source Business standard *payment banks* But they will have to come back to India permanently BS REPORTER Mumbai, 1 January The Reserve Bank of India (RBI) has extended the deadline for submitting applications for small finance banks and payment banks to February 2 against the earlier January 16. The central bank also issued detailed clarifications on the guidelines for these two types of banks based on questions received from prospective applicants. RBI said non- resident Indians ( NRIs) can apply for payment and small finance banks provided they “ return ( to India) for good”. This means individuals like Vikram Pandit, former Citibank chief, can be a promoter only if he comes back to the country permanently. Otherwise, he has to remain just a minority shareholder. Pandit, according to media reports, was planning to set up a payment or a small bank in association with JM Group. However, payment banks are barred from taking deposits from NRIs. In- bound remittances into accounts maintained by residents with a payment bank will be treated as deposits. According to the regulator, there are no restrictions on payment and small banks from sharing the infrastructure of the parent promoter or promoter group entities, provided there is an agreement to do so at an arms length and suitable firewalls are built in, customer confidentiality is maintained and risk mitigation measures are put in place. The regulator has also allowed a promoter to set up asmall finance bank as well as a payment bank, provided the nonoperative financial holding company ( NOFHC) is the same. “The guidelines indicate that if a promoter, setting up a small finance bank, desires to set up a payment bank, it should set up both types of banks under a NOFHC structure. Otherwise, there is no requirement for the small finance banks to have holding company structure,” said RBI. RBI has received 176 and 144 queries from individuals and organisations relating to small finance banks and payment banks, respectively, till December 15. For small finance bank licences, RBI will give preference to those applicants who set up the bank in a cluster of under- banked states and districts, such as in the North- East, East and Central regions of the country. “ Other forms of presence such as satellite offices and mobile branches are not considered as full- fledged branches under the requirement to have 25 per cent branches in the unbanked rural centres,” said RBI. The regulator also said there is no such stipulation regarding an ideal number of branches a small finance bank shall have to be eligible for the license. There is also no cap on the number of licences proposed to be issued for small finance banks and payment banks. At the time of making applications for payment banks and small finance banks, the promoters or promoter group will have to furnish a plan and methodology to comply with all the requirements of the guidelines within 18 months from the date of in- principle approval or as on the date of commencement of operations, whichever is earlier. BANKABLE Payments bank’s primary focus has to be domestic payments Independent KYC checks of customers by payments bank promoted by telecom operator Payment banks can offer locker and vault services Payments bank can be business correspondent ( BC) for as many commercial banks Promoter group can work as BC of payment bank on arms length basis Payment banks are barred from taking deposits from NRIs. In- bound remittances into accounts maintained by residents with a payment bank will be treated as deposits *Municipal bond regime might require changes in the Companies Act* SACHIN P MAMPATTA Mumbai, 1 January The Securities and Exchange Board of India ( Sebi)’ s move to introduce a municipal bond framework might need changes in the Companies Act. The regulator is planning to allow debt- raising under a proposed framework for municipal bonds. The new framework will allow bodies governing urban areas to raise debt to meet expenses. Such money will have to have adefinite end- use and cannot be deployed elsewhere, said a concept paper that the regulator put out on Tuesday. “The proceeds of the proposed issue shall be clearly earmarked for a defined project or a set of projects. The funds raised from issue of municipal bonds shall be used only for the projects that are specified under objects in the offer document,” it said. The move is based on recommendations from the Corporate Bonds and Securitization Advisory Committee. “For effective implementation of the proposed framework, some consequential amendments may be required to be made to the Companies Act, 2013 and the rules made there under to enable raising of funds by corporate municipal entity through issue of debt securities under the proposed framework,” the paper said. The Companies Act has specified certain conditions for listing and trading of debt securities. These include having aboard of directors where one- third of the members are independent; and having to comply with disclosure requirements. The regulator might also allow for increased rates on tax free bonds that municipal bodies issue. “In India, the guidelines issued by the ministry of urban development for issuance of tax- free bonds by municipal bodies provides that only those with an interest rate up to maximum eight per cent per annum shall be eligible for notification by the Central Board of Direct Taxes. A fixed rate of eight per cent, in the prevailing scenario is too little to attract investors to municipal bonds and therefore, there might be flexibility in setting interest rate cap by linking it to a benchmark market rate,” it said. The regulator’s framework is to allow fund raising by municipal bodies to meet their expenses in the face of growing urbanisation. “The steering committee on urban development for the XIth five- year plan ( 20072012), has estimated that total fund requirement for implementation of the Plan target in respect to urban water supply, sewerage and sanitation, drainage and solid waste management is ₹ 12.7 lakh crore,” said the note from the regulator. The Union government has been looking at providing for urbanisation in its annual budget. “As the fruits of development reach an increasingly large number of people, the pace of migration from the rural areas to the cities is increasing. A neo middle class is emerging, which has the aspiration of better living standards. Unless new cities are developed to accommodate the burgeoning number of people, the existing cities would soon become unlivable,” said the latest budget speech quoted in the concept paper. “The prime minister has a vision of developing one hundred Smart Cities, as satellite towns of larger cities and by modernising the existing mid- sized cities. To provide the necessary focus to this critical activity, I have provided asum of ₹ 7,060 crore in the current fiscal,” the finance ministry had added. The regulator has asked for public comments on the new framework. The last date for sending feedback is January 30. Sebi issues concept paper, feedback by January- end Companies Act The Acthas a number of requirements for listing and trading of debt securities Includes having a board of directors with one- third independent members and disclosure requirements Sebi headquarters BS FILE PHOTO *Sebi to revitalise primary market with electronic IPOs in new year* PRESS TRUST OF INDIA New Delhi, 1 January To revitalise the market, the Securities and Exchange Board of India ( Sebi) will soon notify new norms to sell shares through electronic Initial Public Offers ( e- IPOs) Manipulators could face stronger action in the new year, with tougher norms being finalised for insider trading. Beside, Sebi is looking to herald the best global standards on corporate governance practices of the listed companies. The listing agreement signed by the companies with stock exchanges would be converted into listing regulations for better enforcement of the norms. New measures are also on anvil to revive the bond market and soon Sebi would come out with final norms for listing and trading of municipal bonds with an aim to channelise household investments for infrastructure building and contribute to the Prime Minister Narendra Modis Smart Cities programme. A keenly awaited move from Sebi in the new year would be an e- IPO mechanism, through which investment in public offerings can be done online without signing any physical documents. E- IPOs will help fast- track the public offer process and lower the costs, besides allowing investors to apply for shares and buy these at a click on computers without the need for signature on bulky physical documents. Currently, applications for IPOs can be uploaded on a realtime basis only through Asba (application supported by blocked amount). Only selfcertified syndicate banks are authorised to manage and offer Asba, which allows application money to stay in an investors bank account until the shares are allotted. The board of Sebi had already approved a proposal to use secondary market infrastructure for public issuance called e- IPOs and revamping insider trading norms to prevent the menace. Sebi, will soon notify relations for selling shares through e- IPO, sources said. This will faciliate more retail investors in IPOs and the issuance process is likely to undergo a sea change, resulting in reduction in timelines, they added. At present, the time taken for a company to get listed after initial share sale is around 12 days. Sebi might reduce the post issue timelines from T+ 12 days ( 12 days from issue closure to listing and trading) to T+ 6 days. Once the process gets stabilised, timelines could be further curtailed to T+ 2/ 3 days, the sources said. Despite a stable government coming into power and the resultant buoyant secondary market, fund raising through IPO was just ₹ 1,528 crore in 2014. Besides, only six mainboard IPOs came to the market. The entire year saw just one follow- on offer. This was by state- run Engineers India Ltd ( EIL), which also happens to be the biggest public offer with an issue size of ₹ 495 crore. The year, however, witnessed aflurry of activity on the small and medium enterprise (SME) platform. There were as many as 40 SME IPOs, which collected a total of ₹ 267 crore. Clauses on land return, action against officials diluted NITIN SETHI New Delhi, 1 January The National Democratic Alliance ( NDA) government’s land ordinance, approved by the President on Wednesday, has made several amendments to the original law rather quietly. Changes in the retrospective clause of the Bill are important but did not attract enough attention when the ordinance was approved by the Cabinet. In the original 2013 law, if compensation had not been paid for over five years to landowners or the land had not been taken over by the government within five years, the owners had the right to claim the land back. The NDA government has amended this. Now, if the possession of land has been taken by the government agency within five years, this retrospective clause would not apply as long as the government agency acquiring the land had deposited the compensation account in courts or any account maintained for the purpose. A recent Supreme Court order had clarified that this period of five years for triggering the retrospective clause included any period where the land acquisition got stuck in litigation. But the ordinance has blunted this. It has now said if the acquisition proceedings were held up because of any stay or injunctions by any courts, then that period of litigation would not count towards calculating the fiveyear period. The NDA government has also done away with the strict provisions that required action being taken against government officials for falling foul of the law. The 2013 law provided that where an offence had been committed by any department of the government, the head of the department would be deemed to be guilty. The official can escape if he can prove the offence was committed without his knowledge and he had exercised all due diligence. But this provision of the law has been replaced. The new one says no courtcan take cognisance of anycrime committed by officials under the land acquisition Act, without the prior approval of the state concerned or the central government. This is the stock provision in most other laws concerning actions of government officials. The 2013 land Act had tried to hold government officers responsible for their actions, but this has now been done away with. And the government has reverted to providing the typical safety latch maintained under other laws while prosecuting government funcationaries. The government has also loosened the provision that required unused acquired lands be returned to the original owners. The 2013 legislation had provided that the land be returned ifitremained unused for the original purpose for five years. The ordinance now has amended the original law. If the government has fixed a time period for the setting up of a project and the land remained unused for this entire period, the land need not be returned to the original owner, even if such project periods are longer than five years. On the day the Cabinet had cleared the amendments, the government had announced other big- ticket changes, including keeping infrastructure and social infrastructure projects out of the ambit of social impact assessment and the need for consent from land owners. These projects included those in the privatepublicpartnership mode. The list of the category of projects that fall within the government’s definition of “infrastructure” and “ social infrastructure” are listed in the table with this story. It is an exhaustive list that includes high- end hotels, hospitals, ports, special economic zones, tourism facilities, cold chains, fertiliser factories, ports, roads, airports and urban public transport. Transport |Roads and bridges |Ports |Inland waterways |Airports |Railway tracks, tunnels, viaducts and bridges |Urban public transport Energy |Electricity generation, transmission and distribution |Oil pipelines |Oil/ gas/ LNG storage facilities |Gas pipelines Water and sanitation |Solid waste management |Water supply pipelines |Water treatment plants |Sewage collection, treatment and disposal system |Irrigation ( dams, channels, embankments, etc) |Storm water drainage system Communication |Telecommunication fixed network and towers Social and commercial infrastructure |Education institutions |Hospitals, medical colleges, diagnostic centres |Three- star or higher hotels on periphery of 1million- plus cities |Common infrastructure for industrial parks, SEZs, tourism facilities, agricultural markets |Fertilisers |Post- harvest infrastructure |Terminal markets |Soil testing laboratories |Cold chains Infrastructure and social infrastructure which would be exempt from the need for consent and social impact assessment, including those done through PPP mode IN SAFE ZONE Source: Ministry of Finance notification dated March 27, 2012. LAND ORDINANCE -- *A.RengarajanPractising Company SecretaryChennai * *Mobile 93810 11200* “ *LET US SUPPORT COMPANY SECRETARY BENEVOLENT FUND FOR COMMON CAUSE*
Posted on: Fri, 02 Jan 2015 01:58:45 +0000
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