Funds in GIFT City - FAQs & Structuring Insights Blog

 A. Introduction

Gujarat International Fin-Tec City (“GIFT City”) is being developed as a global financial and IT Services hub on the lines of globally benchmarked financial centres. It includes a Special Economic Zone having the status of an International Finance Services Centre (“IFSC”). The IFSC is set up to undertake financial services transactions that are currently carried out outside India by overseas financial institutions and overseas branches/ subsidiaries of Indian financial institutions. 
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 Indian Mutual Funds – M&A Wave

The Securities and Exchange Board of India (“SEBI”) recently approved amendments to the SEBI (Mutual Funds) Regulations, 1996 (“MF Regulations”) at its December 16, 2020 board meeting, notified on February 4, 2021 through the MF Regulations by way of the SEBI (Mutual Funds) (Amendment) Regulations, 2021, with effect from March 5, 2021.

Currently, a Mutual Fund (“MF”) ‘sponsor’ is required to have a ‘sound track record’ i.e. having profits  in 3 out of the last 5 years, including the fifth year. Recognising the role of emerging tech/ fintech companies in the Indian financial services space and to facilitate MF innovation/ geographic penetration, SEBI relaxed the above profit criterion for sponsors. Going forward, MF sponsors who do not meet the above, would still be eligible to, either set up a new, or acquire an existing, MF asset management company (“AMC”) and trustee company, if it has a minimum net-worth of INR 1 billion as contribution towards the AMC’s net-worth, which is required to be maintained till the sponsor makes profits for 5 consecutive financial years.
Continue Reading FIG Papers (No. 3: Series – 1) : Indian Mutual Funds – M&A Wave!

RBI’S REVISED REGULATORY FRAMEWORK FOR NBFCS

Introduction

In the backdrop of recent stress in the financial sector, especially in the speciality finance (i.e. NBFC) space, the Reserve Bank of India (“RBI”) has sought to address potential systemic risks by issuing a discussion paper on ‘Revised Regulatory Framework for NBFCs – A Scale-Based Approach’ (“Discussion Paper”) on January 22, 2021. The apex bank, through the Discussion Paper, has introduced a scale-based approach to the regulation of non-banking financial companies. Owing to their growing significance, linkages with the banking and capital markets sectors, and complexity in operations, the Discussion Paper proposes a four-tiered regulatory structure for NBFCs, based on proportionality of the NBFCs.
Continue Reading FIG Papers (No. 2) : RBI’s Revised Regulatory Framework for NBFCs : Industry Implications

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

Battling Covid -19 and Liquidity– The twin crisis of NBFC sector

While the health crisis has brought the country to its knees, the fatal blow seems to be coming our way from the economic effects of the Covid-19 pandemic. The exposure of the severely-stressed para banking industry to risky segments in these times has made it even more vulnerable to an economic slowdown.[1] With its asset quality deteriorating at an increasing rate, the liquidity in para banking industry has been squeezed off to its last drops.

The impact of the liquidity crisis across various classes of non-banking financial companies (“NBFCs”) may be analysed vis-à-vis the exposure it has towards the borrower segments whose economic activities have been severely impacted.  With the economic and consumption activities a bust in sectors such as real estate and micro-finance, the NBFCs with loan exposures in the said sectors will be hit the worst in the wave of this global pandemic. The increasing loan losses and inaccessibility to new capital is likely to exacerbate the liquidity stress.
Continue Reading Battling Covid-19 and Liquidity– The Twin Crisis of NBFC sector

Tax implications on INVITs, REITs and its Unitholders under Finance Act 2020

As you are aware, the Finance Minister, Ms. Nirmala Sitharaman, presented the Union Budget 2020-2021 on February 1, 2020 and consequently, introduced the Finance Bill, 2020 (“Bill”) in the Lok Sabha. The Bill comprised the financial proposals, including taxation related proposals, to amend the provisions of the Income-tax Act, 1961 (“Income-tax Act”) for the financial year 2021. Subsequently, the Finance Minister and her team had several discussions with various stakeholders, who we understand made many representations, seeking changes in some of the proposals. Pursuant to this, amendments to the Bill were presented and the Bill, incorporating the amendments was passed by the parliament on March 26, 2020 and received the assent of the President of India on March 27, 2020. It has now been enacted as the Finance Act, 2020 (“Finance Act”).
Continue Reading UPDATE:  Tax implications on INVITs, REITs and its Unitholders under Finance Act 2020

Coronavirus - COVID19- Faqs

The World Health Organisation (WHO) declared COVID-19 as a “pandemic” on March 11, 2020.

The outbreak and the rapid spread of COVID-19 has sent shock waves across global markets. It has disrupted supply chains, leading to the closure of several manufacturing facilities globally; serious disruption of air and sea traffic and closure of vital air routes, like the one between the US and Europe. This is turn has led to the collapse of stock markets around the world, leading to the loss of billions of dollars, which got wiped out in a matter of days. A combination of all these factors has led to a decline in the overall volume of global economic activity, forcing the world economy towards a possible recession. It is forcing Boards across the globe to confront a host of difficult questions on how business should be conducted during a global public health crisis.
Continue Reading COVID-19 : OFFICIALLY A PANDEMIC

Mutual Funds and Alternative Investments - Stewardship Code

Introduction

On December 24, 2019, Securities and Exchange Board of India (“SEBI”) released a circular setting up a stewardship code for Asset Management Companies (“AMCs”), Mutual Funds (“MFs”) and all the categories of Alternative Investment Funds (“AIFs”) investing in listed Indian companies (“Stewardship Code” or “Code”). In keeping with global trends, SEBI has made it necessary for the power wielding cash-rich institutional investors, to act in accordance with the responsibilities that invariably accompany and behoove such powers and formulate a policy adopting the principles enshrined in the Code.

The Stewardship Code prescribes certain principles which, aim at enhancing the responsibilities of the AMCs/ AIFs to protect the interests of their investors/beneficiaries. The requirements pertaining to the Stewardship Code shall come into effect on April 1, 2020.
Continue Reading Being Responsible Corporate Citizens – How Mutual Funds and Alternative Investment Funds will Rise Up to the Stewardship code

THE ROAD TO RESOLUTION OF FINANCIAL SERVICE PROVIDERS - IBC

 

The Imperative for a distinct framework for the resolution of financial firms

The financial sector is facing a combination of liquidity, governance and business issues, on account of which certain Non Banking Financial Companies (“NBFCs”) are facing solvency concerns.

The severe liquidity crunch for NBFCs was caused  as banks and other financial institutions have curtailed refinancing the loans of NBFCs on account of which several NBFCs and other financial institutions faced debt servicing and solvency issues. These have sought to be resolved through the Stressed Asset Directions issued by the Reserve Bank of India (“RBI”) on June 7, 2019. This was fraught with complexities given the diverse sets creditor, including market borrowings  each of whom were governed by different financial regulators.
Continue Reading The Road to Resolution of Financial Service Providers: A Firm First Step