News Updates by CMA H Padmanabhan (21-12-2018)

RBI limits total outstanding ECBs to 6.5% of GDP 

The Reserve Bank of India (RBI) Thursday announced a cap on the outstanding stock of external commercial borrowings (ECB) at 6.5 per cent of GDP at current market prices.

Based on the gross domestic product (GDP) figures at March-end 2018, the soft limit works out to USD 160 billion for the current financial year, the RBI said in a statement.

“The outstanding stock of ECB as on September 30, 2018, stood at USD 126.29 billion,” it said.

The decision to have a “rule-based dynamic limit” for outstanding stock of ECB at 6.5 per cent of GDP at current market prices has been taken in consultation with the government, the RBI added.

ECBs refer to commercial loans in the form of bank loans, securitised instruments (floating rate notes and fixed rate bonds, non-convertible, optionally convertible or partially convertible preference shares), buyers’ credit, suppliers’ credit availed of from non-resident lenders with a minimum average maturity of 3 years.

SEBI to come up with sandbox policy soon 

Securities and Exchange Board of India (SEBI) is planning to come up with a sandbox policy to support technology development for financial markets, an official said here on Thursday.

“We will come out with a sandbox policy. We are examining whether any changes in laws are required in terms of its dispensation,” SEBI Chairman Ajay Tyagi said on the sidelines of the 8th India Finance Conference, organised by IIM-Calcutta.

Sandbox concept is something that one can try before implementing it on a larger scale and it refers to experimenting and learning before adopting a technology or system.

Tyagi said the capital market regulator is also working out whether something new can be tried without any legislative changes.

The Insurance Regulatory and Development Authority of India has set up a committee to look into the concept of a regulatory sandbox in India.

He pointed out that there had been substantial technology interventions in capital markets in the past and it would continue.

Tyagi also said that Machine-learning and Artificial Intelligence have made inroads in the area of high frequency and algorithmic trading and some bits of fund management as well.

SEBI to issue circular on ‘side pocketing’ by MFs soon 

Markets regulator Sebi Thursday said it will issue a directive soon on terms and conditions for mutual funds to separate their distressed debt assets, a process widely known as ‘side pocketing’.

The Securities and Exchange Board of India (SEBI) has agreed in principle to the proposal put forward by the mutual funds industry, SEBI chief Ajay Tyagi said.

SEBI will ensure adequate safeguards for investors and look into it that fund managers do not misuse it.

“We will come out with a circular that will put terms and conditions to safeguard the investors and not misused by the MFs,” Tyagi said on the sidelines of a Indian Institute of Management-Calcutta (IIM-C) event here.

‘Side pocketing’ is a mechanism to separate distressed, illiquid and hard-to-value assets from other more liquid assets in a portfolio. It prevents the distressed assets from damaging the returns generated from more liquid and better-performing assets.

MSME & STARTUP’S NEWS

Govt to set up panel to look into tax issues faced by startups

The government has decided to set up an expert committee to look into all the taxation issues being faced by startups and angel investors, the CBDT said Thursday.

It added that “no coercive action or measures to recover the demands of completed assessment under income tax would be taken” against such firms.

This was decided at a high-level meeting of Department of Revenue Secretary Ajay Bhushan Pandey, Department of Industrial Policy and Promotion (DIPP) Secretary Ramesh Abhishek, and Central Board of Direct Taxes (CBDT) Chairman Sushil Chandra.

“It has been decided that the issue of recognition of these startups including the issue of premium among others will be decided on the basis of recommendations of a committee of eminent experts drawn from institutions like IITs, IIMs which will soon be set up by the DIPP on grant of tax exemptions and other connected matters,” the CBDT said in a statement.

The committee of experts, it said, will make recommendations on individual cases of recognised startups.







Startups required to seek tax exemption from inter-ministerial board: DIPP secy

Amid concerns being raised by budding entrepreneurs on angel tax, the commerce and industry ministry said Thursday that startups need to seek the exemption from an inter-ministerial board set up for the purpose. Ramesh Abhishek, Secretary in the department of industrial policy and promotion (DIPP), said that the ministry is already taking up the matter with the department of revenue.

Several startups have again raised concerns on taxation of angel funds under Section 56 of the Income Tax Act, which provides for taxation of funds received by an entity.

He said that the purpose of section 56(2)(viib) of Income Tax Act was to prevent money laundering, and investments made by AIF (alternate investment funds) are exempted from this provision.

“For HNIs and other type of individual investors, there was no mechanism earlier. So, DIPP and income tax department put in place a mechanism and set up an inter ministerial board.

“People who would like investments to be exempted from this particular provision under the law, have to apply,” he told reporters here.

The secretary said the department wants more and more startups to apply for tax exemption.

“If specific issues and problems are pointed out to us by startups, we will take that up with the concerned department,” the secretary said.

Govt to set up panel to look into tax issues faced by startups 

The government has decided to set up an expert committee to look into all the taxation issues being faced by startups and angel investors, the CBDT said Thursday.

It added that “no coercive action or measures to recover the demands of completed assessment under income tax would be taken” against such firms.

This was decided at a high-level meeting of Department of Revenue Secretary Ajay Bhushan Pandey, Department of Industrial Policy and Promotion (DIPP) Secretary Ramesh Abhishek, and Central Board of Direct Taxes (CBDT) Chairman Sushil Chandra.

“It has been decided that the issue of recognition of these startups including the issue of premium among others will be decided on the basis of recommendations of a committee of eminent experts drawn from institutions like IITs, IIMs which will soon be set up by the DIPP on grant of tax exemptions and other connected matters,” the CBDT said in a statement.

Government announces fresh steps for Start-ups 

India on Thursday announced fresh steps to address tax issues faced by start-ups in the country.

A panel of eminent technical experts from IITs and IIMs will be set up soon to draw up a new framework for recognition of start-ups as also premium charged by them on their shares.

Apex direct taxes body, the Central Board of Direct Taxes, has said no coercive action to recover the tax demands even in cases where assessments have been completed under Income Tax would be taken.

These decisions were taken at a high-level meeting on Thursday held by Revenue Secretary Ajay Bhushan Pandey, Department of Industrial Policy and Promotion Secretary Ramesh Abhishek and CBDT chairman Sushil Chandra.

IBC NEWS

NCLAT to hear plea over moratorium on dues recovery from IL&FS on January 28

The National Company Law Appellate Tribunal (NCLAT) Thursday said it would hear the plea over moratorium on dues recovery from IL&FS and group companies on January 28.

A two-member bench headed by Justice S J Mukhopadhaya adjourned the matter after briefly hearing the submissions from IL&FS group and its lenders.

The appellate tribunal has asked all parties including lenders to file their written submissions before it.

Last month, lenders of IL&FS group opposed before the NCLAT the 90-day moratorium on loan recovery from the debt-laden group and its subsidiaries.

On October 15, NCLAT had stayed all proceedings against IL&FS group and its 348 firms till its further orders, over an urgent petition moved by the government.

The Ministry of Corporate Affairs had approached the appellate tribunal after the Mumbai bench of National Company Law Tribunal (NCLT) turned down its plea to grant 90-day moratorium.

IL&FS to sell stake in education, wealth management arms 

Debt-laden Infrastructure Leasing & Financial Services (IL&FS) Group Thursday said that it has initiated a process to sell its stake in education business and in the alternative investment management business.

The Udak Kotak-led board of the crippled infra lender is selling the group’s stake in IL&FS Education & Technology Services (IETS), along with other subsidiary businesses and IL&FS Investment Managers (IIML) along with all its associated fund management platforms, the company said in a statement.

The education business provides technology services to KG to XII class students through its proprietary digital content, devices, platforms and solutions, and offers job linked vocational skills programmes.

IIML manages private equity funds, infra debt funds, among others and has assets under management of around Rs 13,340 crore.

Earlier this week, the group had put its entire domestic road assets on sale and last month, it initiated a process to sell its stake in the renewal energy business.

OTHER NEWS

Govt seeks to fast-forward PSU bank recap; can lift 5 lenders out of PCA

Banking recapitalisation is acquiring greater urgency, with the government showing determination to set the house in order at the earliest.

On Thursday, the government sought Parliament approval for infusion of an additional Rs 41,000 crore in state-owned banks through the second batch of Supplementary Demands for Grants.

That takes total recapitalisation for 2018-19 to Rs 1.06 lakh crore, up from Rs 65,000 crore.

Finance Minister Arun Jaitley told reporters on Thursday that out of Rs 2.11 lakh crore announced earlier for FY18 and FY19, nearly Rs 42,000 crore are still to be deployed in PSU banks.

Banking Secreatry Rajeev Kumar said the funds infusion will help 4-5 banks come out of RBI’s PCA framework in 2018-19.

The funds will be utilised under four different heads: 1) To help banks meet regulatory capital norms 2) Enable better performing PCA banks to get capital 3) Infuse funds into non-PCA banks that are closer to the red line and 4) Give regulatory and growth capital to banks that are being amalgamated.

Government to put draft e-commerce policy up for wide ranging consultation 

The Department Of Industrial Policy and Promotion (DIPP) will put the draft e-commerce policy up for broad based consultation and seek comments for a period of ten days, once it is finalised. The department is in the process of finalising the policy and has already discussed issues related to logistics and exports with stakeholders.

“The draft e-commerce policy will be put up for comments for ten days once it is final. The government will ask for online comments for the draft,” said an official in the know of the details.

DIPP is now the nodal agency for all matters related to e-commerce and has begun fresh discussions for a policy to regulate the e-commerce sector, after the Department of Commerce floated a draft policy in July.

“We are in the process of drafting the new e-commerce policy,” said DIPP secretary Ramesh Abhishek at the sidelines of an event, on Thursday.