The recent downfall of a prominent group helmed by a highly rated core investment company (CIC) brought the relatively lighter-touch regulatory regime for CICs into focus and demonstrated the need to strengthen the same. In this context, the Reserve Bank of India formed a working group to review the regulatory and supervisory framework for CICs and subsequently modified the regulatory regime based on the working group's recommendations.
The Securities and Exchange Board of India recently issued several amendments and clarificatory circulars in respect of debenture issuance in India in order to enhance the transparency of disclosures by issuers, strengthen the role of debenture trustees (DTs) and protect the interests of investors. These changes reflect a paradigm shift with respect to the role envisaged for DTs, while issuers are also now subject to a much stricter regime.
In June 2020 the Ministry of Corporate Affairs issued the Companies (Share Capital and Debentures) Amendment Rules 2020, doing away with the non-convertible debentures (NCD) deposit requirement for all listed companies (including non-banking financial companies and home finance companies) in the context of their issuance of privately placed debentures. This article examines the genesis of the NCD deposit requirement and whether there is a case for further relaxations, among other things.
With the enactment of the Factoring Regulation Act 2011, for the first time a consolidated legal framework governing all aspects of and codifying the law applicable to factoring transactions was introduced in India. While the act's introduction was important, its Achilles heel has always been the limitations that it places on the types of entity which can engage in the factoring business – in particular, its peculiar treatment of non-banking financial companies, an important class of lenders in India.
Securitisation as a structured finance mechanism has several commercial advantages, including balance sheet and risk management, increased liquidity, cost-efficient financing, the marketability of the resulting securities and the opportunity for portfolio diversification. With the continuing need for liquidity by non-banking financial companies, the growing appetite of investors and the developments on the regulatory front, securitisation is likely to remain on the upward curve in the near future.