Photo of Leena Chacko

Partner at the Mumbai Office of Cyril Amarchand Mangaldas. Leena has extensive experience in general corporate and financing transactions, including acquisitions, structured finance and securitization transactions. She can be reached at leena.chacko@cyrilshroff.com

 

Housing Finance Companies - Proposed changes by RBI

The Central Government had, with effect from August 09, 2019, transferred regulatory powers of the Housing Finance Companies (“HFCs”) from the National Housing Bank (“NHB”) to the Reserve Bank of India (“RBI”). It is further stated that the RBI will review the extant of regulatory framework applicable to HFCs and issue the same in due course.  Until such time, HFCs were required to comply with the directions and instructions issued by NHB.[1]

Pursuant to the above and in order to increase the efficiency of HFCs, the RBI has now placed a draft of the changes proposed in the regulations applicable to HFCs for public comments till July 15, 2020, which we have briefly summarised below:
Continue Reading Housing Finance Companies – Proposed changes by RBI

On June 08, 2020, the Reserve Bank of India (RBI) released two draft frameworks — one for securitisation of standard assets (Draft Securitisation Framework) and the other on sale of loan exposures (Draft Sale Framework). In our previous article (available here), we had dealt with key revisions introduced by the RBI under the Draft Securitisation Framework. This article contains a brief summary of the Draft Sale Framework.

The Draft Sale Framework is addressed to the same constituents as the Draft Securitisation Framework and is expected to operate as an umbrella framework, which will govern all loan transfers (standard and stressed assets).

The Draft Sale Framework is broadly divided into three parts viz., (i) general conditions applicable to all loan transfers; (ii) provisions dealing with sale and purchase of standard assets; and (iii) provisions dealing with sale and transfer of stressed assets (including purchase by ARCs).


Continue Reading RBI’s move to revamp loan transfers in India

The Reserve Bank of India (RBI) issued guidelines on February 01, 2006, in relation to securitisation of standard assets by banks, All India Term-Lending and Refinancing Institutions and non-banking financial companies (NBFCs). Securitisation was defined as the process by which assets are sold to bankruptcy remote special purpose vehicle (SPV) in return for immediate cash flow, wherein the cash flows from the underlying pool of assets are used to service the securities issued by the SPV[1]. The criteria for ‘true sale’ as well as the policy on provision of credit enhancement facilities, liquidity facilities and accounting treatment of such transactions was also set out. The guidelines did not separately deal with direct assignment of assets.


Continue Reading A new regime for Securitisation

Banning of Unregulated Schemes Ordinance, 2019

In the aftermath of the Saradha scam, the Standing Committee of Finance (Committee) in its 21st report dated September 21, 2015 suggested the introduction of a comprehensive regulatory framework governing all entities engaged in activities involving acceptance of deposits from the public. While making this recommendation, the Committee observed that certain entities were engaged in financial as well as non-financial activities and therefore, it was difficult to identify the appropriate regulator for such entities. Such entities fall under the jurisdiction of various regulatory bodies and in spite of overlapping regulations, several such entities were not regulated by any regulator.

In view of the suggestions of the Committee, a high level Inter-Ministerial Group (Group) was formulated for identifying gaps in the existing regulatory framework. The Group suggested the enactment of a comprehensive central act to criminalise the solicitation, promotion, acceptance and/or operation of ‘unregulated deposit schemes’. In line with the recommendations of the Committee and the Group, the Banning of Unregulated Schemes Ordinance, 2019 (Ordinance) was promulgated on February 21, 2019.
Continue Reading The Banning of Unregulated Schemes Ordinance, 2019

On November 15, 2016, the Supreme Court delivered an important judgment in IDBI Trusteeship Services Limited v. Hubtown Ltd[1], a case involving investment in India by a foreign investor. While the main thrust of the judgment was on circumstances under which a defendant may be granted leave to defend in a suit for summary judgment, the observations of the court in the context of the structure in consideration provides important indicators as to how courts should look at structured transactions.

In brief, the facts of the case are as follows. FMO, a non-resident foreign entity, made an investment into an Indian company, Vinca Developer Private Limited (Vinca) by way of compulsorily convertible debentures (CCPS) and equity shares. The CCPS were to convert into 99% of the voting shares of Vinca. The proceeds of the investment were further invested by Vinca in its wholly owned subsidiaries, Amazia Developers Private Limited (Amazia) and Rubix Trading Private Limited (Rubix) by way of optionally convertible debentures (OPCDs) bearing a fixed rate of interest. IDBI Trusteeship Services Ltd. (Debenture Trustee) was appointed as a debenture trustee in relation to the OPCDs, acting for the benefit of Vinca. Hubtown Limited (Hubtown) also issued a corporate guarantee in favour of the Debenture Trustee to secure the OPCDs.
Continue Reading IDBI Trusteeship v. Hubtown – Supreme Court Gives a Fillip to Structured Investments