Weekly Updates For the Period starting from August 26, 2012 to August 31, 2012

Secretarial Updates

For the Period starting from August 26, 2012 to August 31, 2012

RBI UPDATE
Sr No	Circular/ Notification number	Particulars	Applicability
1 (a)	RBI/2012-13/177 RPCD.CO.RCB.BC.No.26/07. 38.01/2012-13 dated August 28, 2012	Interest Rate on Deposits	All Banks
(b)	RBI/2012-13/178 A. P. (DIR Series) Circular No. 19 dated August 28, 2012	Issue of Indian Depository Receipts (IDRs) - Limited two way fungibilty	To all the Banks and people dealing with IDRs
(c)	RBI/2012-13/178 A. P. (DIR Series) Circular No. 20 dated August 29, 2012	Non-resident guarantee for non-fund based facilities entered between two resident entities	All Banks
(d)	RBI/2012-13/180 UBD. BPD.(PCB)CIR No.6/ 13.01.000/2012-13 dated August 30, 2012	Premature Repayment of Term/Fixed Deposits in banks with “Either or Survivor” or “Former or Survivor” mandate – Clarification	To all the Banks and joint account holders
(e)	RBI/2012-13/183 DPSS. CO.PD. No.391/ 02.10 .002/2012-13 dated Aug 31, 2012	White Label ATMs (WLAs) in India – Guidelines	To all the Non Bank entities desirous of setting up White Label ATMs
(f)	RBI/2012-13/185 A. P. (DIR Series) Circular No. 21 dated August 31, 2012	Foreign investment by Qualified Foreign Investors (QFIs) – Hedging facilities	All Banks
MCA UPDATES
2. Notices from MCA
(a)	Stopping of Form 23AC and Form 23AC- XBRL for financial year starting on or after 01.04.2011
(b)	Webinar on MCA XBRL filings of financial statements for Financial Year 2011-12
(c)	Investor Education and Protection Fund
CASE STUDY
3(a)	Supreme Court Judgment on the Sahara conglomerate

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 RBI UPDATES:

1(a) Interest Rate on Deposits

RBI Circular:

This is with reference to the RBI Circular No: RBI/2012-13/177 RPCD.CO.RCB.BC.No.26/07. 38.01/2012-13 dated August 28, 2012

Applicable:

To all the Banks

Crux of the Circular

As per the RBI circular RPCD.No.RF.BC.39/07.38.01/98-99 dated December 4, 1998 :

-          The State and Central Co-operative Banks were permitted to offer, at their discretion, differential rates of interest on single term deposits of ` 15 lakh and above, subject to the condition that the schedule of interest rates payable on deposits, including deposits on which differential interest is paid, is disclosed in advance and not subject to negotiation between the depositor and the bank.

-          Based on this it had been observed that there are wide variations in the interest rates offered by banks on single term deposits of ` 15 lakh and above and those offered on other deposits (i.e. deposits less than ` 15 lakh) of corresponding maturities. Further, banks are offering significantly different rates on deposits with very little difference in maturities.

-          There by there was inadequate liquidity management system and inadequate pricing methodologies that prevailed.

Currently what should Banks do:

-          Banks are, therefore, advised to put in place a Board approved transparent policy on pricing of liabilities. The Board/ALCO should ensure that the variation in interest rates on single term deposits of ` 15 lakh and above and other term deposits (i.e. deposits less than ` 15 lakh) is minimal for corresponding maturities.

For further information:

Please follow the below link: http://rbi.org.in/scripts/NotificationUser.aspx?Id=7529&Mode=0

 

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1 (b) Issue of Indian Depository Receipts (IDRs) - Limited two way fungibilty

RBI Circular:

This is with reference to the RBI Circular No: RBI/2012-13/178 A. P. (DIR Series) Circular No. 19 dated August 28, 2012

Applicable:

To all the Banks and people dealing with IDRs

Crux of the Circular

Attention of Authorised Dealers Category – I (AD Category - I) banks is invited to A.P. (DIR Series) Circular No.5 dated July 22, 2009, in terms of which, the guidelines regarding issue of IDRs by eligible companies resident outside India have been laid out.

2. It has now been decided to allow a limited two way fungibility for IDRs (similar to the limited two way fungibility facility available for ADRs/GDRs) subject to the following terms and conditions:

i.                     The conversion of IDRs into underlying equity shares would be governed by the conditions mentioned in paras 6 and 7 of A.P. (DIR Series) Circular No. 5 dated July 22, 2009.

ii.                   Fresh IDRs would continue to be issued in terms of the provisions of A.P. (DIR Series) Circular No. 5 dated July 22, 2009.

iii.                  The re-issuance of IDRs would be allowed only to the extent of IDRs that have been redeemed /converted into underlying shares and sold.

iv.                  There would be an overall cap of USD 5 billion for raising of capital by issuance of IDRs by eligible foreign companies in Indian markets. This cap would be akin to the caps imposed for FII investment in debt securities and would be monitored by SEBI.

Accordingly, Para 5 of A.P. (DIR Series) Circular No. 5 dated July 22, 2009 stands amended as above.

3. The issuance, redemption and fungibility of IDRs would also be subject to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended from time to time as well as other relevant guidelines issued in this regard by the Government, the SEBI and the RBI from time to time.

4.AD Category - I banks may bring the contents of the circular to the notice of their customers/constituents concerned.

5. Necessary amendments to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 (Notification No. FEMA 20/2000-RB dated May 3, 2000) are being notified separately.

6. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

For further information:

Please follow the below link: http://rbi.org.in/scripts/NotificationUser.aspx?Id=7530&Mode=0

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1 (c) Non-resident guarantee for non-fund based facilities entered between two resident entities

RBI Circular:

This is with reference to the RBI Circular No: RBI/2012-13/178 A. P. (DIR Series) Circular No. 20 dated August 29, 2012

           

Applicable:

To all the Banks

Crux of the Circular

Attention of Authorised Dealer Category - I (AD Category - I) banks is invited to Notification No. FEMA 29 / 2000-RB dated September 26, 2000 viz. Payment to person resident outside India on invocation of guarantee, A.P. (DIR Series) Circular No. 28 dated March 30, 2001 and A.P. (DIR Series) Circular No. 5 dated August 1, 2005 relating to External Commercial Borrowings (ECB).

2. Borrowing and lending of Indian Rupees between two persons resident in India does not attract the provisions of the Foreign Exchange Management Act, 1999. In case where a Rupee loan is granted against the guarantee provided by a person resident outside India, there is no transaction involving foreign exchange until the guarantee is invoked and the non-resident guarantor is required to meet the liability under the guarantee. The Reserve Bank vide Notification No. FEMA 29/2000-RB dated September 26, 2000 has granted general permission to a person resident in India, being a principal debtor, to make payment to a person resident outside India, who has met the liability under a guarantee.

3. On a review, it has been decided to extend the facility of non-resident guarantee under the general permission for non-fund based facilities (such as Letters of Credit/guarantees/Letter of Undertaking (LoU) /Letter of Comfort (LoC) ) entered into between two persons resident in India. The method of discharge of liability by the non-resident guarantor under the guarantee and the subsequent repayment of the liability by the principal debtor would continue, as hitherto, as detailed in A.P. (DIR Series) Circular No. 28 dated March 30, 2001.

4. It has also been decided to introduce a reporting format to capture such guarantees issued and invoked. Authorized Dealer Category-I banks are required to furnish such details by all its branches, in a consolidated statement, during the quarter, as per the format in Annex to the Chief General Manager, Foreign Exchange Department, ECB Division, Reserve Bank of India, Central Office Building, 11th floor, Fort, Mumbai – 400 001 (and in MS-Excel file through email) so as to reach the Department not later than 10th day of the following month.

5. The policy would be reviewed at an appropriate time based on the experience gained in this regard.

6. The modifications to the policy will come into force from the date of this circular. AD Category - I banks may bring the contents of this circular to the notice of their constituents and customers.

7. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

For further information:

Please follow the below link: http://rbi.org.in/scripts/NotificationUser.aspx?Id=7531&Mode=0

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1 (d) Premature Repayment of Term/Fixed Deposits in banks with

“Either or Survivor” or “Former or Survivor” mandate – Clarification

RBI Circular:

This is with reference to the RBI Circular No: RBI/2012-13/180 UBD.BPD.(PCB)CIR No.6/ 13.01.000/2012-13 dated August 30, 2012

           

Applicable:

To all the Banks and joint account holders.

Crux of the Circular

Please refer to paragraph 4 of our circular UBD.BPD.(PCB)CIR No.11/13.01.000/ 2011-12 dated November 17, 2011 whereby we had advised that in case joint depositors of term/fixed deposits with “Either or Survivor” or “Former or Survivor” mandate intend to allow premature withdrawal of their deposits by one of the joint depositors on the death of the other, it would be open for banks to allow the same, provided they have taken a specific joint mandate from the depositors for the said purpose. In this regard you may also refer to Paragraph  3 of our circular UBD.BPD.Cir.No.4/13.01.00/2005-06 dated July  14, 2005 in terms of which, Urban Co-operative Banks (UCBs) were advised to incorporate a clause in the account opening form itself to the effect that in the event of death of the depositor, premature termination of term deposits would be allowed subject to the conditions which they may specify therein. UCBs were also advised to give wide publicity to the above and provide guidance to deposit account holders in this regard.

2. It is reiterated that in case of term deposits with “Either or Survivor” or “Former or Survivor” mandate, UCBs are permitted to allow premature withdrawal of the deposit by the surviving joint depositor on the death of the other, only if, there is a joint mandate from the joint depositors to this effect.

3. UCBs  which  have neither incorporated such a clause in the account opening form nor taken adequate measures to make the customers aware of the facility of such mandate, cause unnecessary inconvenience to  the “surviving“ deposit account holders(s). UCBs are, therefore, advised to invariably incorporate the aforesaid clause in the account opening form and also inform their existing as well as future term deposit holders about the availability of such an option.

4. The joint deposit holders may be permitted to give the mandate either at the time of placing fixed deposit or anytime subsequently during the term/tenure of the deposit. If such a mandate is obtained, banks can allow premature withdrawal of term/fixed deposits by the surviving depositor without seeking the concurrence of the legal heirs of the deceased joint deposit holder. It is also reiterated that such premature withdrawal would not attract any penal charge.

5. The clarification provided in this circular would supersede paragraph 3 of circular UBD.BPD.Cir.No.4/13.01.00/2005-06 dated July 14, 2005.

For further information:

Please follow the below link: http://rbi.org.in/scripts/NotificationUser.aspx?Id=7532&Mode=0

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 1(e) White Label ATMs (WLAs) in India – Guidelines

RBI Circular:

This is with reference to the RBI Circular No: RBI/2012-13/183 DPSS.CO.PD. No.391/ 02.10.002 / 2012-13 dated August 31, 2012

           

Applicable:

To all the Non Bank entities desirous of setting up White Label ATMs

Crux of the Circular

Please refer to the guidelines issued vide DPSS.CO.PD. No.2298/02.10.002/2011-2012 dated June 20, 2012 on the captioned subject.

2. We have been receiving queries from non bank entities, whether infusion of capital to satisfy the criteria of net worth of Rs 100 crore would be considered if the capital is infused after the entities’ balance sheet have been audited while seeking authorisation from RBI under the PSS Act, for setting up White Label ATMs.

3. It is clarified that such non-bank entities that wish to infuse capital can do so provided they submit a certificate to this effect from a Chartered Accountant that additional capital has been infused to satisfy the criterion of net-worth of Rs. 100 crore. The certificate to this effect may be submitted from its existing Chartered Accountant who has audited the entity’s last balance sheet or a Chartered Accountant who has conducted a limited review of the accounts of the last quarter / half-year along with the application seeking authorisation as per the stipulated guidelines.

For further information:

Please follow the below link: http://rbi.org.in/scripts/NotificationUser.aspx?Id=7532&Mode=0

 

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1(f) Foreign investment by Qualified Foreign Investors (QFIs) – Hedging facilities

RBI Circular:

This is with reference to the RBI Circular No: RBI/2012-13/185 A. P. (DIR Series) Circular No. 21 dated August 31, 2012

           

Applicable:

To all the Banks

Crux of the Circular

Attention of Authorized Dealers Category – I (AD Category – I) banks is invited to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 dated May 3, 2000 [Notification No. FEMA/25/RB-2000 dated May 3, 2000] and A.P. (DIR Series) Circular No.32 dated December 28, 2010, as amended from time to time.

2. In terms of A.P. (DIR Series) Circular No.8 dated August 9, 2011, A.P. (DIR Series) Circular No. 42 dated November 3, 2011, A.P. (DIR Series) Circular No. 66 dated January 13, 2012 and A.P. (DIR Series) Circular No. 89 dated March 1, 2012, Qualified Foreign Investors (QFI) are allowed to invest in rupee denominated units of domestic Mutual Funds and listed equity shares and allowing SEBI registered FIIs to invest in to be listed debt securities subject to the terms and conditions mentioned therein.

Further, in terms of A.P. (DIR Series) Circular No. 7 dated July 16, 2012, Qualified Foreign Investors (QFIs) have been permitted to purchase on repatriation basis debt securities subject to the various terms and conditions. As per para 2(x) of the circular, QFIs would be permitted to hedge their currency risk on account of their permissible investments (in equity and debt instruments) in terms of the guidelines issued by the Reserve Bank from time to time.

3. It has now been decided to allow QFIs to hedge their currency risk on account of their permissible investments (in equity and debt instruments), as per the details given in the Annex.

4. Necessary amendments to the Notification No. FEMA.25/RB-2000 dated May 3, 2000 [Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000] are being notified separately.

5. AD Category - I banks may bring the contents of this circular to the notice of their constituents and customers.

6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

Annexure 1:

Facilities for Qualified Foreign Investors (QFIs)

Purpose

1. To hedge the currency risk on the market value of entire investment in equity and/or debt in India as on a particular date.
2. To hedge Initial Public Offers (IPO) related transient capital flows under the Application Supported by Blocked Amount (ASBA) mechanism.

Products

Forward foreign exchange contracts with rupee as one of the currencies and foreign currency-INR options. Foreign Currency – INR swaps for IPO related flows.

Operational Guidelines, Terms and Conditions

1. QFIs are allowed to hedge the currency risk on account of their permissible investments with the AD Category-I bank with whom they are maintaining the Rupee Account opened for the purpose of investment.
2. The eligibility for cover may be determined on the basis of the declaration of the QFI with periodic review undertaken by the AD Category I bank based on the investment value as provided / certified by QDP of the QFI at least at quarterly intervals, on the basis of market price movements, fresh inflows, amounts repatriated and other relevant parameters to ensure that the forward cover outstanding is supported by underlying exposures.
3. If a hedge becomes naked in part or in full owing to contraction of the market value of the portfolio, for reasons other than sale of securities, the hedge may be allowed to continue till the original maturity, if so desired.
4. The contracts, once cancelled cannot be rebooked. The forward contracts may, however, be rolled over on or before maturity.
5. The cost of hedge should be met out of repatriable funds and /or inward remittance through normal banking channel.
6. All outward remittances incidental to the hedge are net of applicable taxes.
7. For IPO related transient capital flows
1. QFIs can undertake foreign currency- rupee swaps only for hedging the flows relating to the IPO under the ASBA mechanism.
2. The amount of the swap should not exceed the amount proposed to be invested in the IPO.
3. The tenor of the swap should not exceed 30 days.
4. The contracts, once cancelled, cannot be rebooked. Rollovers under this scheme will also not be permitted.

For further information:

Please follow the below link: http://rbi.org.in/scripts/NotificationUser.aspx?Id=7537&Mode=0

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MCA UPDATES

Notices from MCA

2. a. Stopping of Form 23AC and Form 23AC- XBRL for financial year starting on or after 01.04.2011

Please note that existing Form 23AC, Form 23ACA, Form 23AC-XBRL and Form 23ACA-XBRL can not be filed by those companies whose financial year is starting on or after 1.4.2011 as Revised Schedule VI is applicable for such period. New e-forms are undergoing revision to align with the Revised Schedule VI and new forms would be updated shortly.

Ministry has observed that some listed companies have shown abnormal figure of their shareholders in their Annual Return (e-form no. 20B) filed with the Registrar of Companies.
It appears that the signatories of e-form 20B of above companies including certifying practicing professionals have not verified the figures of number of shareholders from the records of the company. It can also be inferred that by putting figure of only 1 (one shareholder) in a listed company, the practicing professionals have not discharged their duties prudently and are liable for professional misconduct.The signatory Directors and company secretaries of these companies are also liable for furnishing wrong information in the Form.

 
The Regional Directors have been directed to examine the above lapses on the part of companies and by practicing professionals and to furnish their report to the Ministry for initiating further action in the matter.

2. b. Webinar on MCA XBRL filings of financial statements for Financial Year 2011-12

A Webinar on MCA XBRL filings of financial statements for Financial Year 2011-12 has been scheduled on 16.08.2012 at 12.00 noon. Ministry officials, representatives of ICSI, ICAI, TCS, etc are expected to participate in this webinar. Weblink of the Webinar is

http://68.233.237.91/icsi160812

2. c Investor Education and Protection Fund

Investor Education and Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012, has mandated every company to file eForm 5INV containing the information of unclaimed and unpaid amounts as referred to in subsection (2) of section 205C of the Companies Act, 1956.

This information is required to be filed every year within a period of 90 days after the holding of Annual General Meeting or the date on which it should have been held as per the provisions of section 166 of the Act, and every year thereafter till completion of the seven years’ period.

The information is to be filed in Form 5- INV as per the above mentioned rules; and thereafter an excel sheet containing detailed investor wise details is to be filed separately. The eForm, the excel template and detailed steps are provided in the IEPF application link on the portal

www.iepf.gov.in.

For financial year ended on 31st March 2011, the eForm should be filed latest by 31st July 2012.

For more details, refer the website www.iepf.gov.in and the Investor Education and Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012.

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  CASE STUDY

3 (a) Supreme Court Judgment on the Sahara conglomerate

The Supreme Court on Friday ordered the Sahara conglomerate to refund more than $3 billion it had raised from millions of small investors, reaffirming an order from the SEBI, which had said the process violated rules, in a blow to the powerful group. The Supreme Court also ordered Sahara to pay 15% interest to investors on their deposits, a lawyer on the case said.

Two unlisted group companies of Sahara, which has interests ranging from financial services and housing to media and sports, had between 2008 and 2011 raised a total of 177 billion rupees from 22 million small investors through an instrument known as an optionally fully convertible debenture.

The Securities and Exchange Board of India (SEBI) last year ordered the group companies to refund the money, with 15 percent annual interest, after it found that the fund-raising process did not comply with rules.

An appellate tribunal upheld the regulator's order after hearing Sahara's appeal.