GST loom on guarantee services, by Nidhi Bothra

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Related party transactions always follow the presumption of not being at arm’s length and therefore tax provisions prescribe that the transactions should be undertaken at market value and be based on usual commercial terms, as if done with a third party. Transactions with related parties are always subject to scrutiny and are required to demonstrate that the transactions are driven by commercial understanding. The GST regime also prescribes for Read more →

Directions on IT Framework for the NBFC Sector – RBI keen on implementing several operational requirements, by Anita Baid

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In the era of technology, Information Technology (IT) aids plenty of resources to enhance the credit system of the country. Over the years, the Non-Banking Finance Company (NBFC) sector has grown in size and complexity. As the NBFC industry matures and achieves scale, its Information Technology /Information Security (IT/IS) framework, Business continuity planning (BCP), Disaster Recovery (DR) Management, IT audit, etc. Read more →

Reporting Requirements of SFT for NBFC’s

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The government has been scrambling since the demonetisation drive began to stay a step ahead of black money hoarders and to keep a check on transactions made by the companies. Many companies including NBFC’s are facing the wrath of the government’s policies moves in the recent times To add to it, the reporting of Statement of Financial Transaction under Section 285BA[1] of Income Tax Act 1961 has added more to their compliance requirements. Read more →

Action Plan for NPA Ordinance -Sequel 2

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By Vallari Dubey (vallari@vinodkothari.com)

Complementing the Ordinance on Non-Performing Assets (NPA)[1] which originally brought a whole new breeze in the resolution space in India, RBI has come up with a press release as a further to the first step in crystallizing the concept as laid down in the Ordinance.  RBI has brought a lot of changes for the purpose of implementation of the NPA Ordinance. The Sequel two in the Ordinance story has been released in form of a press release by RBI dated 22nd May 2017, laying down the Action Plan to implement the NPA Ordinance[2].

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FAQs on impact of GST on financial services, by Financial Services Division, 24th May, 2017

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  1. What is the meaning of financial services?

Financial services have no meaning ascribed to it under the GST regime. However, for the purpose of this write up, by financial services, we mean any supply of goods or services by a person to another person, meant for the purpose of extending credit support. This includes, but is not limited to the following: Read more →

Section 94B: Thin capitalization rules may impede operations of NBFCs, by Nidhi Bothra & Kanishka Jain, 24th May, 2017

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Genesis of the thin capitalization rules

The genesis of the thin capitalization rules lies in the distinction between tax treatment of debt and equity.  A company typically finances its projects either through equity and debt or mixture of both, equity being costly in terms of cost and ownership is less attractive than the debt financing where interest is a deductible expense. Debt is not only less expensive to service, it also reduces tax liabilities and enhances return on equity.

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RBI cracks whip on Joint Lenders’ Forum, by Abhirup Ghosh

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Background

The Reserve Bank of India, on 5th March, 2017, came out with a notification[1] (Notification) to tweak the norms for constitution and operation of Joint Lender’s Forum (JLF) which was originally introduced in February, 2014.

To do recap, the original framework requires formation of joint lenders’ forum upon an account becoming SMA-2 to devise a corrective action plan (CAP) to revive it. Under the CAP, the lenders have three options – first, rectification of the account without changing any terms of the financial arrangement, second, restructuring of the account which involves change in the terms and conditions of the financial arrangement and lastly, if the other two fails, then the lenders may decide to initiate recovery proceedings against the borrower. Read more →

Is the two-section ordinance key to India’s bulging NPA crisis?

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By Vinod Kothari, (vinod@vinodkothari.com)
The much-awaited ordinance, expected to make a tangible impact on India’s crisis of piling non-performing assets (NPA), was signed into law by the President on 5 May 2017. The Ordinance, consisting of barely two sections, makes amendments to the regulatory framework of banking in India, the Banking Regulation Act. After reading the law, one is forced to ask if this is what was holding up the resolution of NPA crisis in the country. Did it actually have to take all this time?

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FAQs on section 269ST of the Income-tax Act, Kanishka Jain

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Amid the brunt of the De-monetization, which was relatively fresh in the minds of the common people, Budget 2017 spelt out a loud message. The message was very clear; the government wanted the economy to be digitally equipped with no or very less cash transaction. While it seems impossible for the government to have an absolute cash free economy, but the tremors of the change can be felt. Read more →