Government announces FDI reforms in 15 major sectors

Government eased FDI norms in 15 major sectors, including mining, defence, construction, real estate, civil aviation,
broadcasting and LLPs to boost growth and drum up investment. It also raised FIPB approval limit to Rs 5,000 crore from Rs 3,000 crore. The crux of these reforms is to further ease, rationalise and simplify the process of foreign investments into the country and to put more and more FDI proposals on automatic route instead of
government route where time and energy of the investors are wasted.
While 100 per cent foreign direct investment (FDI) has been allowed in DTH, cable network and plantation crop, overseas investment limit in uplinking of news and current affairs TV channels has been raised to 49 per cent from 26 per cent.
The government relaxed conditions for FDI in single-brand retail and allowed 100 per cent FDI under automatic route in duty-free shops and Limited Liability Partnerships (LLP) and eased foreign investment norms in the defence sector. It has also raised the FIPB’s monetary limit to Rs 5,000 crore from Rs 3,000 crore for approving FDI proposals. Hundred per cent FDI under automatic route has been allowed in completed projects for operation and management of townships, malls/shopping complexes and business centres. In the defence sector, 49 per cent foreign investment has been allowed under the automatic route and anything beyond through the Foreign Investment Promotion Board (FIPB) nod. Earlier, the investors were required to take approval of Cabinet Committee on Security for foreign investment above 49 per cent. Portfolio investment and investment by Foreign Venture Capital Investor (FVCIs) will be allowed up to permitted automatic route level of 49 per cent. In case of infusion of fresh foreign investment within the permitted automatic route level, resulting in a change in the
ownership pattern or transfer of stake by existing investor to new foreign investor, government approval will be required.

In the broadcasting sector, 100 per cent FDI has been allowed in DTH, teleports, mobile TV and cable networks. Of this, 49 per cent will be allowed under automatic route and beyond that will need FIPB nod. In the case of terrestrial broadcasting FM (FM radio) and uplinking of news and current affairs’ TV channels, the foreign investment limit
has been raised from 26 per cent to 49 per cent under the approval route.

As for the up-linking of non-news and current affairs’ TV channels, 100 per cent FDI has been now permitted under the automatic route. Earlier, it was allowed under the government approval route. In the private banking sector, the government has introduced full fungibility of foreign investment and accordingly, “FIIs/FPIs/QFIs, following due
procedure, can now invest up to sectoral limit of 74 per cent, provided there is no change of control and management of the investee company”. Earlier, portfolio investment was permitted up to 49 per cent.
Few takeaways from the announcement: 100 per cent FDI allowed in plantation of rubber, coffee, cardamom,
palm oil tree and olive oil tree. Government relaxes FDI policy in single-brand retail, allows companies to sell products through e-commerce. Regional air services allowed foreign investment up to 49 per cent under
automatic route

Banks free to fix interest rates on gold deposit scheme

Reserve Bank of India issued guidelines for the Gold Monetisation Scheme that allows banks to fix their own interest rates on gold deposits. The gold deposit scheme is aimed at mobilising a part of an estimated 20,000 tonnes of idle precious metal with households and institutions. Guidelines: As per the guidelines, banks will be free to set interest rate on such deposit, and principal and interest of the deposit will be denominated in gold.

Redemption of principal and interest at maturity will, at the option of the depositor is either in Indian Rupee equivalent of the deposited gold and accrued interest based on the price of gold prevailing at the time of redemption, or in gold. The option in this regard shall be made in writing by the depositor at the time of making the deposit and
shall be irrevocable, The interest will be credited in the deposit accounts on the respective due dates and will be withdraw able periodically or at maturity as per the terms of the deposit. The designated banks will accept gold deposits under the Short Term (1-3 years) Bank Deposit (STBD) as well as Medium (5-7 years) and Long (12-15
years) Term Government Deposit Schemes. While the former will be accepted by banks on their own account, the latter will be on behalf of Government of India.

The short term bank deposits will attract applicable cash reserve ratio (CRR) and statutory liquidity ratio (SLR). According to Guidelines the stock of gold mobilised under the scheme by banks will count towards the general SLR requirement, a move that will provide additional capital to banks for lending towards productive sectors.

The CRR is the portion of the total deposits, which has to be kept with RBI in cash, while SLR is the portion of deposit compulsorily parked in government securities. Currently, banks have to set aside 4 per cent of the total deposit for CRR while 21.5 per cent for meeting SLR requirement. As per the RBI guidelines, there will be provision for premature withdrawal subject to a minimum lock-in period and penalty to be determined by individual banks.

South Indian Bank Launches Green Pin

The South Indian Bank (SIB) has launched ‘SIB Green PIN’, which allows customers to generate their PIN at the bank’s over 1200 ATMs in the country. The Green PIN replaces the conventional PIN mailer, thus avoiding the hassles involved in sending and receiving of physical PIN mailers. The new PIN is part of the efforts to digitalise
the banking experience in line with the ‘Digital India’ vision.

Green Pin: The bank offers its customers the flexibility to generate a new PIN at a time and location most convenient to them, while simultaneously giving them the opportunity to take a step to save the planet’s vital natural resources. Green PIN is OPT sent to the customer’s mobile number registered with the bank. Using the
OTP, customer can set debit card PIN at the bank’s ATM.

CCEA hikes MSP for major Rabi crops including wheat, gram and pulses

Government has hiked Minimum Support Price (MSP) of Rabi crops including wheat and pulses for Rabi season 2015-16. The MSP of pulses was taken to boost the production as country is facing acute shortage due to domestic demand-supply gap.
Decision in this regard was taken by the Cabinet Committee on Economic Affairs (CCEA) recently. CCEA also gave
its approval for allocation of additional 27 lakh tonnes of foodgrains to Below Poverty Line (BPL) and Above Poverty
Line (APL) families through Public Distribution System (PDS). This will be for states which have yet not implemented National Food Security Act (NFSA), 2013. So far 20 States have implemented the Act and by March 2016 rest of the states will implement the NFSA.
MSP: MSP is a form of agricultural market intervention undertaken by the Central Government in order to insure
agricultural producers are protected against any sharp fall in farm prices. The MSP prices are announced by the Central Government at the beginning of the sowing season for certain crops. The prices are decided by CCEA on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).

RBI issues Uniform Guidelines on Internet Banking for Cooperative Banks

Reserve Bank of India (RBI) issued revised and uniform guidelines on Internet Banking for all licensed cooperative banks including Urban Cooperative Banks (UCBs), Cooperative Banks (StCBs) and Districts Co-operative Banks (DCBs).

These guidelines relate to Internet Banking (View Only) facility and Internet Bankingwith Transaction facility.
Revised guidelines for Internet Banking (View Only) facility: All licensed StCBs, DCCBs and UCBs which have implemented Core Banking Solution (CBS) and migrated to Internet Protocol Version 6 (IPv6) may offer Internet
Banking (View only) facility to their customers, without prior approval of RBI. In case, any service offered under ‘view only’ facility requires two-factor authentication or One Time Password (OTP), banks may adopt the security
features related to internet banking as prescribed by RBI, as appropriate to such services.

The cooperative banks offering this facility to their customers should ensure that the facility is strictly for nontransactional services such as balance enquiry and balance viewing among others.
The cooperative banks have to report commencement of the service to the concerned Regional Office of RBI (and also NABARD in case of StCBs/DCCBs) within one month of operationalisation of this facility. Earlier in 2014, only Urban Cooperative Banks (UCBs) were permitted
to offer this facility to their customers.

Revised guidelines for Internet Banking with Transaction Facility: Only those licensed StCBs, DCCBs and UCBs,
which have implemented CBS and have also migrated to IPv6 can offer this facility to their customers with prior approval of RBI if they fulfill the following criteria:
a. Credit to Risk Adequacy Ratio (CRAR) of not less than 10 per cent
b. Net worth is 50 crore rupees or more as on 31 March of the immediate preceding financial year
c. Gross Non-Performing Assets (NPAs) less than 7 % and Net NPAs not more than 3%
d. The bank should have made a net profit in the immediate preceding financial year and overall, should have made net profit at least in three out of the preceding four financial years.
e. It should not have defaulted in maintenance of Cash Reserve Ratio (CRR)/Statutory Liquidity Ratio (SLR)
during the immediate preceding financial year.
f. It has sound internal control system with at least two professional directors on the Board.
g. The bank has a track record of regulatory compliance and no monetary penalty has been imposed on the bank for
violation of RBI directives/guidelines during the two financial years, proceeding the year in which the application is made

London Stock Exchange Group signs MoU with Yes Bank

London Stock Exchange Group (LSEG) has signed a Memorandum of Understanding ( MoU) with Yes Bank to
develop collaboration around bond and equity issuance, with a particular focus on green infrastructure. As part of the agreement, Yes Bank confirmed that it plans to list a Green Bond of up to $ 500 million on London Stock Exchange (LSE) by December 2016. Yes Bank will look to raise further capital in London, potentially through the listing of global depository receipts as part of its overall $ 1 billion of equity capital raising plans.
London is the world’s most international financial market and has a long history working with partners in India.
Yes Bank is a leader in sustainable finance in India. There are currently 54 Indian companies listed in London, by primary country of operation, with a combined market capitalization of pound sterling 103 billion. In the last two years, London has established itself as the leading centre for offshore rupee debt issuance — so called
“Masala Bonds”.

RBI allows NRIs to subscribe to National Pension System

Reserve Bank of India (RBI) allowed nonresident Indians (NRIs) to subscribe to the National Pension System (NPS). RBI took the decision in consultation with the Union Government to enable National Pension System (NPS) as an investment option for NRIs under Foreign Exchange Management Act (FEMA), 1999.
NRIs may subscribe to the NPS governed and administered by the 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 subscription amounts shall be paid by the NRIs either by inward remittance through normal banking channels or out of funds held in their NRE/FCNR/NRO account. There will be no restriction on repatriation of the annuity/ accumulated savings. The decision is in accordance with the amendment to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Ninth Amendment) Regulations, 2015 was
notified earlier.

Government launches ESahyog Pilot Project to facilitate Taxpayers

The Finance Ministry launched the e- Sahyog pilot project of the Income-Tax Department to facilitate taxpayers by
reducing their need to physically appear before tax authorities. The e-Sahyog project is aimed at reducing compliance cost, especially for small taxpayers.
The objective of e-Sahyog is to provide an online mechanism to resolve mismatches in Income-tax returns of those assesses whose returns have been selected for scrutiny, without visiting the Income Tax Office.
The Income-Tax Department will provide an end to end e-service using SMS, e-mails to inform the tax assesses
of the mismatch. The Finance Ministry also inaugurated a drive to provide public service at peoples’ door step by holding special PAN camps in remote areas. Under this campaign, special PAN camps were held at forty- three remote, semi urban and rural locations across India.

India ranks 8th on minority investors’ protection

India is ranked eighth globally when it comes to protection of minority investors, ahead of many developed economies including the US, Germany and Japan. China is ranked much lower at 134th and
India is ranked best among all BRICS countries (Brazil, Russia, India, China and South Africa).

The sub-ranking for
protecting minority investors is topped by Singapore, New Zealand and Hong Kong jointly at the first position. Malaysia and the UK share the fourth position, followed by Canada (6th rank) and Slovenia (7th). This
is the only sub-ranking where India figures among the top-ten countries globally and reflects the reforms carried out with regard to regulations for companies and capital markets including by the Securities and Exchange Board of India (SEBI) and the Ministry of Corporate Affairs.

India shares the eighth position with Albania, Ireland, Israel, Mongolia and Korea with regard to the protection of minority investors. While India’s ranking has remained the same from the last year, the country is still ahead of
many developed and major developing nations including the US (35th rank), Japan (36), Germany (49) and Australia (66). Among BRICS nations, South Africa is at 14th position, Brazil is 29th and Russia is at 66th place.

The annual report that assesses ease of doing business activities in 189 economies has ranked India at the
130th spot in overall ranking that is based on ten factors, including protection of minority investors.
The overall ranking is based on ten factors –starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing
contracts and resolving insolvency.

Sin Tax to be imposed on alcohol and tobacco

Sin tax is an excise tax that is levied on products and services considered to be bad for health or society such as alcohol, tobacco and gambling. Sin tax is a globally prevalent practice under which sin industries like alcohol and tobacco attract higher rates of tax.
These additional taxes are seen as efforts to discourage people from use of unhealthy products or services. Government can use these taxes to political advantage as they can say they are placing the taxes to act as an incentive to stop smoking or stop excess alcohol consumption. Higher the sin tax means higher government revenues as these are the products which will always be consumed.

Finance Ministry is currently seeking inputs from the industry and other stakeholders at national, state and local levels on the Goods and Services Tax (GST) law meanwhile Government is undertaking the preparatory work necessary for GST implementation, which will subsume various taxes like excise, service tax, sales tax, octroi, etc. and will ensure a single indirect tax regime.