[Ritvij Ratn Tiwari is a 3rd-year B.A., LL.B. (Hons.) student at the National Law School of India University, Bangalore.] In June 2023, the Reserve Bank of India (“RBI”) issued guidelines regulating the arrangements for sharing the losses arising from defaulted loans, popularly called default loss guarantee (“DLG”), between regulated entities (“REs”) and lending service providers (“LSPs”). These...
Put Options: Putting Up with Foreign Exchange Regulation
[Ryan Joseph is a 3rd year B.B.A., LL.B. (Hons.) student at Jindal Global Law School] A decision of the Madras High Court in January this year in GPE (India) Limited v. Twarit Consultancy has added to the controversial debate over the enforcement of put options that guarantee assured returns. The High Court toed the line with other courts and upheld an arbitral award, notwithstanding the...
Securing Borrowers, Shielding Lenders: RBI’s Default Loss Guarantee Regulations
[RS Sanjanaa is a 3rd year BA LLB (Hons.) student at Symbiosis Law School, Pune] The Reserve Bank of India (RBI) has granted approval to and released guidelines (on June 8, 2023) on the much-contended topic of default loss guarantee (DLG). A DLG model according to this refers to the default loss cover provided to a bank or non-banking finance company (NBFC) by the fintech company that was the...
How Will Courts Decide in Bond Holders versus Central Banks?
[Bhargavi Zaveri Shah a doctoral researcher at the Faculty of Law, National University of Singapore and an editor of IndiaCorpLaw Blog and Harsh Vardhan is a management consultant] The Supreme Court is currently hearing an appeal against a Bombay High Court judgement on Yes Bank’s restructuring plan. The question at hand in this appeal is this: whether, as part of Yes Bank’s restructuring...
The Bombay High Court’s Yes Bank Judgement: Falling Short on Fairness
[Harsh Vardhan is a management consultant and Bhargavi Zaveri Shah a doctoral researcher at the Faculty of Law, National University of Singapore and an editor of IndiaCorpLaw Blog] Last week, the Bombay High Court set aside the Reserve Bank of India (RBI)-appointed administrator’s decision to write off the additional tier (AT1) bonds issued by Yes Bank in 2016 and 2017. In 2020, when a...
Relaxation for Flip Structures under the New Overseas Investment Regime
[Shubh Gautam is a fourth year B.A.LL.B (Hons) student at Chanakya National Law University, Patna] Indian startups and new age companies are jumping on the bandwagon of ‘flipping’ their business. This trend has been addressed by the Foreign Exchange Management (Overseas Investment) Rules, 2022 issued on August 22, 2022 (forming a part of the new overseas investment regime). The new overseas...
Asset Reconstruction Companies as Resolution Applicants: Revisiting the SARFAESI’s Limitations
[Arshit Kapoor and Srilagna Dash are 5th year B.B.A. LL.B. (Hons.) and 3rd year B.A. LL.B. (Hons.) students, respectively at National Law University Odisha, Cuttack] Asset Reconstruction Companies (“ARCs”) are financial institutions which reconstruct and securitise bad assets of banks and financial institutions. They are regulated by the Securitisation and Reconstruction of Financial Assets and...
Supreme Court’s Note Ban Judgement: Does it Matter?
In a judgement delivered on 2 January 2023, the Supreme Court upheld the constitutionality of the demonetization exercise undertaken by the Government of India in November 2016. The judgement was delivered by a five-judge constitution bench, with one judge dissenting on all the questions decided by the majority. The lapse of six years since the demonetization exercise led to questions regarding...
RBI Bans Loading of Prepaid Payment Instruments From Credit Lines
[Manasi Chandriani Shah is a Solicitor (B.I.L.S)] Fintech entities, wallet providers, and non-banking financial companies have been mandated to pull the chains on all existing arrangements to facilitate or extend loans through prepaid payment instruments (“PPI”), including cards and wallets. Extending a credit line through any PPI has been prohibited by the Reserve Bank of India (“RBI”). This ban...
Use Cases of a Digital Rupee to the Average Household and Business in India
In her Budget Speech, the Finance Minister announced a proposal to issue a Digital Rupee by the Reserve Bank of India (RBI) starting financial year 2022-23. What functions might a Digital Rupee (synonymously, a central bank digital currency or CBDC) issued by the RBI, serve? Identifying the use-cases of a CBDC is critical to the design of the Digital Rupee, and the design of the infrastructure...
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