RBI Regulatory Updates & Developments
Notifications

Includes:

  • Notification to Scheduled Commercial Banks
  • Notification to AD Banks
  • Notification to Authorised Person
Notification to Scheduled Commercial Banks

• Guidelines on Compensation of Chief Executive Officer/ Whole Time Directors – Restrictions under Section 20 of the Banking Regulation Act, 1949 – Loans to Directors
Commercial banks can now grant loans and advances to their Chief Executive Officer/ Whole Time Directors, for purchasing of
a. Car
b. Personal computer
c. Furniture
d. Constructing/ acquiring a house for personal use
e. Grant of festival advance
f. Credit limit under credit card facility
Without seeking prior approval of RBI (except in the case of loans granted to a Director who was an employee of the bank immediately prior to his/her appointment as a Director), subject to the laid down conditions in the circular.
Such loans and advances are exempt from the applicability of Section 20 of the Banking Regulation Act 1949.
https://rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10025

• Equity Investment by Banks – Review
To give more operational freedom and flexibility in decision making, it is advised that banks, which have CRAR of 10 per cent or more and have also made net profit as of March 31 of the previous year, need not approach RBI for prior approval for equity investments in cases where, after such investment, the holding of the bank remains less than 10 per cent of the investee company’s paid up capital, and the holding of the bank, along with its subsidiaries or joint ventures or entities continues to remain less than 20 per cent of the investee company’s paid up capital.
https://rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10026

• Framework for Revitalising Distressed Assets in the Economy – Review of the Guidelines on Joint Lenders’ Forum (JLF) and Corrective Action Plan (CAP)
As part of continuous assessment of the effectiveness of the Framework, as also based on the feedback received from banks, the framework has been reviewed and it has been decided to introduce the changes/ additions highlighted in the circular in the framework to make it more effective.
https://rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10034

• Partial Credit Enhancement (PCE) to Corporate Bonds
Taking into account the feedback received, and with a view to encouraging corporates to avail of bond financing, it has been decided to allow banks to provide PCE to bonds issued by corporates /special purpose vehicles (SPVs) for funding all types of projects, subject to the guidelines given in the circular.
https://rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10035

• Prudential Norms on Change in Ownership of Borrowing Entities (Outside Strategic Debt Restructuring Scheme(SDR)
In order to further enhance banks’ ability to bring in a change in ownership of borrowing entities, which are under stress primarily due to operational/ managerial inefficiencies despite substantial sacrifices made by the lending banks, it has been decided to allow banks to upgrade the credit facilities extended to borrowing entities, whose ownership has been changed outside SDR, to ‘Standard’ category upon such change in ownership, subject to conditions given in the circular.
https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10039

• Marginal Standing Facility
It has been decided to reduce the Repo rate under the Liquidity Adjustment Facility (LAF) by 50 basis points from 7.25 per cent to 6.75 per cent with immediate effect.
https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10046

• Liquidity Adjustment Facility – Repo and Reverse Repo Rates
It has been decided to reduce the Repo rate under the Liquidity Adjustment Facility (LAF) by 50 basis points from 7.25 per cent to 6.75 per cent with immediate effect.
https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10047

• Change in Bank Rate
The Bank Rate stands adjusted by 50 basis points from 8.25 per cent to 7.75 per cent with effect from 29th September 2015.
https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10050

Notification to AD Banks

• Exchange Earners’ Foreign Currency (EEFC) Account- Discontinuation of Statement pertaining to trade related loans and advances
Submission of a quarterly statement to a Regional Office of RBI pertaining to trade related loans and advances from EEFC has been discontinued with immediate effect.
https://rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10021

• Trade Credit Policy - Rupee (INR) Denominated trade credit
With a view to providing greater flexibility for structuring of trade credit arrangements, it has been decided that the resident importer can raise trade credit in Rupees (INR) within the given framework after entering into a loan agreement with the overseas lender.
https://rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10023

• Opening of foreign currency accounts in India by ship-manning / crew-management agencies
With a view to ensuring strict compliance, the guidelines on the operations in foreign currency accounts opened with AD Category-I banks by foreign shipping or airline companies or their agents in India are reiterated.
https://rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10036

• Processing and settlement of import and export related payments facilitated by Online Payment Gateway Service Providers (OPGSPs)
AD Category-I banks have been permitted to offer the facility to repatriate export related remittances by entering into standing arrangements with Online Payment Gateway Service Providers (OPGSPs) in respect of export of goods and services.
To facilitate e-commerce, it has been decided to permit AD Category-l banks to offer similar facility of payment for imports by entering into standing arrangements with the OPGSPs.
The revised consolidated guidelines on such imports and exports are given in the circular.
https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10037

• External Commercial Borrowings (ECB) Policy - Issuance of Rupee denominated bonds overseas
In order to facilitate Rupee denominated borrowing from overseas, it has been decided to put in place a framework for issuance of Rupee denominated bonds overseas within the overarching ECB policy. The broad contours of the framework are given in the circular.
https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10049

• Regularisation of assets held abroad by a person resident in India under Foreign Exchange Management Act, 1999
To effectively deal with assets held abroad by persons resident in India in violation of the Foreign Exchange Management Act, 1999 (FEMA), for which declarations have been made and taxes and penalties have been paid under the provisions of the Black Money Act, RBI on 25th September 2015 has notified that:
a. No proceedings shall lie under the Foreign Exchange Management Act, 1999 (FEMA) against the declarant with respect to an asset held abroad for which taxes and penalties under the provisions of Black Money Act have been paid.
b. No permission under FEMA will be required to dispose of the asset so declared and bring back the proceeds to India through banking channels within 180 days from the date of declaration.
c. In case the declarant wishes to hold the asset so declared, she/ he may apply to the Reserve Bank of India within 180 days from the date of declaration if such permission is necessary as on date of application. Such applications will be dealt by the Reserve Bank of India as per extant regulations. In case such permission is not granted, the asset will have to be disposed of within 180 days from the date of receipt of the communication from the Reserve Bank conveying refusal of permission or within such extended period as may be permitted by the Reserve Bank and proceeds brought back to India immediately through the banking channel.
https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10051

Notification to Authorised Person

• Guidelines for Grant of Authorisation for Additional Branches of Full Fledge Money Changer (FFMC)/AD Cat. II
As part of further simplification of guidelines for grant of authorisation for additional branches, RBI has further simplified its existing guidelines in respect of required documents, as detailed in the circular.
https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10022

Press Releases

Includes:

  • RBI Cancels Certificate of Registration
  • RBI Seeks Feedback on Draft Framework on ECBs
  • DICGC Committee Recommends Differential Premium for Banks in India
  • India’s External Debt as at the End of June 2015
  • Pricing of Credit by Non-Banking Financial Company (NBFC) - Micro Finance Institution (MFIs) - Applicable Average Base Rate for the Quarter Beginning 1st October 2015
RBI Cancels Certificate of Registration

During September 2015, RBI has cancelled the certificate of registration of one Non-Banking Financial Company (NBFC) viz., Sahara India Financial Corporation Ltd, Lucknow, in exercise of the powers conferred on it under Section 45-IA(6) of the Reserve Bank of India Act, 1934.

RBI Seeks Feedback on Draft Framework on ECBs

On 23rd September 2015, RBI has placed on its website for comments/feedback, the draft framework on External Commercial Borrowings (ECBs). Through this draft framework, an attempt has been made to replace the ECB policy with a more rational and liberal framework, keeping in view the evolving domestic as well as global macro-economic and financial conditions, challenges faced in external sector management and the experience gained so far in administering the ECB policy.

DICGC Committee Recommends Differential Premium for Banks in India

On 30th September 2015, RBI placed on its website the Report of the Committee on Differential Premium System for Banks in India. The primary objective of most Differential Premium Systems (DPS) has been to provide incentives to banks to avoid excessive risk taking, minimise moral hazard and introduce more fairness into the premium assessment process. Introducing fairness into the system bolsters industry support for deposit insurance. Keeping this perspective in mind, there has been an increasing recognition among the deposit insurance agencies around the world about the need for introduction of a DPS based on the risk profile of banks.

India’s External Debt as at the End of June 2015

Major highlights pertaining to India’s external debt as at end-June 2015 are as under:
a. India’s external debt at end-June 2015 was placed at US$ 482.9 billion recording an increase of US$ 8.5 billion over its level at end-March 2015.
b. Excluding valuation gains due to appreciation of the US dollar against the Indian rupee and other major currencies, the increase in external debt during the quarter would have been higher at US$ 10.1 billion.
c. Commercial borrowings continued to be the largest component of external debt with a share of 38.4 per cent, followed by NRI deposits (24.8 per cent) and short-term trade credit (16.6 per cent).
d. The share of short-term debt (original maturity) in total debt witnessed a decline over the preceding quarter as well as over the corresponding quarter of the previous year as FII investment in Government treasury bills was phased out.
e. Accordingly, the ratio of short-term debt (original maturity) to foreign exchange reserves declined to 23.7 per cent as at end-June 2015 (24.8 per cent as at end-March 2015). Similarly, on residual maturity basis, the ratio of short-term debt to foreign exchange reserves worked out to 51.9 per cent at end-June 2015 (54.2 per cent at end-March 2015).
f. The US dollar denominated debt continued to be the largest component of India’s external debt with a share of 58.1 per cent at end-June 2015, followed by Indian rupee (28.4 per cent), SDR (5.9 per cent), Japanese Yen (3.9 per cent) and Euro (2.3 per cent).
g. Across borrower categories, the outstanding debt of Government marginally declined whereas non-Government debt increased and their shares in total external debt were 18.5 per cent and 81.5 per cent, respectively, at end-June 2015.
h. Debt service payments remained at 7.5 per cent as in the previous quarter.

Pricing of Credit by Non-Banking Financial Company (NBFC) - Micro Finance Institutions (MFIs) - Applicable Average Base Rate for the Quarter Beginning 1st October 2015

For the purpose of arriving at the interest rates to be charged by an NBFC-MFI to its borrowers in the quarter beginning 1st October 2015 the average of the base rate has been notified as 9.82 percent.

SEBI Regulatory Updates & Developments
Circulars
  • Continuous Disclosure Requirements for Listed Entities - Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
  • Disclosures to be made by NBFCs in the Offer Documents for Public Issue of Debt Securities under the SEBI (Issue and Listing of Debt Securities) Regulations, 2008
  • Revised Disclosure Formats under SEBI (Prohibition of Insider Trading), Regulations 2015
  • Format for Compliance Report on Corporate Governance to be submitted to Stock Exchange(s) by Listed Entities
  • Registration of Members of Commodity Derivatives Exchanges
Continuous Disclosure Requirements for Listed Entities - Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Listing Regulations”) deals with disclosure of material events by a listed entity, whose equity and convertible securities are listed. Such an entity is required to make disclosures of material events specified under Part A of Schedule III of the Listing Regulations. SEBI, vide its circular dated 9th September 2015, has outlined the details that need to be disclosed in respect of such material events. These are brought out in Annexure 1 of the Circular.
In case of securities or the derivatives, which are listed outside India by the listed entity, parity in disclosures would be required to be followed and whatever is disclosed on overseas stock exchange(s) by the listed entity would be required to be simultaneously disclosed on the stock exchange(s), where the entity is listed in India.

Disclosures to be made by NBFCs in the Offer Documents for Public Issue of Debt Securities under the SEBI (Issue and Listing of Debt Securities) Regulations, 2008

SEBI had prescribed additional certain disclosures to be made in offer documents in respect of public issue of debt securities by Non-Banking Finance Companies (NBFCs), vide its circular dated 17th June 2014. It has now been decided, vide SEBI’s Circular dated 15th September 2015, to align the requirements in line with the stipulations required by RBI.
The disclosure requirements would include the following:

  • Aggregated exposure to the top 20 borrowers with respect to the concentration of advances, as against the present requirement for top 10 borrowers. Exposures to be disclosed in the manner as prescribed by RBI in its guidelines on Corporate Governance for NBFCs, from time to time.
  • Details of all loans, which are overdue and classified as non-performing as per RBI guidelines.
  • Adequate disclosures of onward lending to entities, which are connected with the NBFC or part of its “Group”.
  • Appropriate disclosures in case any of the borrowers of the NBFCs form part of the 'Group' as defined by RBI.
  • Further disclosures including a portfolio summary with regard to industries or sectors, where borrowings have been made, the quantum and percentage of secured vis-a-vis unsecured borrowings.
  • Any change in promoter’s holdings in NBFCs during the last financial year beyond a particular threshold. At present, RBI has prescribed such a threshold level at 26%.
  • A draft template has been provided in the circular, which will serve as a basis for the NBFC to make disclosures.
Revised Disclosure Formats under SEBI (Prohibition of Insider Trading), Regulations 2015

SEBI, vide its circular dated 16th September 2015, has issued revised disclosure formats to be followed by intermediaries under the Prohibition of Insider Trading Regulations 2015.

Format for Compliance Report on Corporate Governance to be submitted to Stock Exchange(s) by Listed Entities

In terms of Regulation 27(2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Listing Regulations”), listed entities are required to submit a quarterly compliance report on corporate governance in the format specified by SEBI to recognised Stock Exchange(s). SEBI has prescribed formats for various compliance reports on corporate governance to be submitted by listed entities, vide its circular dated 24th September 2015. Additionally, the compliance report prepared at the end of the financial year and a secretarial audit report would be required to be put up by the listed entities to their Board of Directors. The circular has come into effect from 2nd September 2015.

Registration of Members of Commodity Derivatives Exchanges

SEBI, vide its circular dated 29th September 2015, has stipulated that all existing members of commodity derivatives exchanges, who satisfy the eligibility requirements for membership, as prescribed in the rules, regulations and bye-laws of the Exchange, where they hold membership, would be eligible to apply for registration to SEBI, within a period of three months from 28th September 2015.
All existing members of commodity derivatives exchanges would have to meet the eligibility criteria as laid down under Securities Contract (Regulation) Rules, 1957. This has to be completed by 28th September 2016.

Regulations

Includes:

  • SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
  • SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2015 and SEBI (Regulatory Fee on Stock Exchanges) (Amendment) Regulations, 2015
  • Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Amendment) Regulations, 2015
  • SEBI (Issue of Capital and Disclosure Requirements) (Sixth Amendment) Regulations, 2015
  • SEBI (Share Based Employee Benefits) (Amendment) Regulations, 2015
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

On 2nd September 2015, SEBI notified the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’) into effect. SEBI’s provisions for listed entities have now been aligned with the provisions of the Companies Act, 2013. The Listing Regulations would come into force on the ninetieth day from the date of publication in the official gazette i.e. 1st December 2015. However, provisions with respect to passing of ‘ordinary resolution’ instead of ‘special resolution’ in case of all material Related Party Transactions, subject to related parties abstaining from voting on such resolutions and classification of promoters as public shareholders under various circumstances, have come into effect immediately.

Salient Features of the new Listing Regulations

  • The Listing Regulations provide principles for disclosures by listed entities and also includes corporate governance principles.
  • Listed entities are now under an obligation to prepare information in accordance with applicable standards of accounting and financial disclosure. Listed entities are required to ensure that the yearly statutory audit is conducted by an independent, competent and qualified Auditor.
  • Further, there are provisions in the Listing Regulations with respect to protection of rights of shareholders and responsibility of directors of a company.
  • Companies desirous of listing their securities are required to enter into a listing agreement with the stock exchange. Existing listed entities are required to execute a fresh listing agreement within 6 months from date of notification the Listing Regulations.
  • Definition of ‘related party’ and ‘related party transaction’ have been amended to provide an exception for units issued by mutual funds, which are listed on a recognised stock exchange(s).
  • The Regulations provide for passing of ordinary resolution instead of special resolution incase of all material related party transactions subject to related parties abstaining from voting on such resolutions, in line with the provisions of the Companies Act, 2013.
SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2015 and SEBI (Regulatory Fee on Stock Exchanges) (Amendment) Regulations, 2015

SEBI notified its revised regulations for stock brokers and sub-brokers on 8th September 2015, which includes provisions on regulatory fee on stock exchanges, stock brokers and sub-brokers. Highlights of the amendments are as under:

  • A regional commodity derivatives exchange would be required to pay an annual regulatory fee of INR 50,000 to SEBI within 30 days of conclusion of the relevant financial year, according to the amended norms.
  • In the case of national commodity derivatives exchanges, the net worth for a self-clearing member should be INR 1 crore and for a clearing member, the same should be INR 3 crore.
  • The deposit amount in the case of national commodity derivative exchange would be INR 50 lacs for both self-clearing and clearing members.
    With regard to regional commodity derivatives exchanges, the net worth level and deposit amount for self-clearing and clearing members would be specified by SEBI from time to time.
Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Amendment) Regulations, 2015

In the revised Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012, SEBI has redefined certain terms which are as under:

  • Clearing member shall have same meaning as specified under SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992.
  • Commodity derivatives exchange would mean a recognized stock exchange which assists, regulates or controls the business of buying, selling or dealing only in commodity derivatives.
  • National commodity derivatives exchange has been defined to mean a commodity derivatives exchange that is demutualized, has an electronic trading platform and is permitted to assist, regulate or control the business of buying, selling or dealing in derivatives on all commodities as notified by the Central Government from time to time.
  • Regional commodity derivatives exchange would mean a commodity derivatives exchange which is not a national commodity derivatives exchange.
    It has been stipulated that no new segment would be introduced by any recognized stock exchange, including a commodity derivatives exchange, without prior approval from SEBI.

It would be mandatory for every commodity derivatives exchange to comply with the provisions of these regulations, as specified by SEBI. However, in certain cases, commodity derivative exchange would be permitted to continue with the existing arrangement for clearing and settlement of trades.

SEBI (Issue of Capital and Disclosure Requirements) (Sixth Amendment) Regulations, 2015

SEBI amended its Issue of Capital and Disclosure Requirements, Regulations, 2009 on 10th September 2015. The revised provisions would be applicable to issuers filing offer documents with the Registrar of Companies on or after the date of commencement of these regulations.
It has now been provided that in case of allocation above INR.250 crore; a minimum of 5 such investors and a maximum of 15 such investors for allocation up to INR.250 crore and an additional 10 such investors for every additional INR.250 crore or part thereof, would be permitted, subject to a minimum allotment of INR.5 crore per such investor.

SEBI (Share Based Employee Benefits) (Amendment) Regulations, 2015

On 18th September 2015, SEBI amended its Share Based Employee Benefits Regulations 2014. Some of the key amendments are brought out below:

  • Employees of associate companies, who were earlier included under the definition of “Employees”, has been excluded from the definition.
  • The trust would be required to hold shares acquired through secondary acquisition for a minimum period of six months, except where they are required to be transferred under certain circumstances.
  • Trusts holding shares for the purposes of implementing General Employee Benefit Scheme (GEBS) or Retirement Benefit Scheme (RBS), which exceed ten percent of the total value of total assets of the trusts would have a period of three years, instead of five years as prescribed earlier.
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