The Reserve Bank of India recently issued a discussion paper which proposes a significant overhaul of its approach to the regulation of non-banking financial companies (NBFCs), commonly referred to as 'shadow banks'. Recent events – in particular, defaults at certain storied NBFC groups and the effect thereof on the sector and financial markets as a whole – have brought the need to further tighten NBFC regulation into sharper focus.
The National Company Law Appellate Tribunal (NCLAT) recently allowed the invocation of a bank guarantee during a moratorium period imposed under Section 14 of the Insolvency and Bankruptcy Code 2016 because of a retrospective amendment made to that section. The NCLAT decision is a welcome clarification of the issue of whether financial bank guarantees can be invoked during a moratorium period.
The Maharashtra governor recently promulgated the Maharashtra Stamp (Amendment and Validation) Ordinance 2021 with immediate effect. The ordinance introduced two key amendments to the Maharashtra Stamp Act 1958 concerning the stamping of documents that encompass multiple transactions and stamp duty rates for agreements that relate to the deposit of title and mortgage deeds.
The Ministry of Corporate Affairs recently brought much-awaited relief to purely debt-listed public and private companies by exempting them from the purview of 'listed companies' (and associated compliances) under the Companies Act 2013 and the rules thereunder. This amendment comes into effect on 1 April 2021. The rationale for the amended definition is to reduce the compliance burden and facilitate business for Indian companies.
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.
The Reserve Bank of India recently issued a circular introducing changes to the regulatory framework for housing finance companies (HFCs). Among other things, the circular defines what constitutes an HFC, sets out the minimum net owned funds required by HFCs and sets out the requirements for non-banking financial company-investment and credit companies. This article examines the recent changes.
The Reserve Bank of India recently announced a resolution framework for COVID-19-related stress to address borrower default pursuant to the stress caused by the pandemic without necessitating a change of ownership and without an asset classification downgrade modifying the existing framework. This article focuses on the key changes introduced for corporate loan accounts (ie, exposures other than personal loans).