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RBI restricts investments in NBFC from FATF non-compliant countries, Anshuman Mozumdar and Anirudh Gotety, L&L Partners

RBI restricts investments in NBFC from FATF non-compliant countries

By Anshuman Mozumdar and Anirudh Gotety, L&L Partners
The Reserve Bank of India (RBI) issued a notification on 12 February 2021 further restricting investments in non-banking financial companies (NBFC) from jurisdictions, which are on the Financial Action Task Force’s (FATF) black list...
Proposed scale based governance frameworks for NBFCs

Proposed scale based governance frameworks for NBFCs

By Sawant Singh and Aditya Bhargava, Phoenix Legal
Non-banking financial companies (NBFCs) have grown rapidly, and are increasingly interconnected to capital markets and other components of the financial system. The dominance of NBFCs in the fintech space and the reliance that retail...
insolvency

NBFCs brought under purview of insolvency code

By Anisha Shroff and Sharanya Kundu, Samvad Partners
With the introduction of a codified law on insolvency and bankruptcy processes, restructuring jurisprudence entered a new era. While the new law focused on rehabilitating and restructuring stressed companies, restructuring processes involving financial service...
DIPP unveils revised FDI policy

Harmonization of NBFC categories

The Reserve Bank of India (RBI) issued a notification on 15 February 2019 merging asset finance companies, loan companies, and investment companies into a new category called non-banking finance company - investment and credit...
Sawant-Singh-and-Aditya-Bhargava-Phoenix-Legal - 副本

Jury out on partial credit enhancements for NBFCs

By Sawant Singh and Aditya Bhargava, Phoenix Legal
To reduce the burden on banks for financing infrastructure projects, and to promote the use of the corporate bond market for this purpose, the Reserve Bank of India (RBI) permitted banks to provide partial...

Regulation of outsourcing finally extended to NBFCs

By Shruti Rajan and Rutu Gandhi, Cyril Amarchand Mangaldas
Outsourcing has become increasingly complex. The world over, laws and regulatory frameworks have been put in place to permit execution and management to take place outside, while ensuring that the key risks and responsibilities...

RBI permits NBFCS to refinance infrastructure, project loans

The Reserve Bank of India, through a circular dated 2 June, has permitted non-banking financial companies (NBFCs) to refinance infrastructure and other project loans by way of take-out financing without a predetermined agreement with...

NBFCs to enjoy SARFAESI protection

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), provides certain measures for recovery of non-performing assets to “financial institutions” as defined under section 2(1)(m) of SARFAESI. The...

Documentation expected to reflect new NBFC rules

By Bhumika Tripathi, Khaitan Sud & Partners
The Indian banking sector has witnessed a paradigm shift in the past decade. Non-banking financial companies (NBFCs) have played a pivotal role in providing an array of financial services and innovative products, and have...

Rule changes for NBFCs: An unwelcome intrusion?

By Sawant Singh, Kartikeya Singh and Aditya Bhargava, Phoenix Legal
The global financial crisis sharply brought into light the role of non-banking financial companies (NBFCs) and the relative ease for “shadow banking” entities in India to conduct the business of lending. For instance, unlike...

Regulatory framework for NBFCs revised

The Reserve Bank of India issued a new set of norms for non-banking financial companies (NBFCs) through a circular dated 10 November. The changes, which aim to increase transparency and improve compliance, come three years...

Shares held by non-residents can be pledged to NBFC

The Reserve Bank of India, through a circular dated 6 June, has relaxed provisions relating to the pledge of equity shares (listed on a recognized stock exchange in India) held by non-resident shareholders in...

RBI approval mandatory before acquiring NBFC

Following a notification on 26 May, it is now mandatory for companies to obtain prior approval from the Reserve Bank of India (RBI) for any acquisition or transfer of control in any non-banking financial...

RBI restricts issue of debt securities by NBFCs

The Reserve Bank of India (RBI), through a circular dated 27 June and a clarification on 2 July, has imposed certain restrictions on the issue of debt securities by non-banking financial companies (NBFCs). The...

Rules for NBFC microfinance companies change

The Reserve Bank of India (RBI) created a new category of non-banking financial company (NBFC) known as non-banking financial company-micro finance institution (NBFC-MFI) through a circular on 2 December 2011 (circular 1). After receiving...

Warburg seizes stake in NBFC

India’s Future Group announced that it will divest its 53.67% stake in Future Capital Holdings to Warburg Pincus, a private equity firm. Future Group operates some of India’s major retail chains through its flagship operation,...
Sonali Sharma,Suprio Bose,Juris Corp

NBFCs: Can banks still benefit from regulatory arbitrage?

By Sonali Sharma and Suprio Bose,Juris Corp
Until recently, non-banking financial companies (NBFCs) were less-stringently regulated than banks by the Reserve Bank of India (RBI), and were thus considered an arbitrage boon in disguise by the financial services sector. NBFCs became...
Digital lending in India- Move towards regulation, Shilpa Mankar Ahluwalia and Vrinda Pareek, Shardul Amarchand Mangaldas & Co

Digital lending in India: Move towards regulation

By Shilpa Mankar Ahluwalia and Vrinda Pareek, Shardul Amarchand Mangaldas & Co
On 15 January 2021, the Delhi High Court directed the government and the Reserve Bank of India (RBI) to respond to a writ petition filed by Dharanidhar Karimojji (petition) seeking the regulation of digital...
RBI ending the party for dividends, Sawant Singh and Aditya Bhargava

RBI ending the party for dividends

By Sawant Singh and Aditya Bhargava, Phoenix Legal
Acting on its deserved reputation for hawk-eyed vigilance, in April 2020, the Reserve Bank of India (RBI) directed banks to refrain from making dividend payouts for the financial year ending 31 March 2020. This...
Devyani Dhawan,Aditya Vikram Dua,SNG & Partners,Ordinary course Banking & finance restructuring

Ordinary course of business is not guaranteed

By Devyani Dhawan and Aditya Vikram Dua, SNG & Partners
Section 185 of the Companies Act, 2013 (act), governs transactions involving loans or the provision of guarantees or securities to companies in which a director is interested. Certain loans and guarantee or security transactions...
India Atma Nirbhar Bharat Scheme micro, small and medium enterprises

Lifeline for MSMES dragged down by pandemic

The pandemic and ensuing economic crisis have disproportionately impacted micro, small and medium enterprises (MSMEs). A large number of them face dire operational and financial constraints including a shortage of working capital, difficulty in...
Sawant Singh and Aditya Bhargava are partners at Phoenix Legal. Sristi Yadav, an associate

Much needed alignment for housing finance companies

By Sawant Singh and Aditya Bhargava, Phoenix Legal
Housing finance companies (HFCs) have traditionally occupied a staid corner of the financial sector, providing loans to homeowners and for the development of the housing industry. As a sector, housing finance has also been...

Analysing financing models for infrastructure projects

By Sharmil Bhushan and Jyoti Punjabi, HSA Advocates
The infrastructure sector is critical to India’s development. Financing in infrastructure is expected to grow exponentially over the next few years, particularly as India needs to spend about US$1.4 trillion on infrastructure if it...
relief

Slowing the free fall

Taking stock of the relief measures deployed by regulators to soften the impact of the lockdown. Gautam Kagalwala reports With the COVID-19 outbreak, the government has been fighting on two fronts. It has introduced a...

Lenders assign GSML debt to ARC

Argus Partners advised a Garden Silk Mills (GSML) consortium of lenders, led by Bank of Baroda, on the resolution of its stressed assets and account under the Reserve Bank of India’s (RBI) circular dated...
ECB

Tweaks to ECB directions helpful, but clarity needed

By Sawant Singh and Aditya Bhargava, Phoenix Legal
Until recently, proceeds of external commercial borrowings (ECB) were not allowed to be used for working capital or general corporate purposes, or for the repayment of rupee loans, except where an ECB with a...
Fintech

Changes to expect in fintech with digital KYC

By Shilpa Mankar Ahluwalia and Himanshu Malhotra, Shardul Amarchand Mangaldas & Co
Fintech players are now offering the Aadhaar-based know your customer (KYC) authentication services (Aadhaar e-KYC) made available by the Unique Identification Authority of India (UIDAI) to customers quickly and at a fraction of the...

Mandatory benchmark linking a good move

By Sawant Singh and Aditya Bhargava, Phoenix Legal
Communication of any relaxation in lending rates is one of the cornerstones of the monetary policy of the Reserve Bank of India (RBI). One reason for this is that unless the benefit of any...

Rebuilding trust

Maharashtra Real Estate Regulatory Authority chief Gautam Chatterjee talks to Gautam Kagalawala about the role of the regulator, challenges, friction with IBC and other regulations and stress in the state’s realty sector The government introduced...
resolution

RBI issues new framework for stressed asset resolution

The Reserve Bank of India (RBI) issued a revised framework for resolution of stressed assets after the Supreme Court struck down its 12 February 2018 circular. The Framework for Resolution of Stressed Accounts (FRESA)...
fintech regulations

Regulations as speed bumps

Dear Editor, The evolution of FinTech is changing the world of finance rapidly. Peer to peer (P2P) lending, a part of the alternate credit bandwagon, takes advantage of the various limitations of traditional banks and...
debt funding

New ECB rules open doors to debt funding for startups

By Aparna Ravi and Samyuktha Damojipurapu, Samvad Partners
Indian companies looking to raise debt overseas have typically had to do so through external commercial borrowings (ECB). ECB can take the form of loans, foreign currency convertible or exchangeable bonds, fixed or floating...

New ECB policy opens doors for foreign capital inflows

By Devashree Limaye and Medha Unadkat, SNG & Partners
To improve the ease of doing business, the Reserve Bank of India (RBI), in consultation with Government of India, notified a new framework for external commercial borrowings (ECB) on 16 January 2019. The new...

Mega-sale of ailing players is looming: Any financers?

By Aashit Shah and Utsav Johri, J. Sagar Associates
Recognizing that infrastructure is the bone marrow of any economy, the Indian government has budgeted approximately US$90 billion towards the infrastructure sector for the fiscal year 2018-19. This sector, however, has some of the...

Foreign funds pouring into affordable housing projects

By Vishwanath Pratap Singh and Srabanee Ghosh, Luthra & Luthra Law Offices
The launch of Pradhan Mantri Awas Yojana – a government scheme targeting housing for all by 2022 – has led to a shift of focus from the luxury segment to affordable housing. Other factors...
blue star

Deals in brief

TATA CHEMICALS ACQUISITION Shardul Amarchand Mangaldas & Co advised Tata Chemicals on its ₹1.2 billion (US$18.4 million) acquisition of the precipitated silica business of Allied Silica Limited (ASL) on a slump sale basis. The firm’s general...

RBI issues guidance for peer to peer lenders

The Reserve Bank of India (RBI) issued Non-Banking Financial Company – Peer to Peer Lending Platform (Reserve Bank) Directions, 2017, on 4 October. By way of these master directions, the RBI has brought peer...
Customer confidentiality and privacy in the banking sector

Banking on secrecy

How private is information provided to a banker? Mohit Shukla describes and analyses the existing norms Every day, people routinely provide personal information of various types and with varying degrees of sensitivity to banks, insurance agents and...
deals of the year 2016 India business law journal

Deals of the year 2016

India Business Law Journal showcases the most significant deals and disputes of 2016 and reveals the legal advisers who guided them. By Nandini Lakshman With the Bombay Stock Exchange’s benchmark Sensex dipping by over 9% in the 2015-16 fiscal...

Liberalization of FDI in financial services sector

By Dipti Lavya Swain and Prateek Rastogi, Luthra & Luthra
Implementing the change announced in India’s budget for 2016-17, the Reserve Bank of India (RBI) on 9 September liberalized the norms for foreign direct investment (FDI) in the financial services sector. The effect is...

Paradigm shift to ‘on tap’ universal bank licences

By Sawant Singh and Aditya Bhargava, Phoenix Legal
its monetary policy statement for 2014-15 on 1 April 2014, the Reserve Bank of India (RBI) announced that it would work on a framework for granting licences “on tap” to universal banks, and for...

Investors eye RBI move to regulate P2P lending

By Dipti Lavya Swain and Advait Nair, Luthra & Luthra Law Offices
The online industry and e-commerce have acted as a game-changer, affecting the nature and dynamic of sectors including transportation, retail, hospitality, etc. It is now perhaps set to do the same to the financial...

External borrowing changes for the infrastructure sector

By Babu Sivaprakasam, Deep Roy and Sharmila Ratnam, Economic Laws Practice
Acountry’s economy has a direct correlation with the performance of companies and accessibility to funds. Accordingly, poor performance by companies leads to difficulties in servicing debt and/or accessing additional debt (thereby overleveraging) and then...

The curious case of FAQs

Ipsita Dutta takes a look at clarifications issued by financial regulators and how to pre-empt the risks they pose The Indian financial sector has seen a steady rise in the number and scope of regulations,...

Court denies assignee bank benefit of SARFAESI Act

By Babu Sivaprakasam, Deep Roy and Megha Agarwal, Economic Laws Practice
The assignment of debt by banks and other financial institutions has become quite common. Bombay High Court recently adjudicated upon an interesting aspect of law in relation to one such assignment in the case...

Restrictions on foreign investment by AIFs and VCFs

On 1 October, the Securities and Exchange Board of India (SEBI) issued a circular dealing with regulatory restrictions concerning overseas investments by alternative investment funds (AIFs) and venture capital funds (VCFs) which are registered...

Lenders’ forum and change in ownership issues clarified

By Babu Sivaprakasam, Deep Roy and Megha Agarwal, Economic Laws Practice
The “Framework for Revitalising Distressed Assets in the Economy”, issued by the Reserve Bank of India (RBI) on 30 January 2014, requires banks and non-banking financial companies (NBFCs) to identify stress in their loan...
A photo of Sawant Singh and Aditya Bhargava, Phoenix Legal

Budget: No ‘big bang’ but progress for financial sector

By Sawant Singh and Aditya Bhargava, Phoenix Legal
With the growing integration of India into the global economy and with the sheer size of the Indian economy, the country’s budget speech has become a keenly anticipated event. Rating agencies, multinational companies and...

More institutions to enjoy powers to enforce security

By Babu Sivaprakasam, Deep Roy and Megha Agarwal, Economic Laws Practice
“Banks and financial institutions at present face considerable difficulties in recovery of dues from the clients and enforcement of security charged to them due to the delays in the legal processes.” Taking into account the...

Evidence needed to substantiate charge of collusion

Dismissing a complaint in Muthoot Mercantile Ltd v State Bank of India & Ors, the Competition Commission of India (CCI) held that “parallel behaviour needs to be substantiated with the additional evidence” when allegations of...
india business law journal, deals of the year 2014

Deals of the Year 2014

India Business Law Journal showcases the most significant deals and disputes of 2014 and the legal advisers who guided them. Nandini Lakshman reports Over the past 12 months, traffic increased substantially on the Indian deal street....

India in 2015

Six prominent figures from India’s in-house counsel community share their views on the legal developments that will shape domestic and international business in the coming year The Indian economy is expected to witness accelerated growth...

Analysis of framework to revitalize distressed assets

By Babu Sivaprakasam, Deep Roy and Megha Agarwal, Economic Laws Practice
Areport on trends in the banking sector issued by the Reserve Bank of India (RBI) on 21 November 2013 put gross non-performing assets (NPAs) of scheduled commercial banks at 3.6% of the gross advances. In...

Evaluating the success of debt restructuring options

By Jeet Sen Gupta, Deep Roy and Divya Srikanth, Economic Laws Practice
The International Monetary Fund recently stated that Indian corporate entities are among the highest leveraged entities in the Asia Pacific region. Recent data show that non-performing assets (NPAs) have risen alarmingly from 2.2% to...

Report proposes revamp of financial sector framework

By Sawant Singh, Aditya Bhargava and Davis Kanjamala, Phoenix Legal
India’s regulatory framework has been uncharitably, if accurately, described as an accumulation of responses to crises, replete with turf squabbles and blind spots, rather than a comprehensive system of parts with a unified purpose. The...

Recent consolidated policy: Anything new in it for you?

By Gautam Khaitan and Gaurav Kapur, OP Khaitan & Co
India’s Department of Industrial Policy and Promotion (DIPP) makes policy pronouncements on foreign direct investment (FDI) through press notes and press releases which are notified by the Reserve Bank of India (RBI) from time...

Guidelines set for issuing of licences for new banks

By Sawant Singh, Aditya Bhargava and Davis Kanjamala, Phoenix Legal
The The Reserve Bank of India (RBI) recently issued guidelines on the licensing of new banks in the private sector and invited applications by 1 July 2013. While the guidelines have been on the...

Reserve Bank of India releases new banking guidelines

On 22 February the Reserve Bank of India (RBI) released the Guidelines for Licensing of New Banks in the Private Sector, paving the way for new private sector banks to obtain licences. The guidelines...

DIPP updates foreign direct investment policy

On 10 April the Department of Industrial Policy and Promotion (DIPP) released a revised version of the consolidated foreign direct investment (FDI) policy through circular 1 of 2012. The new FDI policy subsumes the...

Factoring Regulation Act: No small change for India

By Sawant Singh and Davis Kanjamala, Phoenix Legal
Effective management of working capital is critical to any business enterprise. By receiving funds advanced against invoices, factoring enables a business to free up capital without the need to offer any collateral. Factors also...

Act to bring regulation to business of factoring

By Megha Gupta and Abhijeet Das, Trilegal
Factoring is the assignment of certain debts owed (receivables), for a price, by a person (assignor) to whom the receivables are owed, in favour of a third party (assignee). A much favoured means of...

Directions issued for micro finance institutions

In a welcome move, the Reserve Bank of India (RBI) has extended its surveillance over loans given by non-banking financial companies (NBFCs) to the micro finance sector by issuing directions for a new category...

RBI eases rules for infrastructure investment

The Reserve Bank of India (RBI) has eased restrictions on investments in debt securities to allow foreign institutional investors (FIIs) to invest in non-convertible debentures (NCDs) and bonds issued by non-banking financial companies (NBFCs). This...
Sawant Singh,Hemant Krishna V,Phoenix Legal

Microfinance Institutions Bill: return of the prodigal son

By Sawant Singh and Hemant Krishna V, Phoenix Legal
The recently issued draft Microfinance Institutions (Development and Regulation) Bill, 2011, offers a ray of hope for India’s crisis stricken microfinance institutions (MFIs). Over the last couple of years, the industry has been in...
Sandip Bhagat,Vivek Kumar,S&R Associates

Consolidated FDI policy: easing investments in India

By Sandip Bhagat and Vivek Kumar, S&R Associates
On 31 March, the Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce & Industry, issued circular 1 of 2011. It reflects the policy framework on foreign direct investment (FDI) in India as...

Private equity firms back Indostar

Everstone Capital Management has joined hands with the private equity arm of Goldman Sachs and UK-based investment manager Ashmore to launch a non-banking finance company (NBFC), which will be known as Indostar Capital Finance. Indostar...
india business law journal selected deals

Deals of the Year 2010

India Business Law Journal showcases 50 of the most significant transactions, court cases and IP enforcement actions of 2010 and reveals the law firms that guided them George W Russell reports The international financial crash that...
Arun Madhu,Akanksha Midha,Phoenix Legal

Microfinance, micro manage

By Arun Madhu and Akanksha Midha, Phoenix Legal
Microfinance is not quite so micro anymore and, as the potential to book profits from it grows, so does its potential for scandal. It is the latter that has prompted a scramble to regulate...

New circular clarifies FDI guidelines

On 1 October, the Department of Industrial Policy and Promotion issued a new circular on foreign direct investment (FDI) policy. Circular 2 of 2010 clarifies the following points: The manufacturing of “cigars, cheroots, cigarillos and...
Shardul Thacker,Partner,Mulla & Mulla & Craigie Blunt & Caroe

Issue of non-convertible debentures regulated

By Shardul Thacker, Mulla & Mulla & Craigie Blunt & Caroe
The Reserve Bank of India (RBI) has recognized the importance of corporate deposits for meeting the capital requirements of companies in need of finance. In a circular dated 23 June, the RBI has prescribed directions...

Micro magic

India’s micro financiers have struck gold while reaching out to the poor and vulnerable Alfred Romann reports By most definitions Bihar is one of the toughest places in India to do business. The state is unstable and...
Ameya Khandge,Trilegal

Tighter controls on securitizations

By Ameya Khandge and Vardaan Ahluwalia, Trilegal
As a fall out of the credit crisis, regulators and governments globally are introspecting on every aspect of financial services regulation – be it policy formulation, administration, implementation or enforcement. The UK has gone as...
Ameya Khandge,Vardaan Ahluwalia,Trilegal

Foreign credit will benefit Indian infrastructure projects

By Ameya Khandge and Vardaan Ahluwalia, Trilegal
In a move designed to provide continued support and deepen access to credit for the infrastructure sector, the Reserve Bank of India (RBI) has through a series of circulars issued on 2 March, introduced...
Shardul Thacker,Partner,Mulla & Mulla & Craigie Blunt & Caroe

Liberalizing borrowing norms for infrastructure

By Shardul Thacker, Mulla & Mulla & Craigie Blunt & Caroe
The Reserve Bank of India (RBI) classifies non-banking financial companies (NBFC) into three categories: asset finance companies, loan companies and investment companies. All three types of NBFC are expected to maintain a minimum capital...
Shardul Thacker,Partner,Mulla & Mulla & Craigie Blunt & Caroe

Fairer financial weather leads RBI to amend ECB policy

By Shardul Thacker, Mulla & Mulla & Craigie Blunt & Caroe
The Reserve Bank of India (RBI) has made significant amendments to the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000, which govern policies relating to external commercial borrowings (ECB). The changes, which...
Parneeta Singh,Vardaan Ahluwalia,Trilegal

RBI withdraws some ECB policy relaxations

By Parneeta Singh and Vardaan Ahluwalia, Trilegal
The recent increase in liquidity and availability of capital in the economy has prompted the Reserve Bank of India (RBI) to change its policy on external commercial borrowings (ECBs), reverting to the pre-credit crunch...
Shardul Thacker,Partner,Mulla & Mulla & Craigie Blunt & Caroe

Liberalization of external commercial borrowings

By Shardul Thacker,Mulla & Mulla & Craigie Blunt & Caroe
External commercial borrowing (ECB) can take several forms: bank loans; buyers’ credit; suppliers’ credit; securitized instruments; credit from official export credit agencies and international capital markets; and commercial borrowings from multilateral financial institutions, such...

The desperate search for liquidity

India is implementing regulatory changes to tackle the credit crunch. How will the moves help cash-strapped corporations restructure their debt portfolios and access new sources of funding? Karan Singh and Ameya Khandge report India escaped the...
Sonali Sharma,Suprio Bose,Juris Corp

Making microfinance commercially viable

By Sonali Sharma and Suprio Bose,Juris Corp
The Reserve Bank of India (RBI) through various policy measures has sought to promote small-ticket lending (primarily through priority sector lending stipulations). Some of these measures overlap with what is now known as microfinance. The...

Opening the vault

India’s banking sector is on the verge of a second wave of liberalization. Coming amid a global financial crisis, how will domestic and international banks – and their legal advisers – respond to the challenge? Barney...
H Jayesh,Anahita Irani,Juris Corp

Coming full circle: Novel financing structures needed

By H Jayesh and Anahita Irani,Juris Corp
Historically there have been restrictions on financing by banks. Presently, the Reserve Bank of India (RBI) has capped banks’ credit exposure limits at 15% of their capital funds, in the case of a single...

Raising finances against receivables

By H Jayesh, Harsha Punjabi, and Maymoona Mandviwala, Juris Corp
One of the means of raising finances is by the absolute assignment of receivables (along with underlying securities) from an obligor to an assignor or originator, that are structured as bankruptcy remote from the...
India Finance MinisterBudget Trade Tax

Legislative and regulatory update

The budget India’s latest budget, unveiled by Finance Minister P Chidambaram on 29 February, includes a number of tax provisions that impact businesses and individuals. The budget had been expected to include significant changes to the...
Sanjay Asher,Partner,Crawford Bayley & Co

Non-banking financial companies consolidate

By Sanjay Asher and Bhumika Batra,Crawford Bayley & Co
The non-banking financial companies (NBFC) sector, which grew rapidly in the early 1990s but later witnessed a turbulent period, has been in a phase of consolidation during the last two years. The main reasons for...