiary of infrastructure firm Valecha Engineering, for defaulting on about Rs 105-crore loans. Axis Bank had given term loans of Rs 100 crore to the company in November 2010. However, the company was declared a Non Performing Asset (NPA) in November 2016. The lender has annexed the annual report for the year ending March 2017 to show that liability has been admitted by the company and to show that the erosion of substantial net worth raises doubt about the company’s ability to continue as a going concern, said the NCLT bench presided over by VP Singh and Ravikumar Duraisamy. The tribunal has also appointed Udayraj Patwardhan as interim resolution professional (IRP) for the resolution of the company.
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RELIANCE INDUSTRIES DENIES ANY LINK TO $1.2 B MONEY-LAUNDERING CASE IN NETHERLANDS

Dutch investigators last week arrested three former employees of a local firm suspected of laundering $1.2 billion through over-invoicing services and works rendered for a gas pipeline built by a unit controlled by billionaire Mukesh Ambani, a charge vehemently denied by Reliance Industries. According to Cobouw, a Dutch publication, the three suspects were released on Friday, after three days. East West Pipeline Ltd (EWPL), which was previously known as Reliance Gas Transportation Infrastructure Ltd (RGTIL), denied that any money was laundered at any stage during implementation of the project and that higher capital cost of a pipeline would result in higher tariff for users for receiving natural gas through the line. Ambani’s listed firm Reliance Industries, too, denied any link to the pipeline company saying he neither set up any gas pipeline in 2006 nor did it have contracts with any Netherlands company for any gas line.
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ROC FILES PETITION AGAINST MEHUL CHOKSI, GITANJALI DIRECTORS

Diamantaire Mehul Choksi, along with his company Gitanjali Jewellery Retail Ltd and its other directors, face proceedings in a company petition filed by the Registrar of Companies (RoC), Ministry of Corporate Affairs (MCA), for alleged violations involving a gold deposit scheme Over a week ago, a sessions court granted bail to seven company officials, directing them to cooperate with the court in deciding the matter as early as possible. According to the RoC, which has filed the petition through its assistant registrar, Gitanjali Jewellery is a public limited company registered in Maharashtra under the provisions of the Companies Act, 1956. The RoC had issued a notice to the company on October 28, 2014, calling for information on money collected by it from the public under sales promotion schemes called ‘Swarna Mangal and Shagun’. The company, in its reply submitted on December 16, 2014, furnished the total amount collected, year-wise, from 2010 to 2014, claiming that under three separate schemes — Shagun Scheme, Swarna Mangal Labh Scheme and Swarna Mangal Kalash Scheme — a total of over Rs 30.78 crore, Rs 13.24 crore and Rs 15.27 crore was collected, respectively. In another communication to the company, the RoC had sought an explanation as to why the amount accepted from the customers should not be treated as collection of deposits, disallowed under the Companies Act, 2013. According to the RoC, the advertisements and promotion pamphlets of Gitanjali Jewellery show that the company is paying interest on deposits by offering to pay partly monthly instalments on behalf of the depositors, which violates the Act. The RoC had initiated action after the CBI sent an input to the Central Economic Intelligence Bureau in 2014 regarding sales promotion schemes of various jewellery companies, including Gitanjali Jewellery. According to the communication sent by the CBI to the MCA in 2014, under such schemes, jewellery companies invite the general public to pay a fixed sum of money every month for 12 months, at the end of which the additional one or two installments are paid for by the companies. The depositor is then eligible to purchase jewellery from the company at the ruling rate. The net gain to the depositor gets nullified as profit margin/making charges of the jewellery company. The CBI had expressed apprehensions that these operators will one day either run away or declare themselves insolvent, causing the gullible public to suffer. It had alleged that the schemes violate the Companies (Acceptance of Deposits) Rules, 1975, and also claimed that the jewellers are taking advantage of the lacuna in the system, by using the funds for their working capital or to avail loans from banks against the working capital.
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ESSAR STEEL’S COMMITTEE OF CREDITORS SETS UP PANEL TO OVERSEE OPERATIONS, TRANSITION

Essar Steel’s committee of creditors (CoC) has set up a monitoring committee to oversee the operations of the steel firm and ensure smooth transition to ArcelorMittal, the successful resolution applicant. The monitoring committee is headed by resolution professional Satish Gupta and has four members from the lenders and three from ArcelorMittal, a source in the know of the development told. The development comes after the National Company Law Appellate Tribunal (NCLAT) asked the CoC to set up a monitoring committee to oversee the operations of the steel firm and smooth transition to ArcelorMittal.
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RBI YET TO APPROVE LAKSHMI VILAS BANK-IHFL MERGER

Denying reports of it approving the merger of Lakshmi Vilas Bank (LVB) and Indiabulls Housing Finance Ltd (IHFL), the Reserve Bank of India has said that the merger does not have its nod so far and it would examine the proposals once it receives them from the merging entities. The board of Lakshmi Vilas Bank on Friday had approved a scheme of amalgamation with the IHFL. Some media reports cited the presence of two RBI-nominated additional directors on the bank's board as an indirect approval by the apex bank. It is clarified that the merger announcement does not have any approval of the RBI at this stage. It is also clarified that presence of Additional Directors nominated by the RBI on the Board of LVB does not imply any approval of the RBI of the merger proposal, the central bank said in a statement on Saturday. The Additional Directors have clearly mentioned at the meeting that they have no view on the proposal, it said. The RBI statement further noted that it would examine the proposals as per extant regulatory guidelines and directions and when it receives them from the entities concerned.
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NSE CO-LOCATION CASE: 13 MORE TRADING MEMBERS UNDER SEBI SCANNER

SEBI has ordered investigation and forensic audit of 13 more trading members of the National Stock Exchange linked to the co-location scam at exchange. This is in addition to the ongoing probe against nine other trading members initiated by the market regulator earlier. The investigation / examination by SEBI / NSE are in progress and appropriate proceedings would be initiated upon completion of this. In addition to nine trading members, since forensic auditors indicated that there were other trading members who had also connected to ‘secondary server’, SEBI has commenced separate comprehensive investigation / forensic audit of 13 additional trading members for having substantial ‘secondary server’ connects to ascertain any specific violation on account of such connection, SEBI said. SEBI has also told the Ministry that it has put on hold 19 applications for settlement of the case following directions from the Madras High Court, which had asked the regulator not to process or pass orders under the consent application submitted by the NSE. Under SEBI’s consent settlement, wrong doers can get away by paying penalty without admission or denial of guilt. SEBI has show caused 14 NSE officials. While 13 filed for consent, one former technology official contested the allegations as he said he had joined the exchange only after the alleged scam happened. Co-location was first highlighted by a whistle-blower in 2015. SEBI’s letter to the Ministry also says that it has asked NSE to carry out detailed examination, initiate action and submit a report in a time bound manner with respect to remaining trading members who had any connection to the secondary server. SEBI has told the Ministry that it has so far took taken action against three trading members and issued administrative warning to six in the matter.
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MUTUAL FUNDS COLLECT RS 8,055 CRORE VIA SIP IN MARCH

Mutual funds witnessed inflows worth Rs 8,055.35 crore via SIP in March, 13 per cent higher on year-on-year basis. We have always seen an uptrend in SIP numbers. Though a month-on-month basis the collections have fallen but that is very marginal. We do not see any slowdown in opening of SIP accounts. Three lakh fresh SIP accounts have been opened in the month, said N.S. Venkatesh. SIP accounts for March stood at 2.62 crore vis-a-vis 2.11 crore for the same month last year. Data released by Amfi shows that month-end assets under management (AUM) for March were Rs 23.80 lakh crore. Average AUM or AAUM stood at Rs 24.58 lakh crore. Overall AUM has grown by 11 per cent and the retail AUM has also shown growth of 16 per cent Y-o-Y. Given the market volatility has come down a little bit, market has shown uptrend and easing of border tensions have helped mutual fund inflows. Mutual Funds are mirroring the trend, said Venkatesh. Retail AUM for March stood at Rs 10.73 lakh crore, higher than February AUM of Rs 10.01 lakh crore. ELSS or tax-saving funds saw inflows of Rs 2,742 crore. Income funds have shown a reversal in trend. Income funds received net inflows of Rs 13,856 crore in March compared to outflows of Rs 4,200 crore in February.
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WHILE OTHER EQUITY FUNDRAISING AVENUES DRIED UP IN FY18, OFS ISSUES STOOD OUT

In fiscal year 2019, equity fundraising activity fell to about a fourth of the levels in the previous year. Initial public offerings (IPOs) and qualified institutional placements fell more than 80% in value terms. However, there was one equity fundraising product that stood out, the offer-for-sale (OFS) route that company promoters can use to sell shares. As much as 11,000 crore was raised in the last quarter, when the broader markets were in an upswing. These secondary-market sales are being carried out to comply with the new listing norms, which stipulate that listed stocks should have a minimum 25% public shareholding. The recent Prudential Corporation Holdings Ltd sale of a 3.7% stake in ICICI Prudential Life Insurance Co. Ltd was aimed at reducing its promoter holding to below 75%. Besides, the government has utilized the OFS route to carry through its divestment programme in some cases. Till recently, the OFS route was available only to the top 200 companies (by market capitalization). In December 2018, however, the Securities and Exchange Board of India eased the rules. Companies with a market capitalization of more than 1,000 crore can now use the route. This was done to enable smaller public sector firms to raise funds through this window.
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‘PSB RECAPITALISATION AND RESOLUTION OF STRESSED ASSETS UNDER IBC TO IMPROVE BANK CREDIT OFFTAKE’

Recapitalisation of public sector banks (PSBs), the ongoing improvement in their financials, and resolution of stressed assets under the Insolvency and Bankruptcy Code are expected to improve bank credit offtake, according to Reserve Bank of India’s latest monetary policy report. This is also expected to support investment and aggregate demand in the economy, the report said. On February 20, the government had approved 48,239-crore capital infusion into 12 PSBs. In response to the 25 basis point (bps) reduction in the policy repo rate on February 7, some banks have reduced their lending rates under the marginal cost of funds-based lending rate (MCLR) system. One basis point equals one-hundredth of a percentage point. Following the reduction in policy rate by 25 bps in February, 38 banks have reduced their one-year MCLR so far (till March-end 2019) in the range of 1-106 bps. However, 24 banks, mostly foreign lenders, increased their MCLRs in the range of 5-113 bps during the same period, the report said. While the median term deposit rate (all maturities) of banks declined by 3 basis points, the one-year median MCLR declined by 5 bps during the easing phase so far. The year-on-year (y-o-y) growth was higher at 14.4 per cent (up to March 15, 2019) from 11 per cent a year ago. Of the incremental credit extended by scheduled commercial banks as on March 15, 47.4 per cent was provided by PSBs, 48.9 per cent by private sector banks, and 3.7 per cent by foreign banks. The report said incremental credit flows are also getting increasingly broad-based, with services accounting for the highest share (at 45 per cent in February 2019 against 35 per cent in February 2018), against personal loans (at 31.9 per cent in February 2019 against 48.2 per cent in February 2018). Credit growth to industry, which turned positive in November 2017 after more than a year-long contraction, improved to 15.2 per cent in February 2019 against 4 per cent in February 2018. The share of credit to agriculture, however, moderated to 7.90 per cent in February 2019 against 12.8 per cent in February 2018.
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VIDEOCON GROUP OWES OVER 85,000 CR TO BANKS, VENDORS

In what could become the largest corporate bankruptcy case in the country, Venugopal Dhoot-promoted Videocon Group and its entities owes in excess of 85,000 crore to banks its vendors and even its employees. The company, which is going through the insolvency process, owes its financial creditors that are mostly public sector banks a total of 57,443 crore. It owes the maximum to SBI of around 11,175 crore, followed by IDBI Bank 9,561 crore. Operational claims filed by Videocon Industries include payments of 2,151 crore to 704 vendors, which includes the likes of Samsung, NEC and others. A sum of 3 crore is under reconciliation, the filings showed. Videocon Telecom, a subsidiary, owes as a part of financial claims a whopping 24,302 crore to banks and other financial institutions. Videocon Telecom owes the maximum to SBI to the tune of 4,408 crore, according to the disclosures made by the resolution professional. Central Bank of India is the second biggest claimant with 3,073.16 crore. Further, Videocon owes its employees around 2.1 crore, through salaries and other emoluments. Interestingly, Videocon Industries owes 1,786 crore to Videocon Telecom, its subsidiary. Additionally, claims received from another 73 employees are under review.
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PIYUSH GOYAL TAKES ON RBI FOR LOWERING ECONOMIC GROWTH

Piyush Goyal asked the Reserve Bank of India on Friday to introspect its role in pulling down the country’s projected economic growth for 2019-20 to 7.2 per cent from the earlier forecast of 7.4 per cent. The economy rose 7 per cent in 2018-19, the lowest growth in the five-year term of the Narendra Modi-led government. Goyal, who held the post of finance minister when Arun Jaitley was undergoing treatment, was speaking at the Confederation of Indian Industry’s annual session. All stakeholders, including the RBI, should introspect on their respective roles (on low economic growth), he said, adding the RBI could have taken certain steps differently over a period of time. Goyal said he was glad that now the RBI was recognising growth as much as inflation. (I am) glad that RBI has lowered rates. Lower inflation will help India become more competitive and infuse more liquidity. Arvind Panagariya, said, Given our level of inflation, personally, I would have done 50 basis points (cut), because, somehow, these 25 basis points cuts get lost and pass through happens with 50 basis points (reduction). He said central banks like to be conservative either way — if they raise, they raise by 25 basis points, and if they cut, they cut by 25 basis points. On jobs, Goyal said the nature of employment was changing as more people were working on contractual basis. He said one should benchmark more on ‘livelihood creation’ compared to conventional jobs and warned that any doles would lead to under-reporting of income. Goyal also said capturing authentic data on jobs would become a challenge and hinder formalisation of economy. Suggesting that the country should rather look at its own policies than slowing down global trade, Panagariya said India's share was just 1.7 per cent in global merchandise trade. If global trade was to rise to $20 trillion from $7 trillion over the years, but it rises to $18 trillion or $16 trillion, India can more than make up by raising its share to 3 per cent in global trade. But that would require conducive domestic policies, he said. Panagariya suggested India should explore the possibility of a free-trade agreement (FTA) with the US. With the US being such an important strategic partner, one area where we can explore an FTA agreement is services. He said the ministry of statistics and programme implementation (Mospi) released a 40-page document about the methodology along with figures. If there is a genuine problem with the methodology, the government would itself be happy to (respond to) questions on the quality of data, he said.
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RBI TO SET UP REGULATORY SANDBOX FOR FINTECH FIRMS

Recently, RBI governor Shaktikanta Das said the central bank will set up a regulatory sandbox for which guidelines will be issued in two months. The aim is to have appropriate regulatory and supervisory frameworks to ensure an orderly development of fintech, to streamline their influence into the financial system, to protect customers and safeguard the interest of all stakeholders. RBI’S working group on fintech and digital banking suggested the introduction of a ‘regulatory sandbox or innovation hub’ within a well-defined space and duration to experiment with fintech solutions. There are a number of sandbox models globally. London and Singapore comes to be the closest. As for India, the sandbox model is for the regulator, said Vivek Belgavi. It means if I am a financial services company such as a fintech or a bank and I want to test out a product or process I can do it through this. Say I want to do digital onboarding and use video and other options to check the authentic instead of in-person verification. And I want to check with the regulator if this model will be acceptable then sandbox is the place where I will show this method, he said. RBI is not the first to consider regulatory sandbox. The Insurance Regulatory and Development Authority of India (IRDAI) has also mulled letting firms test products as part of its sandbox approach to test digital and tech-based innovations before launching them in the market.
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‘MF ASSETS GROWTH SLOWEST IN SEVEN YEARS’

The recently-ended financial year 2018-19 saw mutual fund assets growing at the slowest pace in seven years as debt funds, which constitute a major portion of the overall assets under management (AUM) of the industry, saw huge outflows. According to a latest analysis by Crisil, the total AUM rose 6% to touch 24.51 lakh crore in the fiscal, even as debt funds saw total outflows of 1.38 lakh crore between April 2018 and February 2019. Debt funds, which account for nearly 45% of the total assets, managed to recoup some of the losses of the previous quarter, and were up 2.3% or 24,500 crore, to 11.08 lakh crore in the March quarter. In percentage terms, assets of money market, banking and PSU, and ultra-short duration funds, grew in double digits — around 20%, 19% and 15%, respectively. In absolute terms, liquid funds topped the chart with a gain of 14,500 crore in the AUM. Meanwhile, the average AUM of the mutual fund industry rose 3.6% in the fourth quarter of the fiscal to 24.51 lakh crore as against a fall of 2.8% in the preceding quarter. Supported by investor interest in equity mutual funds in the form of lump sum and systematic investment plans (SIP), the category’s average assets rose nearly 6%, or by 36,000 crore to 6.58 lakh crore in the latest quarter. On a consolidated basis, their AUM — 63% of the total equity average AUM — rose by 23,400 crore during the quarter.
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INDIA'S CASH CRUNCH IS WEIGHING ON FINANCIAL HEALTH OF COMPANIES

India's cash crunch is taking its toll on the health of companies and risks inflicting further financial damage, after the credit profile of local firms deteriorated at the fastest pace in six years. There were two issuer rating downgrades for every upgrade in the first three months of 2019, the worst ratio for any first quarter since at least 2013. Lower ratings force borrowers to pay more for money in debt markets. The Reserve Bank of India on Thursday cut interest rates for a second time this year, citing economic headwinds. Policy makers have struggled to guide financing costs lower for companies. Creditors remain wary after the collapse last year of non-bank lender Infrastructure Leasing & Financial Services Ltd. added to bad loan problems. That's a challenge for Prime Minister Narendra Modi who is trying to get the economy back on steadier footing as national elections kick off this week. Care Ratings Ltd downgraded more companies than it upgraded for the first time in six years in the 12-month period through March 31. The worsening can largely be attributed to the liquidity crunch and decline in operating profits, Care said in a report. As the central bank tries to get more money flowing through the financial system, it has embarked on its most aggressive monetary policy easing in more than three years. On Thursday it said it will set up a task force to explore the development of the secondary market for corporate loans. The RBI also injected additional funds into the banking system last month to boost liquidity through a rare currency swap. The cash crunch is a concern for regulators too who are trying to step up liquidity, according to Rajesh Mokashi.
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EMPLOYEE UNION OPPOSES MERGER OF LAKSHMI VILAS BANK WITH INDIABULLS

All India Bank Employees Association (AIBEA) has opposed the proposed merger of Lakshmi Vilas Bank with Indiabulls Housing Finance Ltd. The association urged the Reserve Bank of India (RBI) not to give nod for the merger. While RBI clarified that the Board has unanimously approved the resolution, the RBI nominee directors, as is the practice at the bank, did not have to participate in the voting or express any views. But the union said that the two nominee directors of RBI on the board of the bank were also present in the board meeting and the board's decision has been taken unanimously thereby implying that the proposal has the tacit approval of the RBI. LVB may be a private Bank but the deposits in  Bank (around Rs 30,000 crore) belongs to the people at large and is public money, said C H Venkatachalam. The union further alleged it (the merger) is obviously a short-circuit method by Indiabulls Housing Finance Ltd and manage to become a bank through this method. Taking into account the fragile health of Lakshmi Vilas Bank Ltd, it is necessary for RBI to take a holistic view and merge it with one of the public sector Banks in public interest instead of allowing LVB to merge with IBH, said the union. There is no need at this juncture to go into the scenario of various private sector banks in our country after the recent ICICI Bank episode.  But it is important to keep a very close watch on the affairs of these private banks who deal with substantial savings of the people at large. We urge upon you to bestow your personal attention in this regard and not allow things to happen in a hurry by permitting the merger, said Venkatachalam.
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PNB'S STAKE SALE IN HOUSING FINANCE ARM 'CREDIT POSITIVE': MOODY'S

The sale of Punjab National Bank's 13 per cent stake in PNB Housing Finance is credit positive as it will strengthen the bank's capital, Moody's said Monday. Last month state-run Punjab National Bank announced that it will sell 13 per cent stake in PNB Housing Finance for Rs 1,850 crore (USD 270 million) to global private equity firm General Atlantic Group and alternative investment firm Varde Partners. Upon completion of the sale, PNB will retain a 19.8 per cent stake in PNB Housing Finance worth around Rs 3,000 crore (USD 440 million). Moody's estimates that a sale of the remaining stake at a valuation similar to the current deal would increase PNB's CET1 ratio by approximately 70 basis points.
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PROMOTERS SHOULD DISPLAY PROJECT DETAILS ON WEBSITE: RERA

The Telangana State Real Estate Regulatory Authority (RERA) directed the registered promoters to update the quarterly progress of their respective projects to facilitate the buyers track the progress. The module to update the quarterly progress is live on the RERA website. This apart, the promoters and builders are directed to prominently display the RERA website and respective project registration number in the advertisement or prospectus to be issued to buyers. The promoters, builders and developers were also directed not to sell, advertise or market any real estate project which is not registered with RERA. Similarly, RERA also instructed the real estate agents not to facilitate the sale or purchase of plots, apartments and buildings of unregistered projects. Agents or promoters will be liable for penalty, if they violate the said rules,
RERA officials said.
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BIG BANKS TO REPORT FIRST-QUARTER RESULTS WITH LOWERED EXPECTATIONS

Investors will focus on falling profits a more dovish Federal Reserve and lower interest rates as major US banks kick off what analysts expect to be the first quarter of contracting corporate earnings since 2016. On Friday, April 12, JPMorgan Chase & Co and Wells Fargo & Co will post results to begin the earnings season in earnest Citigroup Inc and Goldman Sachs Group Inc will report the following Monday, followed by Bank of America Corp and Morgan Stanley on Tuesday. In the wake of the Federal Reserve's cautious shift due to signs of softness in the US economy and the subsequent drop in 10-year Treasury yields, S&P 500 banks are seen posting year-on-year first-quarter earnings growth of 2.3 per cent, down from 8.2 per cent forecast six months ago, according to Refinitiv data. The Fed pivoted so abruptly, which gives one pause about what they're saying about the economy, said Chuck Carlson. Flat to falling interest rates are not good news for bank interest margins. It's not surprising that analysts are taking down earnings estimates. The benchmark bond's yield hit a 15-month low in the first quarter, flattening the yield curve and narrowing the gap between the interest banks pay depositors and the interest they charge consumers, which is bad news for profits. In the first three months of the year, the S&P 500 bounced back from a sell-off in December, gaining 13.1 per cent, its biggest quarterly increase since 2009. But financials underperformed the wider market, gaining 7.9 per cent in the quarter as the new low-interest-rate normal that boosted other sectors was a headwind for banks. But some analysts believe the effects on banks of a more accommodative Fed and the flattened yield curve are overstated. Recent history shows that large US financial institutions have beat analyst estimates at a higher rate than the broader market. In the eight most recent quarters, the six banks have beat earnings estimates 83.3 per cent of the time on average, compared with the S&P 500's 75.4 per cent average beat rate. Additionally, bank revenues surprised to the upside 79.2 per cent of the time, while S&P 500 company revenues came in ahead of analyst estimates 68.3 per cent of the time, per Refinitiv data.
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GOVT AGENCIES MUST CREATE AN IDEAL START-UP MILIEU, SAYS TELECOM SECRETARY

The role of administration is critical in building a favourable start-up milieu according to Aruna Sundararajan. Maintaining global yardsticks will be a key challenge start-ups will face in future. They won’t be able to achieve the desired results without the government creating ideal ecosystems, she said. She said a system that integrated talent, market, entrepreneurship, industry relations and investment possibilities is needed. India has the greatest pool of start-ups; the general outlook is optimistic. Entrepreneurs are coming up by overcoming difficult situations, she added.
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CEOS, INDEPENDENT DIRECTORS HOLD KEY TO GOOD CORPORATE GOVERNANCE: NARAYANA MURTHY

Narayana Murthy on Saturday stressed the role of independent directors and CEOs in ensuring good corporate governance According to Murthy, good governance is about representing shareholders faithfully and increasing shareholder value legally and ethically. Good governance is about enhancing the reputation of the corporation It involves understanding the risks involved in every function and mitigating them through debates and discussions, Murthy said. It also entails holding the management responsible to be fair, honest, transparent and accountable to every stakeholder of the company. The CEO of the organisation should understand the nuances of industry and intricacies of the business model. The CEO should not put pressure on Board to obtain disproportionate direct or indirect advantage for himself or herself or his or her family, friends and cronies to the exclusion of fair compensation for other employees, he said. He emphasised that a CEO should be ever ready to question deeply and seek the truth It is about disagreeing without being disagreeable on the boardroom, he said. Talking about the role of an independent director, he said, the accountability of an independent director is only to his shareholders and the regulators. Shareholders have every right to ask questions and you have to be transparent. But you cannot be party to selective disclosure to just any group of shareholders, including the founders, he said. Emphasising the role the government should play in enhancing business environment thereby creating jobs, he said, that the government should be an impartial regulator. The government should resist the temptation to get into or stay in a business, he said. Jish desh mein sarkar byapari hota hai us desh mein log bhikari ho jate hain (In a country where the government gets into business, there the citizens turn into beggars
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INDIA GOVERNMENT HAD NO OUTSTANDING LOANS FROM RBI IN MARCH 29 WEEK

India’s government had no outstanding loans with the Reserve Bank of India (RBI) under ways and means advances in the week ended March 29, according to the central bank’s weekly statistical supplement released on Friday. State governments had 100 million rupees ($1.44 million) loans from the RBI in the week ended March 29, compared with 5.25 billion rupees in the previous week, the release showed.
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TATA STEEL POSTS RECORD INDIAN OUTPUT AFTER BHUSHAN PURCHASE

Tata Steel Ltd.’s Indian steel output rose to a record in its latest financial year thanks to its 2018 acquisition of Bhushan Steel Ltd. assets, potentially making Tata the country’s biggest producer. Production rose 35% to 16.79 million tons in the year ended March 31, as Bhushan Steel added 4.2 million tons to output, the Mumbai-based company said in a statement Saturday. Tata’s volumes are a tad higher than the 16.75 million tons targeted by JSW Steel Ltd., which was India’s biggest steel mill in the previous fiscal year. JSW has yet to release its final number for the latest 12 month period. Tata Steel has been shifting its focus to India, where demand is growing due to a government-led emphasis on building new infrastructure. The state-run Steel Authority of India Ltd. also reported a record production of 16.3 million tons earlier this week. However, steel production at Tata’s Europe division fell 3.7 percent to 10.3 million tons during the 12 months to March, the company said. The European Commission is reviewing a plan by Tata to merge its European operations with those of Thyssenkrupp AG.L.P.
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'BURDEN' FOR COLLATERAL MANAGEMENT COS WORKING ON RENTED WAREHOUSE MODEL

The government has brought warehouses under Goods and Service Tax net from April. However, those players in organised sector who take warehouses on rent as part of their collateral management business, see a huge burden especially when they deal in agri commodities. Agri commodities collateral management business has flourished in last few years as these companies help farmers and processors to get finance from banks and non-banking institutions. They have to pay now 18 per cent GST on rent they pay for warehouses in which they keep collateral commodities. In many cases they themselves finance farmers or their group NBFCs finance them against collateral commodities. Hence these collateral management companies cannot get the input credit of GST they pay on rent because the commodities in which they deal are agri commodities which are not attracting GST. This is a big burden on them. If the agri commodities are fully exempt from GST, all products and services linked to this should have been exempted. The entire channel either needs to be taxed or exempted. We, therefore, consider the current structure of GST levy as an element of business risk. We provide a variety of services to our customers in a package which help us make even a small segment of our business viable, said Ramesh Doraiswami, Managing Director, National Bulk Handling Corporation (NBHC). Smaller warehouses with annual rent income of below Rs.20 lakh are however exempted from GST. This is a major relief as, according to CARE research report, approximately 90 per cent of the warehousing space controlled by unorganized sector players and are less than 10,000 square feet. But this causes another problem when their services are used by collateral management services companies. To address this issue, many players in warehousing sector, meanwhile, have also started focusing on innovative technology to monitor entire logistic issues to avoid demurrage and also the delay in loading and unloading to cut down their cost of warehousing and transportation. In a bid to bring about automation into the entire supply chain model enabling everyone to have direct access to the dashboards that can be customized as per the business needs. The whole objective is to transform how transportation currently done by corporate and shippers in the country. Transport Hub provides end to end solutions from picking the goods by the shipper to delivering the goods, tyre management, fuel management amongst others. This customized technology saves the cost of transportation immensely, said Rohit Chaturvedi.
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INDIA'S ECONOMIC GROWTH DRIVEN BY DOMESTIC DEMAND, NEED TO FOCUS ON EXPORTS: WORLD BANK

India's economic growth in recent years has been too much driven by domestic demand and its exports were about one third of its potential, a World Bank official said, asserting that the next government needs to focus on export-led growth. Praising attempts to liberalize markets within India, Hans Timmer, World Bank Chief Economist for the South Asia Region said that is what is needed to become more competitive. At the same time you've seen also of the last couple of years that the current account deficit widened - an indication that increasingly growth came from the non-tradable sector -- from the domestic sector, and that makes it difficult to export more, Timmer told. The polling for first phase of seven-phase parliamentary polls in the country is scheduled to take place on April 11, with the last phase on May 19 and the results will be announced on May 23. In the last five years, he said, India's overall growth was too much driven by domestic demand, which resulted in double digit growth of imports, and four to five per cent growth in exports. The pluses were that we have seen the GST trying to create more flexibility within the country, so that it's easier to trade between states. That's what you need if you want to trade also with foreign countries, he said. Responding to a question, the World bank official said the focus of the next government should be on reducing the stimulus of domestic demand. According to him, friction between India and Pakistan is unhelpful to the trade and economic growth in the region. The lack of regional integration is not the main course of the under performance in exports. And that's often the assumption. When people look at South Asia, immediately the problem of very limited regional integration jumps up, he said.
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FLIPKART IS READY WITH THE TECH STACK TO START LENDING

Walmart-owned Indian ecommerce giant Flipkart is working on a video Know Your Customer (KYC) solution to offer instant credit to customers who buy through its platform, after Aadhaar-based eKYC for private entities was struck down by the Supreme Court last year. Flipkart, whose plans to enter into digital financial services had been in a limbo for some time, had worked with smaller fintech partners to enable ‘cardless credit’ and checkout finance. However, it now plans to start lending again and underwrite customers to create a preapproved line of credit. I think applying for an NBFC licence is a natural progression to enable credit for our customers and we’re committed to moving in that direction, said Ranjith Boyanapalli, without actually specifying whether it had applied for a non-banking finance company licence from the Reserve Bank of India. Flipkart has started a pilot project for digital KYC with almost 10,000 customers. It will offer the service to more customers in the coming weeks, pending approvals from the RBI. It’s still on a pilot basis for which we’ve opened it up to 10,000 users only, but in two to three weeks we should roll it out to the larger customer base on Flipkart, said Suyash Motarwar. We have received an in-principle approval from the RBI and our lending partners are working very closely with the RBI to ensure we are compliant. Flipkart’s push for an alternative to eKYC comes at a time when it wants to ramp up lending, mostly in a digital format. The company says it has already lent to 1.2 million customers through partners, and is looking to perfect its proprietary credit underwriting model that will largely utilise own customer data. We’re using data points from our platform and outside to act as a proxy for this information, allowing us to give you credit without actually having a credit history, Motarwar said. The company is tracking 500 to 1,000 data points to gauge a customer’s ability and intent to repay loans, crucial factors to check delinquency. Kissht, which offers cardless EMIs to Flipkart customers, and ZestMoney, which offers EMI purchases during online transactions, are two of its major fintech partners.
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SIX OFFENSIVE POSTS ON SOCIAL MEDIA IN TRASH BIN

Takedown of ‘objectionable’ poll campaign content by social media platforms has started, with six items removed so far by platforms like Twitter and Facebook. Posts taken down include both ‘indecent’ and ‘violent’ content, people familiar with the process said. The first phase of polling is on April 11, and the 48-hour silent period before voting comes into place on Monday. Twitter took down two posts — one about the indelible ink used in the elections and the other, an unverified piece of information about electronic voting machines or EVMs. The two posts, officials add, were taken down in less than four hours and less than seven hours, respectively. Similarly, of the five requests EC made to Facebook, the social network had taken down four, while it was yet to take down one. These requests, officials added, were taken down in about five hours. Another post concerned a violent image targeting Karnataka CM and Janata Dal (Secular) leader HD Kumaraswamy. It had a picture of a sword, a head being removed, and blood coming out, the EC official added. That post, sources said, was also removed by Facebook. According to the voluntary code of conduct, social media platforms have to take down the reported content within an outer limit of 3 hours in the 48-hour period before polling as per the recommendations of the Sinha Committee in January 2019. As elections progress, officials said, many more takedowns could happen.
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FACEBOOK DOES PHYSICAL VERIFICATION OF AN INDIAN USER FOR A POST

Facebook, already facing the election heat in India, is busy doing something never heard of: Sending its representatives to users' home to verify if the post with political content was actually written by them. IANS has contacted one such Facebook user in New Delhi who was recently visited by a Facebook representative for the verification process related to the content the user had posted. It was like cops come to your door for passport verification. The Facebook representative asked me to prove my credentials by asking for my Aadhaar card and other documents to understand if I am the one who had posted the political content, the person, who did not wish to be named, told IANS. The user was left stunned to see a Facebook representative landing at his home for inquiring about just a post. It was a shocker for me. How come a social media platform do that to a user? What about a user's privacy? I have never heard of any such incident anywhere. Was this at the behest of the government? asked the user IANS sent a couple of mails to Facebook for their version on this but to no avail. 




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