Law Reporter: 2015

#FEMA (Transfer or Issue of Security by a Person Resident outside India) 9th Amendment Regulations,2015

RESERVE BANK OF INDIA

(Foreign Exchange Department)

(CENTRAL OFFICE)

NOTIFICATION

Mumbai, the 6th October, 2015

No. FEMA. 353 /2015-RB

Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Ninth Amendment) Regulations, 2015

G.S.R. 759 (E).—In exercise of the powers conferred by clause (b) of sub-section (3) of Section 6 and Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India hereby makes the following amendments in the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 (Notification No. FEMA.20/2000-RB dated 3rd May, 2000), namely:-

1. Short Title & Commencement

(i) These Regulations may be called the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Ninth Amendment) Regulations, 2015. (ii) They shall come into force from the date of their publication in the Official Gazette.

2. Amendment to Schedule 5:-

In the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 (Notification No. FEMA 20/2000-RB dated 3rd May 2000), in Schedule 5,

(A) in paragraph 2,

(i) the existing sub-paragraph (3) shall be re-numbered as Paragraph 2C

(ii) after the existing sub-paragraph (2), the following shall be added namely:-

“(3) A Non- Resident Indian may subscribe to National Pension System governed and administered by Pension Fund Regulatory and Development Authority (PFRDA), provided such subscriptions are made through normal banking channels and the person is eligible to invest as per the provisions of the PFRDA Act. The annuity/ accumulated saving will be repatriable.”

(iii) after adding sub-paragraph (3) in paragraph 2, the existing paragraph 2C shall be re-numbered as sub-paragraph (4) in Paragraph 2.

(B) In paragraph 3, after the existing sub-paragraph (2), the following shall be inserted namely:-

“(2A) A non-resident Indian who subscribes to the National Pension System, under sub-paragraph (3) of paragraph (2) of this Schedule shall make payment either by inward remittance through normal banking channels or out of funds held in his NRE/FCNR/NRO account.”

[ F. No. 1/26/EM/2015]

B.P. KANUNGO, Principal Chief General Manager

Supreme Court Verdict on Amendment to Overrule a Judgement is not Valid

Honourable Supreme Court in ACIT (Agr. IT) vs. Netley ‘B’ Estate has held that while an amendment to overrule a judgement is not valid, it is permissible to retrospectively alter the character of the levy so as to save it from illegality – (2015-ITRV-SC-163)

#GST to be implemented w.e.f April 1, 2016

GST constitutional amendment may be passed in Winter Session of Parliament

The GST, a much-awaited reform to replace multiple indirect taxes with one levy shall be implemented with effect from April 1, 2016 as all preparations including rules, legislation and others have been duly undertaken.

GST will be a very efficient system of tax collection as there will be no scope for tax evasion and tax base would be widened and collection would be much higher under the GST regime for both the Centre and the states.

GST will promote ease of doing business and would boost the GDP by about two per cent.

Safety and security measures shall be taken care of as GST net has already offered the states to come up on information technology at par.

With almost 90 per cent of villages without electricity in India the issue of rural electrification is being addressed to ensure smooth implementation of the GST.

There is consensus to impose purchase tax on agriculture produce and therefore it will come under the purview of the GST.

GST is necessary for India’s economic development. Consumers are paying about 29 per cent both visible and invisible tax, hopefully GST will be on a lower side.”

Rate of service tax will go up from the existing 16 per cent but the exact percentage could be known only after the declaration is made.

#SEBI directs #Mutual Funds to Improve Monthly Disclosure Transparency

The Securities and Exchange Board of India (SEBI) has directed mutual fund houses to standardize their fact sheets or the monthly information documents sent to unit holders. The move is aimed at bringing about more transparency and uniformity and helping investors take more informed investment decisions.

Asset management companies (AMCs) will have to provide information such as dividend history and total monthly expenses in a format prescribed by the Association of Mutual Funds of India (Amfi). Also, fund houses will have to present certain data in a graphical and easy-to-read manner. The move follows Sebi citing lack of uniformity in the fact sheets presented by various fund houses.

Further, AMCs should filter information that was non-standardised and define parameters for information that differed in content, formula and presentation across different fund houses, it added.

Though publishing fact sheets isn’t mandatory under Sebi’s mutual fund regulations, AMCs have been doing so for several years.

The use of technologies and systems varies across fund houses — if a particular fund house highlights an additional parameter based on its investment philosophy, it is considered a requirement for other fund houses.

Hence, SEBI wants a better and improvised disclosure standard for the mutual funds to have an effective monitoring system.

#SEBI Seeks Greater #NBFC #Disclosure

The Securities and Exchange Board of India (Sebi) has asked non-banking financial companies (NBFCs) to issue detailed disclosures while launching a public offer of debt securities to raise funds.

The norms, which will be applicable to draft offer documents to be filed on or after November 1, have been finalised on the basis of feedback from market entities. Sebi seeks to align the norms in line with the stipulations required by the Reserve Bank of India (RBI).

The NBFCs would now need to disclose “aggregated exposure to the top 20 borrowers with respect to the concentration of advances”, against the current requirement for top 10 borrowers. They would also need to disclose the details of loans, which are overdue and classified as non-performing according to RBI guidelines.

If any of the borrowers of the NBFCs form part of the ‘group’ as defined by RBI, appropriate disclosures would need to be made in a prescribed format. They will need to mention the name of all such borrowers, the amount of advances, and the percentage of total assets under management.

Further, in order to allow investors to better assess the NBFC issue, it has been decided that some additional disclosures would need to be made in the offer documents.

These disclosures would include a portfolio summary on the sectors to which the NBFCs have lent. The quantum and percentage of secured and unsecured borrowings would also need to be mentioned.

The other details that need to be disclosed include any change in promoters’ holdings in NBFCs during the last financial year beyond a particular threshold. At present, RBI has prescribed such a threshold level at 26 per cent. The same threshold would be applicable or as may be prescribed by RBI from time to time.

Sebi said the NBFCs would also need to state a lending policy, containing overview of origination, risk management, monitoring and collections. Besides, the classification of loans or advances given to associates, entities or persons related to the board, senior management, or promoters etc, would need to be disclosed.

#CBDT forms Committee to Analyse #Industry-based #Tax #Assessment

CBDT has constituted a new committee to examine the feasibility of implementing a new tax assessment system of ‘industry-based jurisdiction’ instead of the current system of territorial revenue collection in the country.

The six-member committee, to be headed by a Principal Commissioner-rank officer of the Income Tax Department, has been created to act on the recommendations of the Tax Administration Reform Commission (TARC) which had submitted its report to the Finance Ministry early this year.

The committee, according to the terms of reference charted out by CBDT, will “carry out analysis of prevailing territorial jurisdiction in the I-T department and study of its various aspects keeping in view the various responsibilities assigned and discharged by the assessing officers” who are located across the country.

The I-T department, at present, has more than 550 regular assessment ranges varying from mofussil areas and small towns to metropolitan cities and they have jurisdiction on taxpayers based on the territorial limits set by the municipal and administrative authorities of the state or Union government.

“The TARC suggestion was to have assessment ranges in the I-T department based on industry or sectors like Information Technology, banking, SEZ, government service and others. The new committee will take an all-India view and submit its report to CBDT.

The committee has also been asked by CBDT to study the efficacy of existing dedicated ranges dealing with cases of trusts, association of persons, professionals and industry- specific jurisdiction in some corporate sector charges, with a view to examining the feasibility of implementing the same on all-India basis in a phased manner.

The committee constituted last week has been given a month’s time to do its job and submit its report to the apex-policy making body of the tax department by October 15.

#SEBI Share Based #Employee Benefits(Amendment) #Regulations,2015

THE GAZETTE OF INDIA

EXTRAORDINARY

PART – III – SECTION 4

PUBLISHED BY AUTHORITY

NEW DELHI, SEPTEMBER 18, 2015

SECURITIES AND EXCHANGE BOARD OF INDIA

NOTIFICATION

Mumbai, the 18th September, 2015

SECURITIES AND EXCHANGE BOARD OF INDIA (SHARE BASED EMPLOYEE BENEFITS) (AMENDMENT) REGULATIONS, 2015

No.SEBI/LAD-NRO/GN/2015-16/021.─In exercise of the powers conferred by sections 11, 11A and 30 of the Securities and Exchange Board of India Act, 1992 read with section 62 of Companies Act, 2013 and rule 12 of Companies (Share Capital and Debentures) Rules, 2014, the Securities and Exchange Board of India hereby makes the following regulations to further amend the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, namely:-

1. These regulations may be called the SEBI (Share Based Employee Benefits) (Amendment) Regulations, 2015.

2. They shall come into force on the date of their publication in the Official Gazette.

3. In the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014:-

(I) In regulation 2, in sub-regulation (1), clause (f), shall be substituted with the following, namely

f. “employee” means—

(i) a permanent employee of the company who has been working in India or outside India; or

(ii) a director of the company, whether a whole time director or not but excluding an independent director; or

(iii) an employee as defined in clause (i) or (ii) of a subsidiary, in India or outside India, or of a holding company of the company

but does not include—

(a) an employee who is a promoter or a person belonging to the promoter group; or

(b) a director who either himself or through his relative or through any body corporate, directly or indirectly, holds more than ten per cent of the outstanding equity shares of the company; “

(II) In regulation 3, in sub-regulation (13), the symbol ―.‖ at the end shall be substituted with the words and symbols ―, whether off-market or on the platform of stock exchange.‖

(III) In regulation 6, in sub-regulation (3), in its clause (c), the words ―or associate‖ shall be omitted. (IV)In regulation 31, in sub-regulation (2), in its clause (b),

a. in sub-clause (iii), the word ―five‖ shall be substituted with the word ―three‖;

b. after sub-clause (iii), following new sub-clause shall be inserted, namely-

―(iv) trustees of a trust may continue to vote in respect of shares held by such trust for a period of three years, commencing from 28th of October, 2014.‖

U.K. SINHA

CHAIRMAN

SECURITIES AND EXCHANGE BOARD OF INDIA

Footnote: 1. The Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 were published in the Gazette of India on 28th October, 2014 vide No. LAD-NRO/GN/2014-15/16/1729.

#SEBI (Issue of Capital and Disclosure Requirements) (6th Amendment) Regulations,2015

THE GAZETTE OF INDIA

EXTRAORDINARY

PART – III – SECTION 4

PUBLISHED BY AUTHORITY

NEW DELHI, SEPTEMBER 10, 2015

SECURITIES AND EXCHANGE BOARD OF INDIA

NOTIFICATION

Mumbai, the 10th September, 2015

SECURITIES AND EXCHANGE BOARD OF INDIA

(ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS)

(SIXTH AMENDMENT) REGULATIONS, 2015

No. SEBI/LAD-NRO/GN/2015-16/18.─ In exercise of the powers conferred by section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following regulations to further amend the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, namely:-

1. These regulations may be called the SEBI (Issue of Capital and Disclosure Requirements) (Sixth Amendment) Regulations, 2015.

2. They shall come into force on the date of their publication in the Official Gazette.

3. They shall be applicable to issuers filing offer documents with the Registrar of Companies on or after the date of commencement of these regulations.

4. In the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, in Schedule XI, in Part A, in para (10), in clause (b), sub-clause (iii), shall be substituted with the following, namely:-

“(iii) in case of allocation above Rs.250 crore; a minimum of 5 such investors and a maximum of 15 such investors for allocation upto Rs.250 crore and an additional 10 such investors for every additional Rs.250 crore or part thereof, shall be permitted, subject to a minimum allotment of Rs.5 crore per such investor.”

U.K. SINHA
CHAIRMAN
SECURITIES AND EXCHANGE BOARD OF INDIA

Companies (Accounts) Second Amendment Rules, 2015

The Ministry of Corporate Affairs has issued rules dated 4th September, 2015 of the Companies (Accounts) Second Amendment Rules, 2015 to bring out necessary amendments in the interest of the stakeholders.

Please click on the below link to access the amendment rules.

Companies (Accounts) Second Amendment Rules, 2015

#CBDT releases second set of FAQs on Compliance Window under Black Money Act

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (hereinafter referred to as ‘the Act’) has introduced a tax compliance provision under Chapter VI of the Act. The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Rules, 2015 (hereinafter referred to as ‘the Rules’) have been notified.

To access the complete FAQ’s please click on the link as below:

FAQs on compliance window under ‘Black Money Act’

Changes in #RTGS time window

RBI/2015-16/168

DPSS (CO) RTGS No.492/04.04.002/2015-16

September 1, 2015

The Chairman / Managing Director / Chief Executive

Officer of participants of RTGS

Madam / Sir,

Changes in RTGS time window

A reference is invited to the Reserve Bank of India press release number 2015-2016/528 dated August 28, 2015 on “Bank Holiday on Second & Fourth Saturdays from September 1; RBI to offer its Support Services to Banks on Working Saturdays”.

2. Accordingly, RTGS will not be operated on second and fourth Saturdays but would operate for full day on working Saturdays. Processing of future value dated transactions with value date falling on second and fourth Saturdays will not be undertaken under RTGS.

3. The RTGS time window with effect from September 1, 2015 will be as under:

Sr. No.	Time Event	Regular days including Saturdays, except Second and Fourth Saturdays of the Month
1.	Open for Business	08:00 hours
2.	Initial Cut-off (Customer transactions)	16:30 hours
3.	Final Cut-off (Inter-bank transactions)	19:45 hours
4.	IDL Reversal	19:45 hours – 20:00 hours
5.	End of Day	20:00 hours

4. This circular is issued under Section 10 (2) of Payment & Settlement Systems Act, 2007.

5. Please acknowledge receipt.

Yours faithfully,

Nilima Ramteke
General Manager

#Guidelines on #Investment in #Exchange Traded Funds with G Sec

Ref: IRDA/F&I/CIR/INV/156/08/2015 Date:28-08-2015

CIRCULAR

The CEOs of all lnsurers,

Sub: Guidelines on Investment in Exchange Traded Funds with G Sec Underlying (GILT-ETF)

Insurers are permitted to invest in the exhaustive asset classes under the provisions of Insurance Act, 1938, IRDA (Investment) Regulations, 2000, and guidelines issued there under.

GILT-ETF launched in India, has been after due consideration, permitted for Insurers to invest as a part of “Approved Investments”.

In line with investments in Mutual Funds under Gilt/G Sec./Liquid categories, subject to conditions prescribed by Cir: INV/GLN/003/2008-09, GILT-ETFs shall fulfil the following additional conditions:

The GILT-ETFs shall be issued and managed by the Mutual Funds registered under SEBI (Mutual Funds) Regulations, 1996, as amended from time to time.

The object of the GILT-ETFs shall be to invest in a basket of Govt. Securities Actively Traded in the market or constituents’ of a publicly available index.

The minimum investment by the Insurer shall not be less than Creation Unit size and shall not be reduced at any time below Creation Unit Size and value of Creation Unit Size, at the time of investment, shall not be more than Rs.50 lakhs.

The Overall Expense Ratio shall be less than 0.50% of the daily net assets of the scheme.

The Insurers to comply with the provisions of Sec 27E of the Insurance Act, 1938 shall ensure that the GILT-ETFs invest only in Domestic Govt. Securities.

The GILT-ETFs shall be treated at par with GILT/G SEC Mutual funds and shall adhere to exposure norms applicable to “Investment in Mutual Funds (MFs) by Insurance Companies“, as per Circular no. INV/CIR/08/2008-09 dated 22nd August, 2008, Circular No.INV/CIR/020/2008-09 dt.11th November, 2008 and Circular No. IRDA/F&I/INV/CIR/213/10/2013 dt. 30th October, 2013.

The Investments in GILT-ETFs shall be listed under Category Code “EGMF” for preparation of IRDAI Periodical Investment Returns.

S N Jayasimhan

Joint Director (Investments)

#CBEC issues Clarification on Service of #SCN

The Central Board of Excise and Customs has issued clarification relating to waiver of issuance of SCN and conclusion of proceedings in Service tax and Central Excise dated 18th August, 2015.

Please click on the below link to access the Notification.

Link

RBI Circular : Detection of Counterfeit Notes

RBI/2015-16/162
DCM (FNVD) No. 776/16.01.05/2015-16

August 27, 2015

The Chairman / Managing Director /
Chief Executive Officer
All Banks

Madam / Sir,

Detection of Counterfeit Notes

Please refer to our Circular DCM (FNVD) No. 5840/16.01.05/2012-13 dated June 27, 2013 on “Detection and Reporting of Counterfeit Notes”. The procedure for detection of counterfeit notes has been reviewed in consultation with the Government and it has been observed that certain modifications are required for bringing improvement in reporting of counterfeit notes and facilitating maintenance of records by banks. Accordingly, the changes in the instructions are advised as under:

2. Detection

i. Over the Counter

Banknotes tendered over the counter should be examined for authenticity through machines and such of these determined as a counterfeit one, shall be stamped as “COUNTERFEIT NOTE” and impounded as detailed in Annex I. Each such impounded note shall be recorded under authentication, in a separate register.

ii. Bulk Receipts at Back Office / Currency Chest

Procedure as at 2 (i) is to be followed where notes are received directly at the back office / currency chest through bulk tenders.

3. When a banknote tendered at the counter of a bank branch or treasury is found to be counterfeit, an acknowledgement receipt in the format (Annex II) must be issued to the tenderer, after stamping the note as in Paragraph 2 ibid. The receipt, in running serial numbers, should be authenticated by the cashier and tenderer. Notice to this effect should be displayed prominently at the offices / branches for information of the public. The receipt is to be issued even in cases where the tenderer is unwilling to countersign it.

4. No credit to customer’s account is to be given for counterfeit notes, if any, in the tender received over the counter or at the back-office / currency chest.

5. In view of the revision in the system of detection of counterfeit notes by banks, the following changes may be noted with respect to existing compensation and penalty for non-detection of counterfeit notes:

5.i. Compensation

The instructions on compensation to banks at 25% of the notional value of counterfeit notes detected and reported and the system of lodging claims for compensation by Forged Note Vigilance Cell of banks stand withdrawn.

5.ii. Penalty

Penalty at 100% of the notional value of counterfeit notes, in addition to the recovery of loss to the extent of the notional value of such notes, will be imposed under the following circumstances:

a) When counterfeit notes are detected in the soiled note remittance of the bank.

b) If counterfeit notes are detected in the currency chest balance of a bank during Inspection / Audit by RBI.

6. All other instructions relating to examination of notes before issuance over the counter, top up of ATMs, reporting to police and other authorities, infrastructure etc. to enable detection as well as liaison with the authorities, remain unchanged.

7. These instructions come into immediate effect.

Yours faithfully,

(Uma Shankar)
Principal Chief General Manager

Encl: As above

Annex I

Format of the stamp for impounding

A stamp with a uniform size of 5 cm x 5 cm with the following inscription may be used.

COUNTERFEIT BANKNOTE IMPOUNDED

COUNTERFEIT BANKNOTE IMPOUNDED
BANK / TREASURY/ SUB-TREASURY
BRANCH
SIGNATURE
DATE

Annex II

Format – Acknowledgement Receipt to be issued to the tenderer of counterfeit notes

Name of the Bank / Treasury/ Sub-treasury:
Address:

Serial Number of the Receipt:
Date:

The note (s) described below received from…………………………….(Name and Address of the tenderer) is/are counterfeit and has/have therefore been impounded and stamped accordingly.

Serial number of the note deemed as counterfeit	Denomination	Parameter on which the note is deemed as counterfeit

Total number of counterfeit notes:

(Signature of the Tenderer)

(Signature of the counter staff)

Security and Risk Mitigation Measures for Card Present and Electronic Payment Transactions

RBI/2015-16/163

DPSS.CO.PD.No.448/02.14.003/2015-16

August 27, 2015

All Scheduled Commercial Banks including RRBs /

Co-operative Banks / State Co-operative Banks /

Central Co-operative Banks / Authorised Card Payment Networks

Dear Madam / Sir,

Security and Risk Mitigation Measures for Card Present and Electronic Payment Transactions – Issuance of EMV Chip and PIN Cards

A reference is invited to our circular DPSS (CO) PD No.2112/02.14.003/2014-15 dated May 07, 2015 on the captioned subject wherein directives were issued that with effect from September 01, 2015 all new cards issued – debit and credit, domestic and international – by banks shall be EMV Chip and Pin based cards.

2. In this regard, representations have been received from various banks expressing difficulties in meeting this timeline on account of existing stock of magnetic stripe only cards with their branches. Further, banks have also indicated that more time is required for completion of certification process for issuance of EMV Chip and Pin cards.

3. Accordingly, it has been decided to grant extension of time for issuance of EMV Chip and Pin cards as under:

Sr. No.	Type of Card/s	Time extended upto
(i)	Cards issued under the Prime Minister Jan Dhan Yojana (PMJDY) / Basic Savings Bank Deposit Account (BSBDA) / other Government schemes	September 30, 2016
(ii)	All cards other than (i) above	January 31, 2016

4. During this extended period, in case of specific requests from customers for issuance of EMV Chip and Pin cards, banks should promptly comply with the request. Besides, all cards issued for international usage will necessarily be EMV Chip and Pin cards, as already advised.

5. As regards migration of existing magnetic stripe only cards to EMV Chip and Pin cards, banks may initiate necessary steps to progressively migrate on their own accord so as to ensure that all active cards issued by them are EMV Chip and Pin based by December 31, 2018. The issuing banks may please note that the magnetic stripe cards issued would have to be replaced by December 31, 2018 irrespective of the validity period of the card and accordingly banks may have to take proactive steps to ensure that the deadlines are adhered to without fail.

6. This directive is issued under Section 10(2) read with Section 18 of Payment and Settlement Systems Act 2007 (Act 51 of 2007).

Yours faithfully

(Nanda S Dave)

Chief General Manager

#Negotiable #Instruments (Amendment) Bill, 2015 brings important #amendment shortly

This is the third major amendment in recent times to the Negotiable Instruments Act 1881, prompted by dishonour of cheques in lakhs, shaking the credibility of the instrument, confidence of stakeholders and choking courts.

Present Amendment:

The amendment adopts the basic principles laid down by the Supreme Court in the above case regarding jurisdiction of courts and improves upon it in the light of the representations made by various stakeholders, including industry associations and financial institutions. Complications had arisen because a cheque was issued in one place on one bank, and presented in another place to another bank. The payer company might be in one corner of the country and the payee might be in another. The payee therefore had to chase the accused in distant places and even if he won, appeals would be filed in another court and arguments will continue for years. The Supreme Court found that even high courts had differed on the question of the choice of courts which should try the case. The present amendment removes such legal obstacles and speeds up the trial.

Procedure:

The new provision states that the holder of the cheque can file a criminal complaint before a magistrate where he resides and tendered the cheque. He need not go to the place where the cheque was issued or other courts. After this clarification, there is a single place to file the complaint. Litigation expenses will come down, and the drawers of cheques, including company directors will be more careful while signing such cheques. The government feels that these procedural changes will be fair to both parties.

Status of the cases already pending:

According to the newly introduced Section 142A of the Act, all cases which were pending in any court, whether filed before it or transferred to it shall go before the court having jurisdiction under the new procedure.

Other important change in the amendment:

The new law also cures a deficiency in the definition of “a cheque in the electronic form”. The law as it stood presumed drawing of a physical cheque and signature. With the advance in technology it needed to be updated. Therefore, it is explains that “a cheque in the electronic form” means a cheque drawn in electronic form by using any computer resource and signed in a secure system with digital signature (with or without biometrics signature) and asymmetric crypto system or with electronic signature. The Negotiable Instruments Act draws colour from definitions of technical expressions from the Information Technology Act, 2000.

National Company Law Tribunal #NCLT Constitution may get delayed

The government is likely to get delayed in notifying the provisions concerning the National Company Law Tribunal (NCLT) and its appellate body (NCLAT).

Till date, around 60 per cent of the Companies Act, 2013 — which has a total of 470 sections and seven schedules — has been notified and enforced. Most of the remaining provisions of the Act are related to NCLT, a body which would replace the existing Company Law Board (CLB), the Board for Industrial and Financial Reconstruction (BIFR) and assume the high court’s power on clearing mergers and acquisition (M&As) and amalgamation.

On May 14, the Supreme Court, in a case filed by the Madras Bar Association, upheld the constitutional validity of NCLT and NCLAT under the Companies Act, 2013. However, the court deemed the selection process of the members of NCLT and NCLAT under the applicable provisions of the new Companies Act as unconstitutional. As a result, the government will need to align the Companies Act, 2013, with the decision of the Supreme Court.

The government requires parliamentary approval to make necessary amendments or it can do the same by exercising the powers vested in it under Section 470 of passing the Removal of Difficulty Orders as per the process laid down therein.

In view of the above procedure, the actual constitution of NCLT, NCLAT may get delayed.

SEBI invites EPFO Pension Funds to invest in the Stock Market

The apex retirement fund regulator EPFO have began to invest in capital markets for the first time ever, however, the regulator SEBI has invited for similar investments by other pension funds as well.

Welcoming the EPFO decision to invest five per cent of its incremental deposits into capital markets through Exchange Traded Funds (ETFs), other pension funds should also look at investing in markets.

“This is a very good development that 5 per cent of the Employee Provident Fund Organisation’s incremental deposits will come into capital markets.

EPFO has a huge corpus of about Rs 6.5 lakh crore, out of which it has an incremental deposit of about Rs 1 lakh crore.While Labour Ministry also issued a notification in April to allow EPFO to invest a part of its funds in stock markets, a similar notification for private provident funds was issued in June. However, trustees of individual funds would need to take a final decision before investing in the stock market.

The EPFO expects that it has a huge potential of becoming the largest domestic investor in terms of making investments in the stock market in the years to come.

#SEBI #Circular #Substantial #Acquisition of #Shares and #Takeovers Regulations, 2011

SEBI CIRCULAR

CIR/CFD/POLICYCELL/3/2015, August 05, 2015

All Recognised Stock Exchanges

All Registered Merchant Bankers

Dear Sir/Madam,

Sub: Formats under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011(Regulations).

1. The formats for the reports/disclosures to be filed under the Regulations have been prescribed by SEBI vide circular No SEBI/CFD/DCR/SAST/ 1/2011/09/23 dated September 23, 2011, SEBI/CFD/DCR/SAST/ 2/2011/10/20 dated October 20, 2011and CIR/CFD/POLICYCELL/11/2013 dated October 21, 2013.

2. In order to ensure that adequate disclosures are made to help investors in taking an informed decision, it has been decided to modify the formats for disclosures under regulation 31of the Regulations.

3. The format for disclosuresunder regulation 31(1)/(2)of the Regulations is placed as Annexure-1.

4. A copy of this circular and the above stated formats are available on SEBI website at www.sebi.gov.in under the categories “Legal Framework” and “Takeovers”.

5. This Circular shall come into force with immediate effect.

Yours faithfully,

Amit Tandon

Deputy General Manager

+91-22-26449373

amitt@sebi.gov.in

To visit the complete circular, please click the below link:

Formats under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011(Regulations)

#FAQs on #Delisting of #Securities Released by #SEBI

1. What is meant by delisting of securities?

The term “delisting” of securities means permanent removal of securities of a listed company from a stock exchange. As a consequence of delisting, the securities of that company would no longer be traded at that stock exchange.

2. What is the difference between Voluntary delisting and Compulsory delisting?

Compulsory delisting refers to permanent removal of securities of a listed company from a stock exchange as a penalizing measure at the behest of the stock exchange for not making submissions/comply with various requirements set out in the Listing agreement within the time frames prescribed. In voluntary delisting, a listed company decides on its own to permanently remove its securities from a stock exchange.

3. What is the exit opportunity available for investors in case a company gets delisted?

SEBI (Delisting of Securities) Guidelines, 2003 provide an exit mechanism, whereby the exit price for voluntary delisting of securities is determined by the promoter of the concerned company which desires to get delisted, in accordance to book building process. The offer price has a floor price, which is average of 26 weeks average of traded price quoted on the stock exchange where the shares of the company are most frequently traded preceding 26 weeks from the date public announcement is made. There is no ceiling on the maximum price.

In case of infrequently traded securities, the offer price is as per Regulation 20 (5) of SEBI (Substantial Acquisition and Takeover) Regulations. For this purpose, infrequently traded securities is determined in the manner as provided in Regulation 20 (5) of SEBI (Substantial Acquisition and Takeover) Regulations.

4. Does a company listed at BSE/NSE have to provide exit offer to shareholders in case it delists from stock exchanges other than BSE and NSE?

No, the company does not have to provide exit offer to shareholders because it continues to be listed on the BSE / NSE which have nationwide reach and shareholders can exit any time they decide to so by way of selling shares in NSE/ BSE.

GST Bill May be Delayed upto 2017

The Narendra Modi-government may wait for the Budget session to get the Constitution Amendment Bill for introduction of Goods and Service Tax passed. The Bill has not been listed for consideration yet.

If the Constitution Amendment Bill does not get passed during the current session, the chances of implementing the GST from April 1 next year will be bleak. In such a situation, the new indirect tax system would be in a place only a year later, that is April 1, 2017, as such a taxation system cannot be implemented in the middle of a fiscal year.

A Constitution Amendment Bill needs order in the House to get passed.But continuous disruption has virtually stopped legislative business in both the Houses and the situation is unlikely to change during the remaining nine sittings of the Monsoon session.

There is a hope that the conditions would improve sooner or later but the same cannot be assured as things are not under control in the current sessions so the bill might get delayed because of these unexpected obstacles.

Sourcing Norms for Single-Brand Retail Likely to be Reviewed #FDI

The rules and regulations with respect to the single brand retailing as a part of the Foreign Direct Investment(FDI) are likely to be reviewed as the Modi led government opposed FDI in multi-brand retail, seems to be planning to remove hurdles for international single-brand retailers, which are allowed up to 100 per cent FDI.

Even as some top international brands want to open fully owned businesses in India, mandatory sourcing norms have turned out to be the biggest hurdle for those into niche categories.

At present, though up to 100 per cent FDI is allowed in single-brand retail, only 49 per cent can come through the automatic route. The sourcing norms, which allow upto 51per cent FDI, stipulate that companies source from India 30 per cent of the value of goods purchased, preferably from micro, small and medium enterprises (MSMEs), village and cottage industries, artisans and craftsmen.

The sourcing rules were also reviewed by the previous government but the same was a total failure as there were a lot of obstacles involved for the foreign set ups to set up fully owned single brand retail businesses in India but the new Modi led government is planning that instead sourcing inputs from India, it would impart specialised and niche manpower training, set up centres of excellence (CoEs) and conduct community-based work programmes beyond their corporate social responsibility.

#SEBI Eases the #Delisting #Regulations

The Securities and Exchange Board of India has made the delisting norms easier by bringing out changes such as the promoters either will have to ensure that at least 25 per cent of minority shareholders participate in such a process or can demonstrate that the entire 100 per cent investors have been approached to ensure that a good percentage of the minority shareholders participate in the delisting process.

Also, in case the acquirer or the merchant banker sends the letter of offer to all shareholders and provide a detailed account regarding the status of delivery of offer letter, the same would be considered as a deemed compliance with the provision the Delisting Regulations,

The regulator further has listed out that in case the acquirer and merchant banker is “unable to deliver offer letter to all shareholders by modes other than speed post or registered post, efforts should be made by them to deliver the letter of offer. In that case, a detailed account regarding the status of delivery of letter of offer, which shall also be considered as a deemed compliance.

At times the delisting process takes a lot of time which extends to more than a year, so the timeline for delisting to take effect has also been reduced to approximately around 76 days from 137 days.

Thus now it will become more easy for the companies who opt for delisting in terms of complying with the more simple and easy delisting regulations.

Govt. nod not Required for 49% #FPI #FDI

With a view to strengthen the Foreign Investment policy, the Government has allowed 49% Foreign Portfolio Investment in many sectors through Automatic route in many of the sectors which include pharmaceuticals, single brand retail, insurance, pension etc. which allows the composite foreign investment caps in all the sectors barring private banking and defence sectors.

Earlier, these sectors had lower caps for the automatic route. For instance, in the insurance and pension sectors, FPI of up to 26 per cent was allowed through the automatic route, while in pharma, any investment would require the government’s prior permission.

The government allowed composite caps for the sectors, instead of the earlier practice of separate caps for FDI and FPI as now there will be complete fungibility across all the sectors and Foreign Institutional Investors as now upto 49%will be allowed automatically.

As the government made foreign investment fungible, foreign investments would include FDI, FPI, investment from non-resident Indians and foreign venture capital investment.

#CBDT Releases E-filing Utility for ITR 3, ITR 4 & ITR 7 #Download now

CBDT has finally enabled e-filing utility for ITR 3, ITR-4 and ITR-7 for Assessment Year 2015-16.

To download the forms please access the link given below:

https://incometaxindiaefiling.gov.in/

MOF to Launch ‘Project Lnsight’ Soon to Tap the Tax Evaders Owning Black Money

The Ministry of Finance (MOF) is likely come out soon with a big project called the ‘Project Insight’ for catching hold of the tax evaders in the country, for which the ministry has also floated a tender worth Rs. 150 crores to establish the project as discussed in the Parliamentary Standing Committee of finance to widen the tax base and which shall be handled under the ‘Project Insight’.

The project would involve the highest degree of data analytics and software and the infrastructure that goes along with the ‘Project Insight’.

The project is also aimed to rank the tax evaders in terms of the quantum of tax evaded, so that the highest amount of the tax evaders can become the targets for the ministry.

The #CBDT Notification to Introduce new form for Reporting of #CSR Expenditure

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

[CENTRAL BOARD OF DIRECT TAXES]

Income-tax

NOTIFICATION

New Delhi, the 29th day of July, 2015

S.O. 2070 (E).─ In exercise of the powers conferred by section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1) These rules may be called the Income-tax (Tenth Amendment) Rules, 2015. (2) They shall be deemed to have come into force with effect from the 1st day of April, 2015.

2. In the Income-tax Rules, 1962, in Appendix-II, for FORM ITR-3, FORM ITR-4, FORM ITR-5, FORM ITR-6 and FORM ITR-7, the following FORMS shall respectively be substituted,

To download the forms, please visit the below link:

http://www.incometaxindia.gov.in/

Black Money Probe Team Pulls up SEBI

A Supreme Court-appointed special investigation team (SIT) on unaccounted money has come down heavily on the creation of such funds through stock exchanges and participatory notes (P-notes). In a report, the SIT said the Securities and Exchange Board of India (Sebi) should have an effective monitoring mechanism to study unusual rises in stock prices and the use of stock exchanges to evade taxes through long-term capital gains.

Sebi has also been asked to put in place a mechanism to monitor the beneficial owners of P-notes.The SIT has recognised the recent steps taken by the regulator to scrutinise cases of tax evasion through exchanges.

Sebi has been sharing such information with the income tax department. Now, the SIT has directed it to share that with the Financial Intelligence Unit, too.

The investigation into market manipulations shows the modus operandi involves companies with poor financial fundamentals raising huge capital by allotment of preferential shares to various entities. This is followed by a sharp rise in share prices, once preferential allotment is carried out, through circular trading. The artificially inflated stocks are then offloaded through companies funded by those seeking to convert unaccounted money into ‘white’ money.

Recently, Sebi had barred about 250 entities, both individuals and companies; the overall funds involved in this could be Rs 20,000 crore.

The SIT, however, isn’t satisfied with a ban on such entities, advocating these entities be prosecuted under the Sebi Act. “The Enforcement Directorate should be informed to take action under the Prevention of Money Laundering Act for the predicate offences”.

Though Sebi is considered to be heading a multi-agency probe on black money creation in domestic markets, the regulator has been criticised for not intervening in these cases on time.

The SIT advised Sebi to red-flag instances pertaining to trading volumes, entities contributing to trading volume and financial backgrounds of firms through annual returns.

According to SIT, information with Sebi on ‘beneficial owners’ should be on individuals. “In no case should the information end with name of a company,” it said. The regulator has been tasked with keeping information on promoters or directors who exercise effective control over the company holding these derivative instruments.

Revised Draft Indian Financial Code

Press Information Bureau

Government of India

Ministry of Finance

23-July-2015 14:59 IST

Revised Draft Indian Financial Code Hosted on the Home Page of the Ministry of Finance; Comments/Suggestions Invited by 8th August, 2015

The Financial Sector Legislative Reforms Commission (FSLRC) set up on 24th March 2011, for re-writing the financial sector laws to bring them in harmony with the current requirements, submitted its Report to the Government on March 22, 2013. The Commission inter aliarecommended a non-sectoral, principle-based legislative architecture for the financial sector, by restructuring existing regulatory agencies and creating new agencies, wherever needed for better governance and accountability.

The Commission presented its Report to the Government of India on 22th March 2013. The Report is in two parts: Volume I – titled “Analysis and Recommendations” and Volume II – titled the “Draft Law” consisting of the Draft Indian Financial Code (IFC).

The Draft IFC along with the Report of the FSLRC were placed in public domain on the home page of website of the Ministry of Finance on 28th March 2013. Comments on the Draft IFC and the Report were invited from the public at large and all stakeholders through a Press Release on 6th June 2013. Hindi version of the Report was subsequently placed on the Ministry of Finance website in Sept 2013. A dedicated e-mail >feedback-fslrc@nic.in< was created to receive online comments. Further, comments were requested from select Ministries/Departments and Regulatory Authorities. Copies of the report in English and Hindi versions were sent by the Hon’ble Finance Minister to all Members of Parliament in October 2014. Copies of the Report were also sent to all State Governments/Union Territories, and to Universities, Research/Academic Institutions, Bank Associations etc. in India for giving wide publicity and inviting comments.

The Draft IFC has been revised in the light of the comments received and hosted now as Revised Draft IFC on the home page of the Ministry of Finance at >www. finmin.nic.in<. The modifications mainly relate to: strengthening the regulatory accountability of financial agencies, removing the provision empowering FSAT to review Regulations, rulemaking and operational aspects of capital controls, monetary policy framework and composition of the Monetary Policy Committee (MPC), regulation of systematically important payment system and others, removing the provision of special guidance etc. Further the modifications have taken into consideration the enactments subsequent to the submission of the FSLRC report; namely The Pension Fund Regulatory and Development Authority Act, 2013 (PFRDA Act) and Securities Laws (Amendment) Act, 2014. However, the modifications in the revised Draft IFC remain consistent with the overall structure and philosophy of the FSLRC Report.

All stakeholders concerned are requested to forward comments/suggestions that they may wish to submit on the Revised Draft IFC by 8thAugust 2015 by e-mail to >feedback-fslrc@nic.in< or in hard copy to FSLRC Division, Department of Economic Affairs, Ministry of Finance, Room No 30, North Block, New Delhi-110001.

Conditions,Safeguards & Procedures of Digitally Signed Invoices in Central Excise and Service Tax

In pursuance of sub-rule (5) of rule 10 and sub-rule (9) of rule 11 of the Central Excise Rules, 2002 made under section 37 of the Central Excise Act, 1944 (1 of 1944) and sub-rule (5) of rule 5 and sub-rule (2) of rule 4C of the Service Tax Rules, 1994 made under sub-section (1) read with sub-section (2) of section 94 of the Finance Act, 1994 (32 of 1994), the Central Board of Excise and Customs hereby specifies the following conditions, safeguards and procedures for issue of invoices, preserving records in electronic form and authentication of records and invoices by digital signatures, namely:-

1. Every assessee proposing to use digital signature shall use Class 2 or Class 3 Digital Signature Certificate duly issued by the Certifying Authority in India.

2. (i) Every assessee proposing to use digital signatures shall intimate the following details to the jurisdictional Deputy Commissioner or Assistant Commissioner of Central Excise, at least fifteen days in advance:-

a) name, e-mail id, office address and designation of the person authorised to use the digital signature certificate;

b) name of the Certifying Authority;

c) date of issue of digital certificate and validity of the digital signature with a copy of the certificate issued by the Certifying Authority along with the complete address of the said Authority:

Provided that in case of any change in the details submitted to the jurisdictional Deputy Commissioner or Assistant Commissioner, complete details shall be submitted afresh within fifteen days of such change.

(ii) Every assessee already using digital signature shall intimate to the jurisdictional Deputy Commissioner or Assistant Commissioner of Central Excise the above details within fifteen days of issue of this notification.

3. Every assessee who opts to maintain records in electronic form and who has more than one factory or service tax registration shall maintain separate electronic records for each factory or each service tax registration.

4. Every assessee who opts to maintain records in electronic form, shall on request by a Central Excise Officer, produce the specified records in electronic form and invoices through e-mail or on a specified storage device in an electronically readable format for verification of the authenticity of the document and the request for such records and invoices shall be specified in the letter or e-mail by the Central Excise Officer.

5. A Central Excise Officer, during an enquiry, investigation or audit, in accordance with the provisions of section 14 of the Central Excise Act, 1944 and as made applicable to Service Tax as per the provisions contained in section 83 of the Finance Act, 1994, may direct an assessee to furnish printouts of the records in electronic form and invoices and may resume printouts of such records and invoices after verifying the correctness of the same in electronic format; and after the print outs of such records in electronic form have been signed by the assessee or any other person authorised by the assessee in this regard, if so requested by such Central Excise Officer.

6. Every assessee who opts to maintain records in electronic form shall ensure that appropriate backup of records in electronic form is maintained and preserved for a period of 5 years immediately after the financial year to which such records pertain.

7. This notification shall come into force on the date of its publication in the Official Gazette.

Foreign Investment in India by Foreign Portfolio Investors

1. Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to Schedule 5 to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 notified vide Notification No. FEMA.20/2000- RB dated May 3, 2000, as amended from time to time and to A.P. (DIR Series) Circular No. 71 dated February 3, 2015 and A.P. (DIR Series) Circular No. 73 dated February 6, 2015 in terms of which all future investments by an FPI within the limit for investment in corporate bonds shall be required to be made in corporate bonds with a minimum residual maturity of three years.

2. The Reserve Bank has been receiving enquiries about the applicability of the aforesaid directions on investment by FPIs in security receipts (SRs) issued by the Asset Reconstruction Companies (ARCs). It is clarified that the restriction on investments with less than three years residual maturity shall not be applicable to investment by FPIs in SRs issued by ARCs. However, investment in SRs shall be within the overall limit prescribed for corporate debt from time to time.

3. The aforesaid directions come into force with immediate effect. Further operational guidelines, if any, will be issued by SEBI. All other existing conditions for investment by FPIs in the debt market remain unchanged.

4. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

5. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

RBI Circular on Issue of Shares under Employees Stock Options Scheme

RBI/2015-16/128

A.P. (DIR Series) Circular No.4

July 16, 2015

All Category – I Authorised Dealer banks

Madam/Sir,

Issue of shares under Employees Stock Options Scheme and/or sweat equity shares to persons resident outside India

Attention of Authorised Dealer Category – I (AD Category-I) banks is invited to Regulation 8 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, notified by the Reserve Bank vide Notification No. FEMA. 20/2000-RB dated 3rd May 2000, as amended from time to time.

2. In terms of the extant instructions, an Indian company can issue shares under Employees’ Stock Option (ESOP) Scheme, by whatever name called, to its employees or employees of its Joint venture or Wholly owned overseas subsidiary/subsidiaries who are resident outside India, directly or through a Trust, provided that the scheme has been drawn in terms of regulations issued under the SEBI Act, 1992 and face value of the shares to be allotted under the scheme to non-resident employees does not exceed 5 per cent of the paid up capital of the issuing company. The Trust or Indian company has to ensure compliance with the above conditions and comply with the reporting requirement.

3. On a review, it has been decided that an Indian company may issue “employees’ stock option” and/or “sweat equity shares” to its employees/directors or employees/directors of its holding company or joint venture or wholly owned overseas subsidiary/subsidiaries who are resident outside India, provided that :

The scheme has been drawn either in terms of regulations issued under the Securities Exchange Board of India Act, 1992 or the Companies (Share Capital and Debentures) Rules, 2014 notified by the Central Government under the Companies Act 2013, as the case may be.

The “employee’s stock option”/ “sweat equity shares” issued to non-resident employees/directors under the applicable rules/regulations are in compliance with the sectoral cap applicable to the said company.

Issue of “employee’s stock option”/ “sweat equity shares” in a company where foreign investment is under the approval route shall require prior approval of the Foreign Investment Promotion Board (FIPB) of Government of India.

Issue of “employee’s stock option”/ “sweat equity shares” under the applicable rules/regulations to an employee/director who is a citizen of Bangladesh/Pakistan shall require prior approval of the Foreign Investment Promotion Board (FIPB) of Government of India.

4. The issuing company shall furnish to the Regional Office concerned of the Reserve Bank of India under whose jurisdiction the registered office of the company operates, within 30 days from the date of issue of employees’ stock option or sweat equity shares, a return as per the Form-ESOP (given as Annex to this circular).

5. Authorised Dealer banks may bring the contents of this circular to the notice of their constituents /customers concerned.

6. Reserve Bank has since amended the Principal Regulations through the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Fourth Amendment) Regulations, 2015 notified through Notification No. FEMA.344/2015-RB dated June 11, 2015, vide G.S.R. No. 484 (E) dated June 11, 2015.

7. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(B.P. Kanungo)

Principal Chief General Manager

The circular can also be accessed at the link given below.

Issue of shares under ESOS and Sweat Equity shares to persons resident outside India

Top 4 MNCs Audit Firms Face Charge due to Unauthorized Practice of Law

Complaint filed before Bar Council of Delhi alleging unauthorized practice of law by top 4 multinational audit firms.

The Society of Indian Law Firms (SILF) which professes to be the apex body of law firms in India has filed a complaint before the Bar Council of Delhi against 4 of the biggest multinational audit and accounting firms PwC, Deloitte, KPMG and EY alleging that they have been unauthorizedly practicing law.

Following receipt of the individual complaints by SILF, the Bar Council of Delhi has issued notice to all four firms seeking replies on or before 7th August. The council has also directed firm representatives to be present in person on 7th August, 2015 failing which ex-parte orders will be passed.

SILF wants the Bar Council of Delhi to direct the Big 4 firms and its affiliates not to engage in the alleged unauthorised practice of law and has also sought appropriate legal action to be initiated against them.

According to the complaint,”by engaging in the unauthorised practise of the profession” the Big 4 firms “have acted in violation of Sections 29 of the Act and Rules aforementioned and are, therefore, liable to be punished with 6 months imprisonment for unauthorised practise of the profession of law liable under Section 45 of the (Advocates) Act.” The complaint has also named the global top brass of the firms, along with other senior India-based officials.

#FAQ’s on #Secretarial #Audit under #Companies Act, 2013

The provision of Secretarial Audit specifies that:

Every listed company and a company belonging to other class of companies as may be prescribed shall annex with its Board’s report made in terms of sub-section (3) of section 134, a secretarial audit report, given by a company secretary in practice, in such form as may be prescribed.

It shall be the duty of the company to give all assistance and facilities to the company secretary in practice, for auditing the secretarial and related records of the company.

The Board of Directors, in their report made in terms of sub-section (3) of section 134, shall explain in full any qualification or observation or other remarks made by the company secretary in practice in his report under sub-section (1).

In view of the above provision the Institute of Company Secretaries of India have come out with the FAQ’s on Secretarial Audit which will help the professionals in deriving the best of the quality while undertaking such audit.

Please click on the below link to follow the FAQ’s.

FAQ’s on Secretarial Audit under Companies Act, 2013

#RBI Circular on Prepaid Payment Instrument #PPI

RBI/2015-16/123

DPSS.CO.PD.No. 58/02.14.006/2015-16

July 09, 2015

All Prepaid Payment Instrument Issuers, System Providers, System Participants and all other Prospective Prepaid Payment Instrument Issuers

Madam / Dear Sir

Prepaid Payment Instrument (PPI) guidelines – Introduction of New Category of PPI for Mass Transit Systems (PPI-MTS)

A reference is invited to the Master Circular on Policy Guidelines on Issuance and Operation of Pre-Paid Payment Instruments in India issued vide RBI/2014-2015/105 DPSS.CO.PD.PPI.No. 3/02.14.006/2014-15 dated July 1, 2014 (updated as on December 03, 2014) outlining the features as well as the requirements for issuance and operations of PPIs.

2. In the process of moving from cash based payments to electronic payments, the migration of micro and small value cash payments can play a significant role in achieving the vision of less-cash society. One such area where a large number of small value cash payments take place relates to mass transit systems. Therefore, based on a review, a new category of semi-closed Prepaid Payment Instruments (PPI) is being introduced with the following features:

The semi-closed PPIs will be issued by the mass transit system operator (PPI-MTS) after authorisation under the Payment and Settlement Systems Act, 2007 to issue and operate such semi-closed PPIs;

The PPI-MTS will necessarily contain the Automated Fare Collection application related to the transit service to qualify as PPI-MTS;

Apart from the mass transit system, such PPI-MTS can be used only at other merchants whose activities are allied to or are carried on within the premises of the transit system ;

The PPI-MTS issuer will ensure on-boarding of merchants (only those permissible as under (iii) above) following due procedure applicable to any other PPI issuer;

The PPI-MTS will have minimum validity of six months from the date of issue;

The issuer may decide upon the desired level of KYC, if any, for such PPIs;

The PPI-MTS issued may be reloadable in nature and at no point of time the value / balance in PPI can exceed the limit of Rs. 2,000/- (Rupees Two Thousand Only);

No cash-out or refund will be permitted from these PPIs;

Funds transfer under the Domestic Money Transfer (DMT) guidelines will also not be applicable to these PPIs;

All other extant guidelines for escrow arrangement, customer grievance redressal mechanism, agent / merchant due diligence, reporting and MIS requirements etc. applicable to issue of PPIs would continue to be applicable in respect of PPI-MTS.

3. Based on experience the guidelines will be reviewed taking into account both convenience and security aspects.

4. The above guidelines will come into effect from the date of issue of circular. The other provisions of Master Circular dated July 1, 2015 (as amended from time to time) will remain unchanged.

5. This directive is issued under Section 10(2) read with Section 18 of Payment and Settlement Systems Act 2007 (Act 51 of 2007).