Prudential Framework for Resolution of Stressed Assets: New Dispensation for dealing with NPAs

By Vinod Kothari [vinod@vinodkothari.com]; Abhirup Ghosh [abhirup@vinodkothari.com]

With the 12th Feb., 2018 having been struck down by the Supreme Court, the RBI has come with a new framework, in form of Directions[1], with enhanced applicability covering banks, financial institutions, small finance banks, and systematically important NBFCs. The Directions apply with immediate effect, that is, 7th June, 2019.

The revised framework [FRESA – Framework for Resolution of Stressed Accounts] has much larger room for discretion to lenders, and unlike the 12th Feb., 2018 circular, does not mandate referral of the borrowers en masse to insolvency resolution. While the RBI has reserved the rights, under sec.  35AA of the BR Act, to refer specific borrowers to the IBC, the FRESA gives liberty to the members of the joint lenders forum consisting of banks, financial institutions, small finance banks and systemically important NBFCs, to decide the resolution plan. The resolution plan may involve restructuring, sale of the exposures to other entities, change of management or ownership of the borrower, as also reference to the IBC. Read more

Filing of return for delayed payment to MSMEs- Effective or frittering?

By Simran Jalan (simran@vinodkothari.com)

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Anticipated boost in liquidity position of NBFCs and HFCs

By Vineet Ojha (vineet@vinodkothari.com)

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RBI’s First Monetary Policy for FY 2018-19

Anita Baid

finserv@vinodkothari.com

 

The Reserve Bank of India (RBI) released its first monetary policy statement for FY 2018-19 on April 05, 2018[1] (‘Policy Statement’). The aforesaid statement sets out various developmental and regulatory policy measures for the financial sector. It aims at strengthening regulation and supervision; broadening and deepening financial markets; improving currency management; promoting financial inclusion and literacy; and, facilitating data management. Some of the major issues from the Policy Statement have been discussed herein below: Read more

RBI discontinues LoUs and LoCs

Seems to be running ‘the Great Sparrow Campaign’

Vallari Dubey & Nikhil Jain

finserv@vinodkothari.com

The Reserve Bank of India (RBI) via a Notification dated March 13, 2018[1] has discontinued the use of Letters of Undertaking (LoUs) and Letters of Comfort (LoCs) for Trade Credits with immediate effect. Read more

Help in the hour of need: RBI relaxes asset classification norms for MSME accounts

By Abhirup Ghosh(finserv@vinodkothari.com)

The Reserve Bank of India (RBI), on 7th February, 2018[1], has come out with a notification to grant relaxation to banks and NBFCs with respect to asset classification in case of MSME accounts. The notification has been released on the pretext that the due to the implementation of Goods and Services Tax, the cashflows of small enterprises have been impacted severely, thereby hampering their ability to honour their financial obligations.

In this write up we have tried to cover the impact of the notification.

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Regulations on Prepaid Payment Instruments -Comparing the Master Circular and Master Directions

By Anita Baid, (finserv@vinodkothari.com)

With an enlarged view of the Government to make India go cashless and straddle towards the concept of digitalisation, many companies, specifically NBFCs are seeking approval from the Reserve Bank of India (RBI) to set up business in Prepaid Payment Instruments (PPI). Before getting into the present regulatory framework of such PPIs, one needs to understand the concept of such instruments. PPIs are a form of digital electronic instruments. PPI issuers open an account for its account holders known as PPI holders and with the help of such account, withdrawal/ deposit is made for some pre-ascertained payments or receipt. A certain amount is deposited into such PPI Account from the holder’s Bank A/c and using the balance deposited in the PPI Account, payments are made and/or even cash is received. The introduction of such mechanism enables a person to go cashless. Such PPI instruments can be of three types: Read more

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