Private equity and venture capital (PE/VC) investments have recorded the highest monthly investments in the past 10 years at $3.1 billion in May 2017. For the third consecutive month in a year, the investment flow crossed the $2-billion mark.
Private equity and venture capital (PE/VC) investments have recorded the highest monthly investments in the past 10 years at $3.1 billion in May 2017. For the third consecutive month in a year, the investment flow crossed the $2-billion mark.
Markets watchdog Securities and Exchange Board of India (SEBI) plans to overhaul the regulatory framework for corporate governance, including appointment and removal of independent directors, people familiar with the matter said.
Besides, a high level panel is looking at corporate governance issues such as those pertaining to related party transactions, auditing and effectiveness of board evaluation practices, the people added.
Against the backdrop of recent instances of boardroom battles involving large corporates, the SEBI is looking to revamp the norms and the matter is expected to be discussed at its board meeting later this month.
Strengthening corporate governance practice is a focus area for the regulator, with SEBI chairman Ajay Tyagi recently saying, “independent directors are not independent”.
The regulator is keen on stricter norms for independent directors, including with respect to their appointment, removal and larger responsibility as part of a company’s board, the people said.
Currently, an independent director can be removed by way of an ordinary resolution — which requires the approval of at least 50 percent shareholders of a particular company.
However, when it comes to re-appointment of independent directors, the firm concerned has to move a special resolution under which nod from 75 percent or more shareholders is required.
According to sources, SEBI wants to make it special resolution mandatory for removal of an independent director as such a provision will reduce the arbitrariness of promoters in deciding upon the ouster of such directors.
Besides, stringent disclosure requirements for independent directors, including at the time of their appointments, are being looked at, sources said.
Earlier this month, the watchdog set up a 21-member committee under the chairmanship of veteran banker Uday Kotak to suggest ways to further improve corporate governance standards of listed companies.
The panel will make recommendations on ensuring independence in spirit of independent directors and their active participation in functioning of the company.
Besides, measures to address issues faced by investors on participation in general meetings and ways for improving effectiveness of board evaluation practices will be suggested by the committee.
Apart from Kotak, who is the chairman of Kotak Mahindra Bank, other members include HDFC CEO Keki Mistry, Wipro chief strategic officer Rishad Premji, L&T Whole Time Director R Shankar Raman and BSE CEO Ashishkumar Chauhan.
In April, Tyagi had said there were too many lacunae with respect to the concept of independent directors with many having “no commitment to any cause”.
“I must admit I have no solutions on what should be done but it will be anyone’s case that existing system has lot of lacunae,” he had said.
Earlier this year, the regulator came out with detailed corporate governance norms for listed companies that provide for stricter disclosures and protection of investor rights, including equitable treatment for minority and foreign shareholders.
The new rules, which would be effective from October 1, require companies to get shareholders’ approval for related party transactions, establish whistle blower mechanism, elaborate disclosures on pay packages and have at least one woman director on their boards.
The Reserve Bank of India (RBI) is looking into a request to extend the classification period for non-performing assets (NPAs) to help small and medium enterprises (SMEs).
“Some people have made representation to the finance ministry of raising the NPA classification period beyond existing 90 days. This issue is under consideration. It is being examined by the RBI,” Minister of State for Finance Arjun Ram Meghwal told newswire PTI.
Currently, an account turns into a non-performing asset (NPA) or bad loan if it is not serviced for 90 days.In case of small businesses and SMEs, payments come usually late. Once they miss the 90-day period and fall in the NPA category, their credit line is cut.
In the absence of vibrant factoring or trade receivable market, small businesses and SMEs face the issue of timely credit availability. Meghwal also said that there is a need to strengthen loan restructuring mechanism in an effort to tackle inflation.
Loan restructuring is reviewed by the RBI from time to time as part of its effort to fight the mounting NPAs in the banking system.
Most recently, the minister said, the government brought in an ordinance giving wide-ranging legislative powers to the Reserve Bank to fight NPAs.
The ordinance authorises RBI to issue directions to any bank to initiate insolvency resolution process in the event of a default under the provisions of the Insolvency and Bankruptcy Code (IBC), 2016.
As per some estimates, banks are sitting on unrecognised stressed loans worth Rs 7.7 lakh crore in corporate and SME sectors and expect around 35 per cent of them to slip into the NPA category in the next 12-18 months.
There is a likelihood of Rs 2.6 lakh crore of corporate and SME loans, which are 3.2 per cent of total bank credit to be recognised as stressed loans by 2019.
Stressed loans include restructured assets that carry the risk of turning into NPAs.
Given the lukewarm response to the safe harbour mechanism for transfer pricing, Central Board of Direct Taxes (CBDT) on Thursday cut the operating profit margin for information technology-enabled services, knowledge process outsourcing services (KPOs) and research and development (R&D) related to software and generic pharmaceutical drugs companies.
The new rules will apply to transactions of up to Rs 200 crore. Safe harbour rules, a dispute-avoidance mechanism, are defined as circumstances under which the income-tax authorities accept the transfer pricing declared by the assessee. The rule provides the minimum operating profit margin in relation to operating expenses that a taxpayer is expected to earn for certain categories of international transactions. The same is acceptable to the income tax authorities as arm’s length price (ALP). The rules are applicable for transactions between group companies based in different countries so that a fair price or ALP is arrived at by the tax authorities. The rules have come into effect from April 1 this year and will continue to remain in force for two successive years up to assessment year 2019-2020, the board said in a statement
For software development services, safe harbour margins have been reduced to a peak rate of 18% from 22% in the previous regime. Similarly, for KPOs, a graded structure of three different rates of 24%, 21% and 18% has been provided, based on employee cost to operating cost ratio, replacing the single rate of 25% earlier. For the third category of R&D services, the margins have been reduced to 24% from 30% and 29%, respectively, earlier. “The lukewarm response to the earlier safe habour scheme was on account of the high rates. Thus, taxpayers opted for unilateral APA process instead. The revised scheme has been designed to attract small to medium business, especially in the IT/ITeS segment, so as to give them a viable alternative to APA regime, which is both time consuming and expensive. The rates for IT/ITeS segment are more or less in line with the APAs being settled and hence the safe harbour scheme, this time, should get a positive response,” Arun Chhabra, director, Grant Thornton Advisory, said.
Assessees eligible under the present safe harbour regime up to AY 2017-18 shall also have the right to choose the safe harbour option most beneficial to them, the board said. It added that a new category of transactions being “Receipt of Low Value-Adding Intra-Group Services” has been introduced. “The revised safe harbour rules are a welcome step towards making safe harbour a viable alternate dispute resolution mechanism. Key highlights are: Reduction of margins for service units, introduction of safe harbour rate for low-valued services (in line with BEPS recommendation) and well-thought scheme for knowledge process outsourcing companies. Overall, it’s a welcome step towards strengthening the safe harbour option for small and mid size companies,” Kunj Vaidya, leader transfer pricing, Price Waterhouse & Co, said.
The Indian rupee has been one of the best performing currencies among the emerging markets since the beginning of 2017, thanks to robust macroeconomic factors and attractive domestic bond yields. As a result, foreign fund inflows have hit a record.
So far this year, India has seen an inflow of nearly Rs 1.25 lakh crore, including Rs 73,200 crore in bonds, against an outflow of Rs 25,500 crore, a year ago. This is higher than foreign fund inflows in the first half of any previous calendar year, even as only the first week of June has got over so far. Given the present economic scenario, rupee is expected to sustain these levels and remain range bound.
India’s current account deficit has consistently improved over the years — from 4.8% of GDP in 2012-13 to expected 0.9 per cent in 2016-17, helped by weak oil prices, which constitute as much as 40-50 per cent of India’s imports.
With brent crude oil prices continuing to remain weak, down more than 8 per cent in the past two weeks and 1 per cent year-on-year, and the Reserve Bank of India keeping benchmark interest rate unchanged in its Wednesday policy meeting, the rupee is likely to continue to trade at the current levels vis-à-vis the US dollar in the short to medium term.
Source: http://economictimes.indiatimes.com/articleshow/59046239.cms
The one-nation, one-tax principle that underlines the goods and services tax (GST), set to be rolled out on July 1, could be adopted in a much more broader sense by the income tax department through a path-breaking initiative on jurisdiction-free assessment.
This would mean that a taxpayer in Mumbai could be assessed by an income tax officer located in Patna, a significant leap toward eradicating corruption by reducing the need for face-to-face contact between citizens and tax officials to the absolute minimum besides speeding up processing.
The move, which will require a change in the income tax law, would also end the relevance of various geographic divisions in the form of wards and circles with the whole country becoming one jurisdiction. This, it is hoped, will put an end to a system in which bribery is said to be used as a tool to ease processes through human intervention.
A high-level internal report of the Central Board of Direct Taxes (CBDT) recommended the move, which is under active consideration, a senior official told Economic Times.
“We are looking at it,” the CBDT official said.
The government may consider implementing the process in the next financial year.
The Catalyst
The key catalyst for such a significant reform is the massive shift toward e-filing of returns, which is already jurisdiction-free with returns going to the Central Processing Centre in Bengaluru.
In the last financial year, over 42.1 million tax returns had been filed online by February. The number of e-returns processed by then was 43 million, which included some backlog from previous years.
Multiple Benefits
In line with this move towards e-processing, the income tax department may even opt for e-scrutiny for all limited scrutiny cases where assesses can explain the transactions in question over email, the official said.
A complete jurisdiction-free environment would make geography redundant and the income tax department completely faceless for taxpayers. Any review or scrutiny of return could happen anywhere in India through an electronic interface, ensuring that the payee is not forced to interact with officials. “A taxpayer would not need to have any physical interface with his assessing officer,” said the official cited above.
CBDT had earlier constituted a seven-member committee to formulate a Standard Assessment Procedure for e-scrutiny to promote greater certainty, transparency and accountability. The board has in recent times taken a number of initiatives to reduce the face-to-face contact between tax officials and assessees and make the system non-adversarial.
These include directing field offices to raise only specific queries in income tax assessment cases picked up for scrutiny. It also directed the expeditious completion of those scrutiny cases where income concealed is up to Rs 5 lakh. “Jurisdiction-free assessment will help the tax department plan and allocate assessment work across the country,” said Jiger Saiya, partner, direct tax, BDO India.
Source: http://economictimes.indiatimes.com/articleshow/59026099.cms
The resolution of the vexed issue of massive non-performing assets (NPAs) in the banking system is a work in progress and some “visible action” will be initiated over the next few days under the NPA ordinance promulgated recently, finance and defence minister Arun Jaitley said on Thursday.
“The RBI was taking measures under the existing mechanism. We have now taken other steps and there would be visible action taken under the new mechanism in the next few days,” Jaitley said, addressing media on achievements of the ministries under him over the past three years. The Centre won’t provide any special package to any state to waive farm loans but the states are free to spend from their own budgets should they take any such decision, the minister said.
Here are few excerpts from FM’s media briefing:
On NPAs and other things constraining private investments
Massive toxic assets impact the ability of banks to support growth, although record levels of foreign direct investments (gross FDI inflows touched $60 billion in 2016-17) and higher government spending have offset inadequate private investments to a certain extent. Linked to it (NPAs) is the challenge of wanting to increase private sector investment, even though our FDI and public investments have significantly increased. And of course there is a significant (adverse) impact of the global situation also (on private investments).
“Note ban not sole reason for Q4 GDP slowdown”
Demonetisation could be one of the several factors, and not the sole reason, that contributed to the slowdown of GDP growth to an 8 quarter-low of 6.1% in Q42016-17. What you think is very clear (that note ban dragged down Q4 growth) isn’t very clear. There are several factors which can contribute to GDP in a particular quarter. There was some slowdown visible, given the global and domestic situations, even prior to demonetisation in the last year. Financial services, which used to have 9-10% growth, has come down (to 2.2% in Q42016-17). Under the current global situation, 7-8% growth, which is at the moment the Indian normal, is fairly reasonable by our own standard and very good by global standards.
And I am sure as the impact of all these policies (taken by the government) holds out, growth will gather momentum. There won’t be any adverse impact of GST on GDP growth. The GST by itself should normally add to growth.
(Chief economic adviser Arvind Subramanian pointed out that under the GST, the incidence of tax is going to come down. While there could be some teething problem in implementation, at the most, initially, the tax cut would be positive to both reduce inflation and stimulate consumption).
On Pradhan Mantri Garib Kalyan Yojana
PMGKY wasn’t an isolated scheme in last financial year. First we introduced the Income Disclosure Scheme; after the IDS, there was a (post-demonetisation) phase of people depositing cash in the banking system. And the PMGKY was over and above these. To assess the total amount of (black money) disclosures made, you have to look at all the three collectively.
Revenue secretary Hasmukh Adhia said the response to PMGKY hasn’t been very good; only Rs 5,000 crore has been declared under the scheme. There are mainly two reasons for it. First, even before the scheme was announced, people had tried to deposit their cash in different accounts and tried to “adjust their money”. Secondly, many people found the (PMGKY) rate – 50% tax plus 25% as interest-free for four years – too high).
No central funds for farm loan waiver by states
The Centre won’t provide any special package to any state to waive farm loans but states are free to spend from their own budgets should they take any such decision. The Centre will continue to provide the states funds in accordance with the latest Finance Commission suggestions, and not more to waive farm loans (clarified that states are free to take decision on farm loan waivers from their own budgets but they have to stick to the 3% fiscal deficit target, as stipulated under the fiscal responsibility legislation).
On Air India
As far as AI is concerned, Niti Aayog has given its suggestion to the civil aviation ministry and the ministry will have to explore all the options for divestment or privatisation of the airline. The civil aviation minister will now devise the methodology ( for disinvestment / privatisation). As far the merger of oil PSUs are concerned, the petroleum ministry will have to take a call.
On “jobless growth”
Jobs aren’t created outside the economic structure. If the economy grows then it’s only natural that the formal sector would create jobs and in this country job creation is even faster in the informal sector. Since there is no firm statistics available on job growth in the informal sector, the term ‘jobless growth’ is being bandied about.
On the amount of demonetised currency
On the total currency given to the banks, the RBI used to give the figures frequently during the process of demonetisation, but now that the exercise is complete, as a responsible institution it can’t give an approximation. Today, every currency note is to be counted and if there are counterfeits these also need to be counted before arriving at the real count. The exercise is enormous and large but the RBI will give the accurate figure when it is complete.