Fixed Income
Expert group suggests index for corporate bond market
In a bid to develop a strong corporate bond market in India, an expert group on Thursday suggested standardisation of corporate bond issuance, relaxing norms for allowing foreign investments, creation of a bond index and encouraging corporates to tap the market.
 
A report of the Working Group on Development of Corporate Bond Market in India released by the Securities Exchange Board of India (SEBI) on Thursday also said that a centralised database for corporate bonds markets may be established expeditiously in two phases, for secondary market trades by the end of August 2016 and for both primary and secondary markets by the end of October 2016.
 
The report said though equity indices serve as popular benchmarks for equities, designing debt indices has posed challenges in India as the market lacks breadth and depth.
 
"Market participants, however, need a debt market index as benchmark. SEBI is in dialogue with stock exchanges to design a suitable debt market index. Stock exchanges/other entities may design a suitable corporate bond index to serve as a benchmark," the panel recommended.
 
Among various recommendations, the panel said corporates should be encouraged to tap the bond market beyond a cut-off level. "Large corporates with borrowings from the banking system above a cut-off level may be required to tap the market for a portion of their working capital and term loan needs."
 
"Necessary guidelines may be issued by RBI (Reserve Bank of India) taking into account market conditions by September 2016," the report said.
 
The panel also suggested necessary amendments in FEMA regulations to urge foreign portfolio investors (FPIs) to invest in corporate bonds. "Necessary amendments may be made in FEMA regulations to allow investment by FPIs in unlisted debt securities and pass through securities issued by securitisations SPVs/Special Purpose Distinct Entity (SPDE) as announced in the Union Budget 2016-17," the report said.
 
Necessary notification, in this regard, may be issued by the RBI by end August 2016, it said.
 
In order to standardise bond issuance, it said, "...SEBI may have a re-look at the guidelines issued in October 2013 so as to clarify on day count convention, shut period, basis for yield calculation, calculation of coupon interest and redemption with intervening holidays with illustrations."
 
The working group comprises nominees from Reserve Bank, Finance Ministry, SEBI, Insurance Regulatory Development Authority of India and Pension Fund Regulatory and Development Authority (PFRDA).
 
The report said given that the public sector banks would be required to raise around Rs 80,000-85,000 crore by way of issuance of AT-1 instruments, there is an implicit need to broaden the investor base and make these instruments more attractive to the investors.
 
"Insurance companies and EPFO (Employees' Provident Fund Organisation) may be allowed to invest in AT-1 bonds of banks subject to prudential limits with credit rating up to investment grade," it said.
 
The panel also said regulated entities like banks, PDs, in addition to brokers, may be encouraged by the regulators to act as market makers in corporate bond market subject to appropriate risk management framework.
 
The panel suggested the credit rating agencies may be mandated to strictly adhere to the regulatory norms with regard to timely disclosure of defaults on the stock exchanges and their own website.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Strengthen MSE facilitation council sooner than later
Most micro and small enterprises (MSE) suffer from delayed payments for their supplies and services. Several contractual engagements with both the government and public sector undertakings also are not honoured.
 
In line with the long-standing demand of small-scale sector to alleviate the problem of delayed payments the Delayed Payments Act came into being in 1993. The hope that the small scale industries would be relieved of the stress in working capital was short-lived due to ineffective implementation. The Act has been amended in September 1998 providing for payment of penal interest at 150% of the prime lending rate of State Bank of India (SBI), defining default period as 120 days. It also provided for an alternative mechanism of arbitration and conciliation and also redefined the term supplier to include any institution, agency or undertaking notified as such by the Union Government. Industrial Facilitation Councils empowered to act as arbitrators or conciliators were to be notified by governments in the State and union territories (UT). The amendments were effected to strengthen the Act, to make it more useful without disturbing the buyer - seller cordial relations and to provide a relief to the small suppliers from undergoing the cumbersome recourse of legal redressal through civil suits.
 
Subsequently, in 2006 when the Micro, small and medium enterprises (MSME) Development Act was brought in, the Delayed Payments Act was subsumed in Sections 15 to18 of the MSME Development Act whereby the MSE Facilitation Councils replaced the Industrial Facilitation Councils. The well intentioned provisions, however, are still not delivering the intended reliefs for the following reasons:
 
1. The Council is expected to deliver the judgment within 90 days of lodging the claim. Not infrequently this time lag expands at the Council itself due to administrative reasons as the Chairman is obliged to perform other statutory functions as Director of Industries within the ordained timelines of the state government. 
 
2. Ninety days’ delay if unresolved in terms of actual realisation of the supply bill turns the account into non-performing asset (NPA). Ninety days was fixed when the NPA norm was 120 days overdue position. Therefore, this timeline of 90 days has to be reduced to 60 days and that too mandatorily.
 
3. The Council that meets once in a month should meet at fortnightly intervals to provide reasonable scope for hearing both sides providing for either party unable to present itself when called upon to do so by the Council for any justifiable reason. No more than two adjournments shall be allowed in such cases by the Chairman. It is desirable that this is provided in the statute itself instead of rules.
 
4. After the Council adjudicates on the claim, if the respondent does not honour the order, the firm has to file an Execution Petition within the respective jurisdiction after waiting for three months from the date of the order and this is governed by the CPC. Therefore, the intended settlement does not take place.
 
Jurisdiction: Section 18(4)
 
1. Several MSEs enter into sale contracts and public procurement policies (PPPs) that specify the jurisdiction of the dispute within the respective State. Unless the MSMED Act has a provision to overrule such jurisdiction, the claim order will go for a legal tangle involving huge legal expense and further delay in realising the claim from the respondent. 
 
2. Most such disputes are formidable when the respondent is either a government department or public sector undertaking.
 
3. It is incumbent on the payee to remit 75% of the claim amount in case the Council’s order is contested in the High Court. But such remittance being made into the Court and not into the account of the firm, the sword of NPA still hangs on the neck of the enterprise. It is a matter for consideration whether the related High Court in such dispute could straight away inform the Bank where the firm holds its accounts that the Deposit is held by the Court in its name so that the proceedings of the Bank due to declaring the Account as NPA and further proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) can be halted and the unit allowed to carry on its normal production activity with renewal of their credit limits. 
 
4. Clause 4 of Section 18 has overriding clause that is not honoured by several State Governments and the High Courts as well. Therefore, strengthening this provision is extremely important when alone the disputed claim gets remittance of 75% into the Court upfront. 
 
Hence it is important that the issue of the jurisdiction should have an overriding provision over any and all other such clauses in any agreement between the disputant parties. All said and done, the small enterprises being captive suppliers do not have the muscle to alter the PPP clauses even when some of them contravene law.
 
Chairman:
 
1. Chairman of the Council being a quasi judiciary function shall be no less than Director of the Industries. This is imperative for the other reason that the Director acting as Chairman has full knowledge of (a) the functioning of the inter-relationship between the buyer and seller as a contractual arrangement; (b) the functioning of the industry itself from the date of registration to its demonstrated ability of reaching production capacity and standards of supply of goods and services by it; and (c) of the transactional milieu of the industries with the banks and financial institutions (FIs), as Chairman of State Level Inter-Institutional Committee (SLIIC) Sub-committee.
 
2.  This position shall get the acceptance from all the State Governments: several state governments, notwithstanding the existence of such Councils in their own State, refuse to honour the verdict of the Council.
 
Training:
 
The Chairman and the Members of the Council shall be given a five-day training in the essential laws that govern the contracts, sale of goods Act, taxation laws and the jurisdictional issues, Arbitration and Conciliation Act 1996 and its further amendments through Case Laws in the State Judicial Academy or the National Law University/School. This will enable them to come to quicker decisions on the disputes between the buyers and sellers and lessen the burden of arguments on either side which is necessary to judge the case within two or three hearings. 
 
Whenever the Courts receive petitions relating to the debts due to the MSMEs from the government departments or PSUs, it is a matter of introspection as to the reasons for Judiciary at different tiers not asking them to specify what according to them meets with the contractual arrangement and pass the orders in just one or two hearings. This single step could settle many grievances relating to MSEs before they are declared as NPAs by the Banks and FIs.
 
(B Yerram Raju  is Adviser, MSE Facilitation Council, Department of Industries, Government of Telangana. The views are personal.)

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COMMENTS

arun k Dasgupta

3 months ago

It is highly unacceptable in US and UK market to substitute a product by another one ; even if of similar quality. It is surprising that Welspun did not know about this . They may find it extremely difficult to enter the market going forward.

Grand old tigress of Ranthambore, Machli, dies
Watched over by her human admirers, Ranthambore Tiger Reserve's pride, 19-year-old tigress Machli, the oldest big cat ever known to have walked the wilderness, died on Wednesday morning, officials said.
 
Machli, the most photographed big cat at the reserve, died at 9.40 a.m. 
 
She had been refusing food and water for some time. She was under observation at Ama Ghati, in the fringe area of the reserve, and surrounded by a bevy of her admirers and forest officials when she died.
 
Her body has been taken to the Ama Ghati check-post for the post-mortem, after which it will be cremated. The cremation is to avoid the body parts from being harvested, Ranthambore Field Director Y.K Sahu told IANS.
 
Earlier this week after Machli, or T-16, was found in feeble condition near a resort in Ama Ghati fringes, officials cordoned off the area and kept her under observation. 
 
The area had a waterhole, and Machli lived there after she started losing her canines and prime area in 2008. 
 
For the last seven years, Machli was being fed bait to avoid death from starvation, perhaps a reason for her longevity.
 
"She lived an abnormally big life. Generally tigers in wilderness only reach 13 or 14 years, she almost touched 20," Sunayan Sharma, a former forester and founder of Sariska Tiger Foundation, told IANS.
 
"She also gave birth to about five litters which is extraordinary; and the way she'd been hunting was distinct, showing her extraordinary agility and adaptability," Sharma added.
 
Born in early 1997, and mother of over 12 cubs of which nine survived since 2000, the end of this extraordinary tigress was also distinct.
 
"It's very rare that one can witness a tiger die. They mostly go into seclusion. Due to her stature, she deserved our tending," Sahu said. 
 
For many forest officials, Machli's dying was an emotional moment.
 
Often seen hunting and playing around water bodies, which earned her the name Machli (fish) and titles like "Lady of lakes" or "Queen Mother", experts said her life was a distinct case of "evolution" in the behaviour of tigers, especially those in Ranthambore.
 
"Tiger behaviour is evolving and it was best reflected in the case of Machli. She understood the importance of humans and never showed aggression. She was the most photographed tigress ever," R.N. Mehrotra, former Field Director of Ranthambore who observed Machli for seven years from 2005 to 2012, told IANS.
 
He said that though the tiger has been described as solitary and elusive nocturnal carnivore, Machli's case showed a change in mindset of tigers and the way they perceived humans.
 
"The behaviour change in conditional to the situation," he said, contrasting Machli's case with 'Ustad" or T-24, another famous tiger from Ranthambore, whose behaviour change made him more aggressive, supposedly due to extreme interventions by humans in his area. Ustad was lablled a maneater and sent to captivity last year.
 
The Ranthambore Reserve reportedly earned millions of rupees a year from tourists flocking to see and photograph Machli.
 
The most famous tiger ever, Machli besides being remembered for her legendary battle with a huge crocodile, a dedicated postal stamp and as lead character of many documentaries, leaves behind a legacy of evolution. 
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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