Foreign investment ceiling in ARCs raised to 74% from 49%
NEW DELHI: Foreign investment ceiling in Asset Reconstruction Companies (ARCs) has been increased to 74 per cent from 49 per cent, a move aimed at bringing more foreign expertise in the segment.
"The ceiling for FDI in ARCs has been increased from 49 per cent to 74 per cent ," the Finance Ministry said in a statement today, adding, this is subject to certain conditions.
The decision was taken after consultation with the stakeholders and the sector regulators, it added.
However, the foreign investment in ARCs would need to comply with the FDI policy, including the one related with sectoral caps. Further, foreign investment limit of 74 per cent in ARC would be a combined limit of FDI and FII.
With this change in the policy, "the prohibition on investment by FII in ARCs will be removed". The total shareholding of an individual FII shall not exceed 10 per cent of the total paid-up capital, the Ministry said.
Earlier, Foreign Institutional Investors (FIIs) were permitted to invest only in Security Receipts (SRs) issued by ARCs upto 49 per cent of each tranche of scheme of SRs. The Finance Ministry also said "the limit of FII investment in SRs may be enhanced from 49 per cent to 74 per cent".
Further, "the individual limit of 10 per cent for investment of a single FII in each tranche of SRs may be dispensed with," it said, adding the necessary notification and circular would be issued by RBI and SEBI.
The investments by FIIs would remain within the limit on on corporate bonds, and sectoral caps under the extant FDI regulations. The government had opened the ARC segment for FDI in 2005 as domestic companies did not have any experience in setting up this business.
Presently there are 14 ARCs in the country, of which nine have no foreign investment. ARCIL, a public sector ARC, is handling about 60 per cent of the asset restructuring business in the country.
PSU banks can increase authorised share capital: Ministry
NEW DELHI, DEC 21:
The State-owned banks can now increase capital while issuing preference shares, rights issues or bonus shares without being limited by the earlier ceiling of Rs 3,000 crore, the Finance Ministry said today.
The restriction has been removed following passage of the Banking Laws (Amendment) Bill 2012 in Parliament. The Bill will become a law after it is signed by the President.
The Ministry said the Bill will strengthen the regulatory powers of the Reserve Bank and further develop the banking sector in India.
“It will also enable the nationalised banks to raise capital by issue of preference shares or rights issue or issue of bonus shares”.
“It would also enable them to increase or decrease the authorised capital with approval from the Government and RBI without being limited by the ceiling of a maximum of Rs 3,000 crore,” the ministry added.
The government had to drop a controversial clause which would have allowed banks to enter into forward trading under intense opposition from different parties.
The Bill, which was passed by both the Houses of Parliament in the just concluded Winter Session, has also paved the way for new bank licences by RBI.
“This would not only help in achieving the goal of financial inclusion by providing more banking facilities but would also provide extra employment opportunities to the people at large in the banking sector,” the ministry added.
Microfinance defaulters may find it tough to get fresh loans
KOLKATA, DEC. 21:
A defaulter or overleveraged borrower might find it difficult to get credit from microfinance institutions (MFIs).
With almost all NBFC-MFIs sharing nearly 100 per cent of the borrowers’ credit history with credit bureaus, borrowers will find it difficult to approach them for loans.
Following the crisis in the MFI industry in Andhra Pradesh, the Reserve Bank of India had, in September last year, asked all NBFC-MFIs to upload the data of their clients with any of the four credit bureaus including Cibil, Experian, Equifax and High Mark.
According to Alok Prasad, Chief Executive Officer, Microfinance Institutions Network (MFIN), close to 75 million client records have been uploaded with the two credit bureaus — Equifax and High Mark Credit Information Services Ltd.
“The first step is where the MFIs provide a data of their clients to credit bureaus; the next step is where they can take reports on specific clients to get their borrowing and repayment record. Both these steps are being followed by MFIs,” Prasad told Business Line.
There are close to 25 million borrowers in the industry.
“The higher number of records with credit bureaus is primarily because a borrower might have taken more than one loan. Some of them might not be taking credit at present but records still exist,” said Chandra Shekhar Ghosh, Founder and Chairman of Bandhan.
RBI, in its guidelines to NBFC-MFIs, had instructed that a self-help group cannot borrow from more than two MFIs and the total borrowing should not exceed Rs 50,000.
“Multiple lending and over leveraging were the two key issues that came to light following the crisis. This has been largely put in check as our lending decisions are based on the credit report,” said Shubhankar Sengupta, Chief Executive Officer, Arohan Financial Services.
SLOW DISBURSEMENTS
Though MFIs are currently uploading monthly credit record with the bureaus, they will soon start feeding fortnightly data as well to make the system more effective, Prasad said.
The new system has, however, delayed the disbursement process a bit.
“Earlier, disbursements were made within a week but now it takes about two weeks to consult the records and take a decision,” Ghosh said.
PSU banks can increase authorised share capital: Ministry
NEW DELHI, DEC 21:
The State-owned banks can now increase capital while issuing preference shares, rights issues or bonus shares without being limited by the earlier ceiling of Rs 3,000 crore, the Finance Ministry said today.
The restriction has been removed following passage of the Banking Laws (Amendment) Bill 2012 in Parliament. The Bill will become a law after it is signed by the President.
The Ministry said the Bill will strengthen the regulatory powers of the Reserve Bank and further develop the banking sector in India.
“It will also enable the nationalised banks to raise capital by issue of preference shares or rights issue or issue of bonus shares”.
“It would also enable them to increase or decrease the authorised capital with approval from the Government and RBI without being limited by the ceiling of a maximum of Rs 3,000 crore,” the ministry added.
The government had to drop a controversial clause which would have allowed banks to enter into forward trading under intense opposition from different parties.
The Bill, which was passed by both the Houses of Parliament in the just concluded Winter Session, has also paved the way for new bank licences by RBI.
“This would not only help in achieving the goal of financial inclusion by providing more banking facilities but would also provide extra employment opportunities to the people at large in the banking sector,” the ministry added.
Microfinance defaulters may find it tough to get fresh loans
KOLKATA, DEC. 21:
A defaulter or overleveraged borrower might find it difficult to get credit from microfinance institutions (MFIs).
With almost all NBFC-MFIs sharing nearly 100 per cent of the borrowers’ credit history with credit bureaus, borrowers will find it difficult to approach them for loans.
Following the crisis in the MFI industry in Andhra Pradesh, the Reserve Bank of India had, in September last year, asked all NBFC-MFIs to upload the data of their clients with any of the four credit bureaus including Cibil, Experian, Equifax and High Mark.
According to Alok Prasad, Chief Executive Officer, Microfinance Institutions Network (MFIN), close to 75 million client records have been uploaded with the two credit bureaus — Equifax and High Mark Credit Information Services Ltd.
“The first step is where the MFIs provide a data of their clients to credit bureaus; the next step is where they can take reports on specific clients to get their borrowing and repayment record. Both these steps are being followed by MFIs,” Prasad told Business Line.
There are close to 25 million borrowers in the industry.
“The higher number of records with credit bureaus is primarily because a borrower might have taken more than one loan. Some of them might not be taking credit at present but records still exist,” said Chandra Shekhar Ghosh, Founder and Chairman of Bandhan.
RBI, in its guidelines to NBFC-MFIs, had instructed that a self-help group cannot borrow from more than two MFIs and the total borrowing should not exceed Rs 50,000.
“Multiple lending and over leveraging were the two key issues that came to light following the crisis. This has been largely put in check as our lending decisions are based on the credit report,” said Shubhankar Sengupta, Chief Executive Officer, Arohan Financial Services.
SLOW DISBURSEMENTS
Though MFIs are currently uploading monthly credit record with the bureaus, they will soon start feeding fortnightly data as well to make the system more effective, Prasad said.
The new system has, however, delayed the disbursement process a bit.
“Earlier, disbursements were made within a week but now it takes about two weeks to consult the records and take a decision,” Ghosh said.
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