Anticipated boost in liquidity position of NBFCs and HFCs

By Vineet Ojha (vineet@vinodkothari.com)

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Variable Capital Company: Singapore proposes a new way of making investments

Can India replicate this model?

By Simran Jalan (finserv@vinodkothari.com)

Introduction

On March 23, 2017, Monetary Authority of Singapore (MAS) issued a consultation paper[1] for Singapore Variable Capital Companies. On September 10, 2018, the MAS tabled the Variable Capital Companies Bill (the “Bill”)[2] in Singapore Parliament.

The Variable Capital Company (“VCC”) is a corporate structure that is tailored for collective investment schemes (“CIS”). In Singapore, the most commonly used investment fund structures are unit trusts (constituted by way of trust deeds) and investment companies. The legislative framework for VCC seeks to provide an alternative to incorporating a company under the Singapore Companies Act (“CA”) for the formation of CIS in Singapore.

With the introduction of the VCC structure, the fund managers will have greater operational flexibility. This VCC structure will act as a platform for the fund managers to establish a domicile of their investment funds in Singapore.

This Bill will be administered by the Accounting and Corporate Regulatory Authority (“ACRA”) and will act as the registrar. However, the anti-money laundering and counter-financing of terrorism obligations of VCC will be overseen by the MAS. Read more

Investment by FPIs in securitised debt instruments

By Anita Baid,(anita@vinodkothari.com)(finserv@vinodkothari.com)

Investments by Foreign Portfolio Investors (FPIs) in unlisted debentures and securitised debt instruments (SDIs) issued by Indian companies was allowed pursuant to SEBI notification dated 27th February, 2017[1]. Earlier in November, 2016, Reserve Bank of India (RBI) had also permitted investment by FPIs in unlisted non-convertible debentures and securitised debt instruments issued by Indian companies[2]. The said amendments by the securities market regulator and financial services regulator were the final push which was needed to encourage more FPI investments in India.

Previously, FPIs could invest only in debt securities of companies engaged in infrastructure sector. This was a clear indication that the government aimed to develop the infrastructure sector in India. But eventually, it seemed that the government did not want to restrict this to infrastructure only and wanted to reap all the benefits for developing a dynamic and facilitating bond market in the country.

Economic development and smooth flow of funds into the economy are the twin sides of the same coin and the government of India has very well taken this into account while amending the FPI regulation. Allowing FPI investments in unlisted debt instruments of Indian companies, was a step by the government to relax the burden which the companies had to bear, while raising funds in form of equity. The regulation  in turn blocked the companies from taping into fresh funds and listing of debt instruments, which called for additional burden of complying with a host of other regulations.

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Integration of Financial Markets and Capital Markets

State of Indian Capital Markets

By Mayank Agarwal (finserv@vinodkothari.com )

Capital market is the one-stop solution for both companies and investors looking to utilize idle money in the most financially sound manner. While money markets provide short-term (generally less than one year) route of raising money, capital markets provide a much broader avenue. Although businesses rely upon money market sources to address liquidity issues, capital markets are explored with the intention of improving the solvency situation of the businesses.

A healthy and booming capital market is a clear-cut indication that the domestic people have confidence in the financial ecosystem of the country and that they trust the government and financial institutions with their money. Strong capital market volume aids economic growth by mobilization of savings and providing funds to those in need, thus increasing productivity.

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RBI revamps Directions for issuance of Commercial Paper

By Richa Saraf, legal@vinodkothari.com

The Reserve Bank of India (RBI) vide Notification No. MRD.DIRD.01/CGM (TRS) – 2017 dated August 10, 2017 has issued Reserve Bank Commercial Paper Directions, 2017 (“New Directions”). The new guidelines are in supersession of the existing directions on Commercial Paper in the Master Directions on Money Market (Section II) RBI/FMRD/2016-17/32 dated July 7, 2016 (“Old Directions”). The following table captures the difference between the old and new directions:- Read more