Regulations
Securities Debt: SEBI’s amendments inconsequential
In an environment where securitisation is considered to be done and written off, the amendments on public offer and listing of securitised debt instruments by SEBI are highly inconsequential
 
Market regulator Securities Exchange Board of India (SEBI) on 9 April 2015 amended the Regulations pertaining to public offer and listing of securitised debt instruments vide SEBI (Public Offer and Listing of Securitised Debt Instruments) (Amendment) Regulations, 2015. However, in an environment where securitisation is considered to be done and written off, these amendments by SEBI are highly inconsequential. Especially at this time, the market does not need an overdose of regulations but a new lease of life.
 
The Amendment Regulation of 2015 are accommodating the Concept Paper issued by SEBI earlier, in 2014, with regard to standardisation of the Term Sheet; Rationalisation & Enhancement of Responsibilities of Securitization Trustees
Performance of Securitisation Industry in recent years
 
The securitisation industry has been constantly under regulatory scanner and the amendments since 2012 have given industry reasons to rejoice and mourn at its visible and slow death. This is also evident with the rise and the fall in the securitisation volumes ever since. The table below explains the securitisation volumes over the years as below:
 
 
In the year 2012, the revised securitisation guidelines were issued for banks and non-banks in April and August of 2012 respectively. The guidelines were a welcome change, as they brought clarity on securitisation, through pass-through certificate (PTC) route. The market swung upwards post the amendments. There were certain issues with regard to taxation of securitisation vehicles and the pass-through nature of the trusts. 
 
In the wake of the market demanding pass-through for securitisation trusts, the Union Budget for 2012-13 introduced Chapter XII EA with regard to taxation of securitisation trusts pursuant to which distribution tax was levied on the income distributed by securitisation trusts. 
 
If the provisions of distribution tax on securitisation trusts as against the demand for pass-through was not enough for the market to be throttled, a series of amendments on the priority sector lending guidelines by Reserve Bank of India (RBI) did the needful of killing the market completely.
 
In May 2014, vide a notification on Treatment of Rural Infrastructure Development Fund (RIDF) and certain other funds under priority sector, RBI stated that the outstanding deposits as on 31st March of the current year under RIDF, Warehouse Infrastructure Fund (WIF), Short Term Co-operative Rural Credit Refinance Fund (STCRCRF) and Short Term RRB Fund with NABARD, will be treated as part of indirect agriculture and will count towards overall priority sector target achievement. This reduced dependence of banks on non-banking financial companies (NBFCs) for meeting their priority sector lending targets. 
 
It was always evident and known that the securitisation industry in India was dependent on the priority sector lending targets of banks. NBFCs would sell their portfolios to banks, so that banks could meet their priority sector lending targets; it also explained the heightened volumes of securitisation towards the fag end of the financial year. It would not be improper to say that securitisation volumes were directly proportionate to the demand for priority sector requirements. The RBI in 2014 eased the priority sector targets for banks.  
 
The series of regulatory reforms in the sector have made the industry vary of the changes and has been looking at alternative modes of refinancing. While securitisation is considered quintessential for the growth and sustenance of NBFCs in India, emphatically they are forced to look at alternative means of refinancing.
 
The dipping volumes in the year 2014-15, that are at an all-time low in the recent years, speaks of the markets response to the recent regulatory changes. 
 
The Amendment Regulation of 2015 introduces the eligibility requirements for the trustee, registration requirements and the various compliances required to be carried out by the trustee. The Amendment Regulation of 2015 also finalise the term sheet that may be used as a standardised document for all securitisation transactions. 
 
Highlights of Amendments
 
The summary changes introduced vide Amendment Regulation of 2015 are as below:
a. An entity making an application to SEBI to be registered as a trustee of special purpose distinct entities shall require 
i. net worth of Rs2 crore;
ii. have in its employment minimum of two persons; between them have at least five years of experience in securitisation activity and at least one among them shall have a professional qualification in law from any university or institution recognised by the Central Government or any State Government or a foreign university.
 
b. The requirement for application to SEBI for being trustee shall not be applicable to National Housing Bank (NHB) and National Bank for Agriculture and Rural Development (NABARD).
 
c. The responsibilities of the trustees include:
i. Creation, monitoring, protection and enforcement of security interests;
ii. Grievance redressal for protection of investors interests;
iii. Timely redemption of securitised debt instruments;
iv. Monitoring asset cover at all times which includes calling for periodic reports from originator 
v. Maintenance of net worth and infrastructure to facilitate carrying out of responsibilities of trusteeship.
 
The term sheet is the same as was proposed under the concept paper. 
 
How the market views the Amendments?
 
In an environment where securitisation is considered to be done and written off, the amendments introduced by SEBI are highly inconsequential. The question of greater responsibility of the trustees arises where there is any securitisation in the market. 
Are the regulators listening?
 
(CS Nidhi Bothra is executive vice president at Vinod Kothari Consultants Pvt Ltd)

User

Net neutrality: Flipkart walks away from Airtel Zero platform
E-commerce giant Flipkart on Tuesday said it is "walking away" from the platform Airtel Zero and is committed to the larger cause of net neutrality.
 
"We at Flipkart have always strongly believed in the concept of net neutrality, for we exist because of the Internet," a statement issued by the e-commerce company said.
 
"We will be walking away from the ongoing discussions with Airtel for their platform Airtel Zero. We will be committing ourselves to the larger cause of net neutrality in India. We will be internally discussing over the next few days, the details of actions we will take to support the cause," the statement added.
 
Bharti Airtel recently launched Airtel Zero, an open marketing platform that will allow customers to access mobile applications at zero data charges.
 
Flipkart stated that over the past few days, there has been a great amount of debate, "both internally and externally, on the topic of zero rating, and we have a deeper understanding of the implications".
 
The company also said it will be working towards ensuring that the spirit of net neutrality is upheld and applied equally to all companies in India irrespective of the size or the service being offered and there is absolutely no discrimination.
 
Net neutrality means that governments and internet service providers should treat all data on the internet equally - therefore, not charging users, content, platform, site, application or mode of communication differentially.
 
Amid a huge hue and cry in social media over net neutrality, Communications and IT Minister Ravi Shankar Prasad said on Monday that a panel examining the issue will submit its report by the second week of May to help the government take a comprehensive decision on the contentious issue.
 
The entire process of a committee of experts going into the pros and cons of the issue will benefit the government in making comprehensive decisions, he said.
 
"This is the reason we are doing it independent of TRAI (Telecom Regulatory Authority of India)," Prasad added.
 
The six-member panel, which will conduct the study and submit its report, has been set up the department of telecommunications (DoT).
 
In March, telecom regulator TRAI released a paper inviting comments from users and companies on how over-the-top services should be regulated in the country. It has asked stakeholders to send suggestions by April 24 and counter-arguments need to be submitted by May 8.
 
Congress leader Ajay Maken also said that his party supports net neutrality and Internet freedom must not be compromised.
 
The US Federal Communications Commission has defended its stand on net neutrality and its commissioner Mignon Clyburn said: "The rules will ensure that the internet remains the great equalizer of our time."
 
N. Chandramouli, chief executive officer, Trust Research Advisory, publishers of the Brand Trust Report, said: "From a brand point of view we can already see it is impacting and hampering the equation with telecom brands such as Airtel, decided in December 2014 that they would charge more for calls made through services like Skype and Viber, but had to roll back the decision after outrage on social networks."

User

CBI finds nothing to prove graft in 35th National Games
The preliminary probe by the CBI into the allegations levelled over a massive corruption in the conduct of the 35th National Games in Kerala has nothing substantial to prove, a source said.
 
The source, who did not wish to be identified, told IANS that the probe was based on a complaint filed by CPI-M legislator V. Sivankutty.
 
"We have not been able to find anything to substantiate the allegations for which a CBI probe was sought. Since the Centre has also funded the event, we also looked into that aspect. The final report will be submitted to a court next month," said the CBI source. 
 
The budget of the event was Rs.611 crore and the games were held in seven districts of the state from January 31 to February 14, 2015.
 
Things turned hot for the organisers ever since a section of the media here went hammer and tongs against them after it was found that the event management company selected was a sister concern of the leading regional daily in Kerala. 
 
Many reports of alleged corruption surfaced in the media. Following such reports, Sivankutty approached a court, seeking a preliminary Central Bureau of Investigation (CBI) probe. 
 
Jacob Punnoose, chief, National Games, told IANS that CBI officials went through many documents as part of their preliminary probe.
 
"What must not be forgotten...ever since the concept of the games village came, despite building many infrastructure projects for the event, the 35th National Games turned out to be the cheapest," said Punnoose. 
 
He said the budget of the event was fixed at Rs.611 crore but it was conducted by spending only Rs.550 crore. 

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)