[The following post is contributed by Dhanush. M, a 4th year studnent at the Jindal Global law School] The rapid growth of non-performing assets (NPAs), especially with regard to public sector banks (PSBs) is a major hurdle to the sustenance of the banking system. This prompted the Reserve Bank of India (RBI) to issue a paper in early 2014 titled “Framework ForRevitalising Distressed Assets and...
Subordinated debentures – A Capital Supporting Instrument
[The following guest post is contributed by Vinita Nair of Vinod Kothari & Co. The author may be contacted at [email protected]] Non Banking Financial Companies (NBFCs) in India are always seeking sources of raising funds. Capital is costly and therefore NBFCs rely more on public funds. Public funds as defined under the Systemically Important Non-Banking Financial (Non-Deposit Accepting...
Negotiable Instruments Amendment Ordinance Promulgated
In May, the Government proposed the Negotiable Instruments (Amendment) Bill, 2015 with a view to amending the Negotiable Instruments Act, 1882 (the “NI Act”). This was necessary due to jurisdictional issues pertaining to cases brought under section 138 of the NI Act for dishonour of cheques. The background and rationale for the amendment has been stated explicitly in the Statement of Objects and...
Designing Executive Compensation for Banks and Financial Institutions
When it comes to banks and financial institutions, there are additional corporate governance requirements apart from those applicable to other types of companies. This is because the operation of banks and financial institutions affect the interests of a constituency other than shareholders, namely deposit holders and other creditors. Hence, executive compensation practices need to take these...
Truth in lending: Regulatory Measures in India
[The following guest post is contributed by Neha Somani of Vinod Kothari Consultants Pvt. Ltd. The author can be contacted at [email protected]] Truth-in-lending laws, found in many countries world-over, ensure that lenders make a truthful disclosure of their rates of interest, and do not seek to attract borrowers with misleading rates of interest. Truthful disclosure of rates of...
Wilful Defaulters: A Further Analysis
[The following post is contributed by Prachi Narayan of Vinod Kothari & Company. She can be contacted at [email protected]. A previous post on the topic discusses SEBI’s recent proposal towards “wilful defaulters”. This guest post discusses in detail the current regime imposed by the RBI and also comments briefly on the SEBI proposal as well as relevant case law on the topic] The...
Report on Governance of Banks
Historically, the governance of banks has received greater (and somewhat different) attention when compared to governance of companies carrying on other forms of business. This is because banks deal with depositors’ funds and their actions or misdeeds can cause a more severe strain on the economy as a whole. Hence, while banks that are established as companies (and listed on the stock exchanges)...
Guest Post: Nachiket Mor Committee Recommends Bank – NBFC Convergence
[This post has been contributed by Shampita Das of Vinod Kothari & Company. The author may be contacted at [email protected]] The Reserve Bank of India (RBI) in September, 2013 had set up a ‘Committee on Comprehensive Financial Services for Small Businesses and Low-Income Households’, under the Chairmanship of Dr. Nachiket Mor, Member on RBI’s Central Board of Directors. The main...
RBI’s Stance on Bitcoins and Other Virtual Currencies
Earlier this month, we had highlighted some legal issues pertaining to Bitcoin, as that form of virtual currency has been gaining ascendancy the world over. We had stated that the Reserve Bank of India (RBI), as the currency regulator, would certainly be seized of the issue. It now emerges that it is indeed the case. Yesterday, the RBI issued a press release warning users, holders and traders of...
RBI releases discussion paper on banking structure in India
The RBI issued guidelines for licensing of new banks in the private sector, vide its press release dated February 22, 2013 (covered here). It was stated in the guidelines that there was a need for an explicit policy on banking structure in India, keeping in view the recommendations of the Narasimham Committee, Raghuram Rajan Committee and other viewpoints. Accordingly, it was announced in the...
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