Change in shareholding patten requires Bank’s approval

In reference to SARFAESI Act, 2002, every Securitisation Company / Reconstruction Company (SC / RC) is required to obtain prior approval of the Reserve Bank for any substantial change in its management. The expression “substantial change in management” means the change in the management by way of transfer of shares or amalgamation or transfer of the business of the company. Hence, one of the terms and conditions stipulated to the SC/RCs, while granting them the Certificate of Registration, states that prior approval of Reserve Bank will have to be taken by the SC/RCs for any change in their shareholding pattern.

Further all SC/RC companies may require RBI approval for changes in the shareholding pattern related to : (a) any transfer of shares by which the transferee becomes a sponsor (b) any transfer of shares by which the transferor ceases to be a sponsor and (c) an aggregate transfer of ten per cent or more of the total paid-up share capital of the SC/RC by a sponsor during the period of five years commencing from the date of certificate of registration..

Circular No. RBI/2014-2015/476 DNBR(PD)CC.No. 01/SCRC / 26.03.001 / 2014-2015 dtd. 24-2-2015.

NBFCs Raising Money by Private Placement of Non Convertible Debentures (NCDs)

NBFCs for resource planning should cover the planning horizon and the periodicity of private placement and the policy is to be approved by the Board. The following issues shall be governed: :

i. Minimum subscription per investor shall be ` 20,000 (Rupees Twenty thousand);

ii. Issuance of private placement of NCDs shall be in two separate categories;

(a) Maximum subscription of less than ` 1 crore and

(b) A minimum subscription of ` 1 crore and above per investor;

iii. Limit of 200 subscribers for every financial year, for issuance of NCDs with a maximum subscription of less than ` 1 crore, shall be fully secured;

iv. No limit on the number of subscribers in respect of issuances with a minimum subscription of ` 1 crore and above; the option to create security in favour of subscribers will be with the issuers. The unsecured debentures shall not be treated as public deposits as defined in NBFCs Acceptance of Public Deposits (Reserve Bank) Directions, 1998.

v. An NBFC (excluding Core Investment Companies) shall issue debentures only for deployment of funds on its own balance sheet and not to facilitate resource requests of group entities / parent company / associates.

vi. An NBFC shall not extend loans against the security of its own debentures (issued either by way of private placement or public issue).

All tax exempt bonds offered by NBFCs are exempted from the applicability of the circular. All NCDs of maturity up to one year as per the guidelines on Issuance of Non-Convertible Debentures (Reserve Bank) Directions, 2010, dated June 23, 2010, by Internal Debt Management Department, RBI shall be applicable.

Circular No. RBI/2014-15/475 DNBR (PD) CC No. 021/03.10.001/2014-15 dated 20-2-2015

Sections 10(4) & 11(1) of the FEMA: Risk Management and Inter Bank Dealings: Foreign Currency (FCY) – INR Swaps

All eligible residents can enter into FCY-INR swaps to hedge exchange rate and/or interest rate risk exposure arising out of long-term foreign currency borrowing or to transform long-term INR borrowing into foreign currency liability, subject to guidelines. Further, swap transactions, once cancelled, shall not be rebooked or reentered. Also to permit greater flexibility to the residents borrowing in foreign currency where the underlying is still surviving, the client, on cancellation of the swap contract, may be permitted to re-enter into a fresh FCY-INR swap to hedge the underlying but only after the expiry of the tenor of the original swap contract that had been cancelled.

Circular No. RBI/2014-15/469A.P. (DIR Series) Circular No. 78 dated 13-2-2015

Ss.10(4) & 11(1) FEMA, 1999 : Foreign Direct Investment in Pharmaceuticals sector – Clarification

FDI policy for pharmaceutical sector has been reviewed and it has now been decided with immediate effect that there would be a special carve out for medical devices which was earlier given the same treatment as pharmaceutical sector. FDI up to 100% is permitted under the automatic route in for manufacturing of medical devises and is applicable to Greenfield Projects (100% Automatic) and Brownfield Projects (100% Government). This circular has also defined the definition of Medical Devices.

Circular RBI/2014-15/441 A.P. (DIR Series) Circular No. 70 dated 2-2-2015.

S. 10(4) & 11(1): FEMA Act, 1999 Foreign investment in India by Foreign Portfolio Investors

All future investment in Government securities by registered Foreign Portfolio Investors (FPIs) shall be required to be made in Government bonds with a minimum residual maturity of three years. Accordingly, all future investments by an FPI within the limit for investment in corporate bonds shall be required to be made in corporate bonds with a minimum residual maturity of three years. Further, all future investments against the limits vacated when the current investment runs off either through sale or redemption, shall be required to be made in corporate bonds with a minimum residual maturity of three years. FPIs shall not be allowed to make any further investment in liquid and money market mutual fund schemes. There is no lock-in period and FPIs shall be free to sell the securities (including those that are presently held with less than three years residual maturity) to domestic investors.

Circular RBI/2014-15/448 A.P.(DIR Series) Circular No. 71 dated 3-2-2015

S. 6(3) and S. 47(2) Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) (Amendment) Regulations, 2015

RBI permission necessary to acquire or transfer of immovable property in India not exceeding five years except for lease by citizens of certain countries like Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau or Hong Kong.

Notification No. FEMA. 335/2015-RB dated 4-2-2015

Ss. 10(4) & 11(1) FEMA, 1999 Foreign investment in India by Foreign Portfolio Investors

FPIs shall be permitted to invest in Government securities, the coupons received on their existing investments in Government securities. These investments shall be kept outside the applicable limit (currently USD 30 billion) for investments by FPIs in government securities. AD Category – I banks shall ensure reporting of such investments as may be prescribed from time to time.

RBI/2014-15/453 A.P. (DIR Series) Circular No. 72 dtd. 5-2-2015

Ss. 10(4) & 11(1) FEMA, 1999 Foreign investment in India by Foreign Portfolio Investors

The Reserve Bank has issued a clarification about the applicability of investment by FPI :

Any fresh investments shall be permitted in any type of debt instrument in India with a minimum residual maturity of three years. Accordingly, FPIs shall not be allowed to make any further investment in CPs.

FPIs shall not be allowed to make any further investments in debt instruments having minimum initial/residual maturity of three years with optionality clause exercisable within three years.

FPIs shall be permitted to invest in amortised debt instruments provided the duration of the instrument is three years and above.

Further any clarification above shall not be in conformity with the provisions of the A.P. (DIR Series) Circular No. 71 dated February 3, 2015.

RBI/2014-15/460 A. P. (DIR Series) Circular No.73 dated 6-2-2015

Ss.10 (4) & S.11(1) FEMA Act, 1999 – Import of goods into India

The RBI liberalise and simplify the procedure to dispense the requirement of submitting request in Form A-1 to the AD Category–I Banks for making payments towards imports into India as they need to obtain all the requisite details from the importers and satisfy itself about the bona fides of the transactions before effecting the remittance by persons, firms and companies for making payments, exceeding USD 5,000 or its equivalent towards imports into India.

RBI/2014-15/467 A. P. (DIR Series) Circular No. 76 12-2-2105.

Sujeet Karkala,

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