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Improving investor interest – Recent Legislative and Regulatory Measures (Shri R. Gandhi, Deputy Governor - March 2, 2017 - at the “Asia-Pacific Regional Meeting 2017” jointly organised by Link Legal India Law Services and Globalaw at Hotel Trident, Nariman Point, Mumbai)

Improving investor interest – Recent Legislative and Regulatory Measures (Shri R. Gandhi, Deputy Governor - March 2, 2017 - at the “Asia-Pacific Regional Meeting 2017” jointly organised by Link Legal India Law Services and Globalaw at Hotel Trident, Nariman Point, Mumbai) - News and Press Release - Dated:- 3-3-2017 - It is a well recognized fact that clear and efficient laws provide confidence to the investing community. Such investments can be by domestic entities or foreign entities or investm .....

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vency of corporates, firms and individuals has been a much awaited move. The Insolvency and Bankruptcy Code, 2016 (IBC) lays down a resolution process that is time bound and undertaken by professionals. It creates an institutional mechanism for insolvency resolution process for businesses operated by companies, individuals or any other entities, either by coming up with a viable survival mechanism or by ensuring their prompt liquidation. The preamble to the Code makes clear the objective of the .....

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mber of legislations. A key innovation of the new Code is its four pillars of institutional infrastructure comprising of Insolvency professionals, Information Utilities, Adjudicating Authorities (NCLT & DRT) and Insolvency and Bankruptcy Board of India. The Financial Resolution and Deposit Insurance Bill, 2016 (Draft) 4. The IBC 2016 about which I spoke so far does not provide for resolution of the corporates providing financial services. The need for jurisdictions having a specialized resol .....

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ions by the Central Government for resolution. The draft Bill on Financial Resolution and Deposit Insurance not only consolidates the resolution provisions presently scattered in different statutes, but also introduces new requirements like classification of financial service providers into various categories of risk to viability, submission of resolution / restoration plans, etc. and new methods for resolution, on the lines of prevalent international practices. It also proposes creation of a ne .....

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nvestor confidence in the Indian financial market. Amendments to the SARFAESI Act and DRT Act 5. Slow pace of recovery of financial debts has been imposing considerable strain on the financial position of the lenders, thus raising concerns for any investor, existing or prospective, of such lenders. Specialized laws establishing Debt Recovery Tribunals (DRTs) and empowering secured creditors to enforce security interest without the intervention of court, have been in vogue for several years now. .....

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electronic form; and (iii) uniform procedure for conduct of proceedings. Further, specific provisions have been enacted in those laws to clarify regarding the priority of secured creditors over state dues. 6. Another important change brought about is enabling 'Debenture trustees' to approach DRTs to recover unpaid debts due under listed debt securities as well as to invoke the provisions of SARFAESI Act to enforce the security interest without the intervention of courts. These measures .....

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in security receipts issued by ARCs. 8. Apart from the above, there were a number of legislative measures of substantial significance to the investor community. For instance, a Constitutional amendment was brought in the previous year for enabling a single Goods and Service Tax throughout the country. In the year 2015, Parliament passed the Arbitration and Conciliation (Amendment) Act providing for various changes to the arbitration laws, with a view to making arbitration quicker, reducing inter .....

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tes for achieving the motive of swift and speedy enforcement of contracts, recovery of monetary claims and compensation for damages suffered to increase investment and economic activity in our country. Other two notable legislative measures important from an investment perspective are Benami Transaction (Prohibition) Amendment Act, 2016 and Real Estate (Regulation and Development) Act, 2016. The Benami Transaction (Prohibition) Amendment Act, 2016 aims to control the menace of black money and it .....

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tory measures relating to foreign investment. In today s world, no country can be an island oblivious of the developments in the world around it. With globalization and trade reforms, countries are globally integrated and have trade linkages with each other. Free trade enables lower prices for consumers, increased exports, benefits from economies of scale and a greater choice of goods. In developing nations, including India, free trade has increased the gap of Current Account Deficits as imports .....

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emittances. 10. India continues to be among the top ten countries in terms of foreign direct investment (FDI) inflows globally and the fourth in developing Asia, as per the World Investment Report 2016 by the United Nations Conference for Trade and Development (UNCTAD). India also jumped 16 notches again to 39 among 144 countries in the World Economic Forum s Global Competitiveness Index 2016 that ranks countries on the basis of parameters such as institutions, macroeconomic environment, educati .....

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ealth funds, insurance companies and pension funds; (c) small negative list of end use restrictions; (d) nudge borrowers towards rupee denominated debt and (e) permit higher interest for long term foreign currency borrowings. Recognizing the needs of the infrastructure sector, long term borrowing in foreign currency denominated ECB with a minimum average maturity of ten years has been permitted (subsequently reduced to five years in alignment with OECD requirements). Access to alternative source .....

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he Central Government. On an annual basis, it issues a consolidated circular detailing the policy stance. The sectoral limits, approval routes and investment linked conditionalities are laid down in the policy stance. It also issues Press Notes as and when changes in the policy are proposed. Regulations are issued under the Foreign Exchange Management Act, 1999 (FEMA) to give a legal backing to these policies. 13. Investment can be received in the form of equity shares, compulsorily convertible .....

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y announced by the Government, the regulations have been amended so that wherever sectoral limits / caps on foreign investment are in place, such limits / caps are required to be reckoned within a composite manner aggregating both Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI). In addition control and ownership have been defined for the purpose of arriving at the indirect foreign investment in an Indian company and guidelines have been issued for calculating the total for .....

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has been permitted under the automatic route for sectors where 100 per cent FDI is allowed without attendant FDI-linked performance conditionality. Ease of Doing Business 15. Several steps have been initiated for facilitating the ease of doing business and contributing to an ecosystem that is conducive to the growth of start-ups. Accordingly, a dedicated mailbox was set up to provide assistance and guidance to the start-up sector. Further, online submission of Form A2 for outward remittances has .....

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tted to collect payments on behalf of their subsidiaries abroad; (iv) companies have been permitted to have an escrow arrangement or paying the consideration on a deferred basis for an amount up to 25 per cent of the total consideration for a period not exceeding 18 months in respect of transfer of shares between a resident and non-resident; (v) startup companies were allowed to issue innovative FDI instruments like convertible notes and (vi) start-ups were permitted to access rupee loans under .....

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has been steady in the recent years. As on Dec 2016, the outstanding FCNR (B), NRE and NRO deposits were US$ 20.859, US$ 77.418 and US$ 11.458 billion, respectively. Flows in respect of personal remittances were US$ 44.083 billion and US$ 37.656 billion in the last two financial years. 18. To further facilitate the account holders, policies were changed to permit transfer across non-resident ordinary rupee (NRO) accounts. Further, NRIs and persons of Indian origin (PIOs) have been permitted to o .....

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ccount with balances commensurate with business operations. An Indian company receiving foreign investment under the FDI route has been permitted to open and maintain a foreign currency account with an AD in India provided it has impending foreign currency expenditure. The account needs to be closed immediately after the requirements are completed or within six months from the date of opening of such account, whichever is earlier. Overseas Investment 19. India s external sector management has ga .....

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portunities thrown up by the rapid globalization. The robustness of direct investment flows - both inward as well as outward, serve as an indicator of the maturity and degree of integration of India in the global economy. 20. While the average of total Financial Commitments (FC) under ODI for 2014-15 and 2015-16 at around US$ 30 billion was lower than the average of preceding two years (US$ 40 billion), the outlook and potential for growth in outward FDI from India remain positive as seen by enc .....

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ring of R&D and promotion of brand India. 22. At the same time, the increasing degree of uncertainty in a continuously changing, and in recent times- often a disruptively changing global business environment, also poses some challenges for Indian businesses with respect to their ODI. 23. The policy and regulatory approach has been to balance the need to pave the way for growth of Indian businesses to keep pace with the changing demands of businesses and improve the ease of doing business for .....

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ment by domestic companies through joint ventures and wholly owned subsidiaries up to 400% of their net worth; restrictions apply only in respect of investments abroad in real estate and banking. Investment which is also termed as financial commitment can be in form of equity, loan, guarantee and raising funds through pledge of shares, domestic and overseas assets. Further, resident individuals are enabled to undertake outward FDI within LRS limit of US$ 250,000. Current issues 26. During last o .....

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t of United Nations Conference on Trade and Development (UNCTAD) has observed that tax avoidance practices by Multinational Enterprises (MNEs) are a global issue, relevant to all countries. Such structures are created, typically, based on either for transfer pricing reasons or for financing their subsidiaries. While these could be established for tax avoidance purposes, such structures often involve investments in offshore investment hubs as holding entities, through which further investments ar .....

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