[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...
RBI Proposal on Rupee Linked Bonds
In the past, rupee denominated bond issuances have essentially been available to multilateral institutions, of which the International Finance Corporation (IFC) had availed of them. Now, the Reserve Bank of India (RBI) has announced a draft framework, which allows Indian companies as well to tap this avenue for raising debt. Indian corporates that are eligible to avail of external commercial...
Lenders Empowered to Take Control over Distressed Firms
The Reserve Bank of India (RBI) yesterday conferred a significant power to banks to acquire control of borrower companies which fail to achieve prescribed milestones as part of their restructuring. Under this arrangement, the Joint Lenders’ Forum (or JLF, formed for the purpose of addressing distressed assets) may “convert the whole or part of the loan and interest outstanding into equity shares...
RBI’s New Diktat: Lending to a Subsidiary
[The following post is contributed by Nivedita Shankar, who is a Senior Associate at Vinod Kothari & Company. She can be contacted at [email protected]] The Reserve Bank of India (RBI) on January 7, 2015[1] has modified the Master Circular on Wilful Defaulters (Master Circular) with a view to usher in greater transparency and accountability in the process for identification of wilful...
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...
Pricing of Options To Foreign Investors
The last few weeks have witnessed some activity from the Reserve Bank of India (RBI), which is indicative of a more liberalized approach towards the pricing at which foreign investors are able to sell their shares upon exercise of options (such as put options) made available to them under contractual documentation. Most of the indications came from the RBI in relation to a specific case involving...
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...
SEBI’s Proposal on “Wilful Defaulters”
Over the years, the Reserve Bank of India (RBI) has significantly tightened the regime relating to “wilful defaulters” who are declared as such through a process stipulated by the RBI. Upon such a declaration, the regulatory regime of the RBI effectively stifles the ability of a wilful defaulter from raising further bank financing. However, realisation seems to have dawned more lately on the fact...
RBI Circular on Security for External Commercial Borrowings
The Reserve Bank of India (RBI) prescribes stringent norms on external commercial borrowings (ECBs) as also the grant of security in favour of foreign lenders or suppliers who have extended ECBs to Indian borrowers. While clarity has been developing over the years, there has often been doubt regarding specific types of securities and guarantees to be granted. Now, the RBI has issued a circular...
RBI Allows FDI against “Legitimate Dues”
Hitherto, an Indian company could issue shares to a non-resident against payment obligations only in certain circumstances. These related to “lump-sum technical know-how fee, royalty, External Commercial Borrowings (ECB) (other than import dues deemed as ECB or Trade Credit as per RBI guidelines) and import payables of capital goods by units in Special Economic Zones” subject to applicable...
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