In 2015, the Supreme Court [SC] had held that the Reserve Bank of India [RBI] cannot withhold information on defaulters and other issues covered under the RTI [Right to Information] Act under the “guise” of confidence or trust with financial institutions [FIs] and is accountable to provide information sought by general public. The apex court had opined that the banking regulator was duty bound to furnish all information relating to its annual inspection report [AIR] on banks and other material under the RTI Act unless the material is exempted from disclosure under the law. It had also ordered that RBI should take rigid action against those banks and FIs indulging in “disreputable business practices”. Yet, under its “Disclosure Policy” [it...
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Category: Regulatory environment
NPAs resolution – SC puts a speed-breaker
In December 2016, Modi – government enacted the Insolvency and Bankruptcy Code [IBC] – a robust and impeccable legal framework for recovery of non-performing assets [NPAs] of lenders in a fast track mode. It also amended the Banking Regulation Act [BRA] [2017] arming the Reserve Bank of India [RBI] with powers to give directions to banks for making reference to National Company Law Tribunal [NCLT] for resolution of NPAs under IBC. Following this, the RBI had sent two lists involving 40 accounts with NPAs worth over Rs 400,000 crore to banks [June & December, 2017] for taking up resolution and in case not resolved [within deadline] make reference to NCLT. Meanwhile, on February 12, 2018, the RBI issued an order...
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In GST, a tale of two obnoxious levies
From the start on July 1, 2017, the implementation of the Goods and Services Tax (GST) has been plagued by several anomalies. The GST Council — the all-powerful body to decide the tax architecture and rates on various items — could have adopted a proactive stance, anticipated problems and taken steps to nip them in the bud. Unfortunately, most of the time, it has been reactive. As a result, it continues to grapple with unending problems. Two such contentious issues are (i) including the TCS (tax collected at source) amount — levied under the provisions of the Income-Tax Act, 1961 — in the value of goods for the purpose of determining the GST liability; (ii) requiring e-commerce companies to deduct tax at the rate...
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A case against shareholder interests
The idea floated by high-profile entrepreneurs, seeking dual-class share structure along with differential voting rights for founder-promoters of startups, is flawed. The Government must look for better ways to help small businesses An advocacy group, IndiaTech, representing some of the most high-profile entrepreneurs, has made a submission to the Ministry of Corporate Affairs (MCA) and the markets regulator, Securities Exchange Board of India (SEBI), seeking a dual-class share structure along with differential voting rights for founder-promoters of start-ups that can encourage the country’s most valuable companies to get listed on the domestic stock exchanges instead of overseas exchanges such as Nasdaq and New York Stock Exchange (NYSE). At present, the Companies Act 2013, permits firms having consistent track record of distributable profits...
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Protectionism hurts e-commerce
Instead of the extreme steps proposed by a new policy, the government should consider a pragmatic and flexible arrangement to address the concerns on protection of sensitive data With increasing penetration of internet, surging middle-class and focus on customer convenience and affordable pricing, online retail commerce in India has grown at a phenomenal 70 per cent during the last five years reaching about US $40 billion during 2017. This is projected to increase five-fold to US $200 billion by 2026. Much of the growth has been driven by foreign majors such as Amazon,Walmart/Flipkart and so on under a policy notified in 2016-17 which allowed 100 per cent foreign direct investment (FDI) in the marketplace model of e-commerce. The marketplace is an...
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Dual-class share structure – a flawed idea
An advocacy group IndiaTech representing some of the most high profile entrepreneurs have made a submission to the ministry of corporate affairs [MCA] and the markets regulator Securities Exchange Board of India [SEBI] for allowing a dual-class share structure with differential voting rights for founder-promoters of start-ups to encourage country’s most valuable companies to get listed on the domestic stock exchanges instead of overseas exchanges such as Nasdaq and New York Stock Exchange [NYSE]. At present, the Companies Act [2013] permits firms having consistent track record of distributable profits for three years to issue shares with differential voting rights [DVR] subject to a cap of 26% of the total share capital. The lobby group wants the MCA to dispense with...
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E-commerce policy draft – needs overhaul
With increasing penetration of internet, surging middle-class, its growing aspirations and focus on customer convenience, online retail commerce in India is projected to increase from an already high of US$ 38.5 billion in 2017 to over US$ 200 billion by 2026. Seizing the unfolding opportunities, foreign majors such as Amazon,Walmart/Flipkart etc have already made substantial investment in the marketplace model of e-commerce. Under a policy notified in 2016-17, the government allowed 100% foreign direct investment [FDI] in this format. The market-place is an electronic platform on which the sellers/vendors get connected with the end consumers and carry out the sale/purchase transactions. The owner of the platform is expected to act only as a facilitator by providing support services viz. warehousing, logistics,...
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Foreign majors still dominate ‘marketplace’
India has come a long way since the process of economic reforms and liberalization started nearly three decades ago [1991] – with major focus on abolishing controls and license raj. It can boast of unprecedented progress with corresponding gains by way of putting the economy on a high growth trajectory. The achievements have been particularly noteworthy under Modi – dispensation. Yet, our governance systems including those which have a strong bearing on the economy continue to remain shackled by bureaucratic controls and red tape. The ability of the bureaucrats [a sophisticated nomenclature to describe officials] to maneuver and navigate things the way they want has not diminished. One can see a vivid demonstration of their ability in the way the subject...
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Digital tax – a welcome idea
Some of the path-breaking reforms implemented by the Modi – dispensation viz. demonetization, GST [Goods and Services Tax], Benami Law, Black Money Act etc have helped the government in bringing about a substantial increase in tax collection. At the same time, its expenses are increasing leaps and bounds due to mammoth needs for building infrastructure [including augmenting and strengthening the military infrastructure and preparedness of our armed forces] on the one hand and adequately funding welfare schemes meant for assuring affordable housing, fuel, education and health for majority of the poor on the other. Faced with a substantial shortfall in revenue vis-à-vis requirements, the government will need to explore new ways of garnering tax revenue. An area that offers huge potential...
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Unshackle banks from credit cycle
The Insolvency and Bankruptcy Code is an important legislation that has instilled a sense of urgency among all stakeholders to resolve bad loans but for the momentum to sustain, India needs a committed leadership Banking is inherently a huge profitable business. To get a sense of it, all one needs to do is to look at the thousands of crores of rupees that a bank receives in various savings account on which it pays a meager 3.5 per cent to 4 per cent interest and earns a minimum of 10 per cent by way of lending. Even on account of funds, it garners by way of term deposits — 6.25 per cent to 7.5 per cent, depending on the period....
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