India: Corporate Law Alert - January 14, 2013

Last Updated: 5 March 2013

Reserve Bank of India Amends Definition of Infrastructure Loan of NBFCs

The Reserve Bank of India ("RBI") vide Notification No. DNBS. 253/CGM (CRS)-2012 dated December 28, 2012 has amended the definition of 'infrastructure loan' as given in the Non-Banking Financial (Deposit Accepting or Holding) Companies (NBFC) Prudential Norms (Reserve Bank) Directions, 2007. RBI has also vide Notification No. DNBS. 254/CGM (CRS)-2012 dated December 28, 2012 decided to bring about harmonization by amending the definition of the term 'infrastructure loans' in the Non-Banking Financial (Non-Deposit Accepting or Holding) Companies (NBFC) Prudential Norms (Reserve Bank) Directions, 2007. Pursuant to the amendments, "infrastructure loan" means a credit facility extended by NBFCs to a borrower for exposure in the following infrastructure subsectors:

Category

Infrastructure sub-sectors

Transport

  1. Roads and bridges
  2. Ports
  3. Inland waterways
  4. Airports
  5. Railway track, tunnels, viaducts, bridges
  6. Urban public transport (except rolling stock in case of urban road transport)

Energy

  1. Electricity generation
  2. Electricity transmission
  3. Electricity distribution
  4. Oil pipelines
  5. Oil / gas / Liquefied Natural Gas storage Facility
  6. Gas pipelines

Water and Sanitation

  1. Solid waste management
  2. Water supply pipelines
  3. Water treatment plants
  4. Sewage collection, treatment and disposal system
  5. Irrigation (dams, channels, embankments etc.)
  6. Storm water drainage system

Communication

  1. Telecommunication (fixed network)
  2. Telecommunication towers

Social and Commercial Infrastructure

  1. Education institutions (capital stock)
  2. Hospitals (capital stock)
  3. Three-star or higher category classified hotels located outside cities with population of more than 1 million
  4. Common infrastructure for industrial parks, SEZ, tourism facilities and agriculture markets
  5. Fertilizer (Capital investment)
  6. Post harvest storage infrastructure for agriculture and horticultural produce including cold storage
  7. Terminal markets
  8. Soil-testing laboratories
  9. Cold chain

The RBI has further clarified that the exposure to projects which were previously included under the definition of infrastructure but are not included in the revised definition will continue to get the benefits under 'infrastructure lending' till the completion of such projects. However, any fresh lending to those sub-sectors from the date of this circular will not qualify as 'infrastructure lending'.

Export of Goods and Services – Simplification and Revision of Softex Procedures

The RBI vide A.P. (DIR Series) Circular No. 66 dated January 1, 2013 has decided to implement the Softex procedure introduced vide A.P. (DIR Series) Circular No. 80 dated February 15,2012 to all Special Economic Zones ("SEZs"), Export Processing Zones ("EPZs"), 100% Export Oriented Units ("EOUs") and Domestic Tariff Areas ("DTAs").

As per the revised procedure, a software exporter either under the Software Technology Parks of India ("STPI") scheme or SEZs/ EPZs/ 100% EOUs/ DTA, whose annual turnover is at least Rs. 1000 crores or who files at least 600 (Six Hundred) SOFTEX forms annually on an all India basis, will be eligible to submit statements in the revised excel format sheets. The notification clarifies that all other terms and conditions as mentioned in Circular No. 80 dated February 15, 2012 will remain unchanged.

External Commercial Borrowings for Low Cost Affordable Housing Projects

The RBI has vide A.P. (DIR Series) Circular No. 61 dated December 17, 2012 decided to allow External Commercial Borrowings ("ECB") for low cost affordable housing projects via the approval route. ECB can be availed of by developers/builders for low cost affordable housing projects. Housing Finance Companies ("HFCs") and the National Housing Bank ("NHB") can also avail of ECB for financing prospective owners of low cost affordable housing units.

For the purpose of low cost affordable housing project for the purpose of ECB would be a project in which at least 60% (Sixty per cent) of the permissible floor space index would be for units with a maximum area up to 60 (Sixty) square meters.

Slum rehabilitation projects are also eligible under the scheme, subject to the parameters set by the Central Sanctioning and Monitoring Committee of the Affordable Housing in Partnership Scheme.

The eligibility criteria laid down for builders or developers are that: (i) they must be a company incorporated under the Companies Act, 1956; (ii) they should have a minimum of five years experience in undertaking residential projects; (iii) they should not have defaulted in terms of any financial commitments to banks or financial institutions; and (iv) they must have all necessary clearances from various bodies with respect to land usages and environment clearances.

The eligibility criteria laid down for HFC is that: (i) the HFC should be registered with the NHB and operating in accordance with the regulatory directions and guidelines issued by NHB; (ii) the minimum paid up capital as per the latest audited balance sheet should be Rs. 50 crores (Rupees Fifty Crores)etc.

The RBI has further stated that the ECB proceeds shall be utilized for low cost affordable housing projects only and shall not be utilized for acquisition of land. Developers, builders, HFCs and NHB will not be permitted to raise 'Foreign Currency Convertible Bonds' under this scheme.

The RBI has also decided that NHB shall act as the nodal agency for deciding a project's eligibility as a low cost housing project. On satisfaction of the same, the NHB shall forward the application of the builder/developer to the RBI for consideration under the approval route.

For the financial year 2012-13, an aggregate limit of USD 1 (One) billion is fixed for ECB under the low cost affordable housing scheme which includes ECBs to be raised by developers/ builders and the NHB / specified HFCs. The said policy has come into force with immediate effect.

Trade Credits for Import into India

The RBI has vide A.P. (DIR Series) Circular No. 59 dated December 14, 2012 decided to relax the condition of ab initio buyers' credit from 15 (Fifteen) months to 6 (Six) months for existing trade credits for companies in the infrastructure sector. However, the condition regarding ab initio buyers' credit for 15 (fifteen) months shall continue for future trade credit for companies in the infrastructure sector.

The RBI had vide A.P. (DIR Series) Circular No. 28 dated September 11, 2012, specified that companies in the infrastructure sector, where infrastructure is as defined under the extant guidelines on ECB, were allowed to avail trade credit up to a maximum period of 5 (Five) years for import of capital goods as classified by the Directorate General of Foreign Trade, subject to the following conditions:

  1. the trade credit must be ab initio contracted for a period not less than 15 (fifteen) months and should not be in the nature of short term rollovers; and
  2. AD banks are not permitted to issue letters of credit / guarantees / letter of undertaking / letter of comfort in favour of overseas suppliers, bank and financial institution for the extended period beyond 3 (Three) years.

Review of All-In-Cost Ceiling – External Commercial Borrowing

The RBI vide A.P. (DIR Series) Circular No. 60 dated December 14, 2012 has decided to continue with the enhanced 'all-in-cost' ceiling for ECB which it had originally specified vide A.P. (DIR Series) Circular No. 51 dated November 23, 2011 and extended from time to time. The enhanced 'all-in-cost' ceiling for ECB is as follows:

Average Maturity Period

All-in-Cost over 6 month LIBOR (for the respective currency of borrowing or applicable benchmark)

3 years and upto 5 years

350 bps

More than 5 Years

500 bps

The aforementioned 'all-in-cost' ceiling is applicable upto March 31, 2013 and is subject to review thereafter. All other aspects of the ECB policy remain unchanged.

Review of All-In-Cost Ceiling – Trade Credits for Imports into India

The RBI vide A.P. (DIR Series) Circular No. 58 dated December 14, 2012 has decided to continue with the 'all-in-cost' ceiling for trade credits for imports into India which was specified vide A.P. (DIR Series) Circular No. 44 dated November 15, 2011 and extended from time to time. The enhanced 'all-in-cost' ceiling is as follows:

Maturity Period

All-in-Cost over 6 month LIBOR (for the respective currency of borrowing or applicable benchmark)

Upto 1 year

350 bps

More than 1 year and upto 3 years

350 bps

The aforementioned 'all-in-cost' ceiling is applicable upto March 31, 2013 and is subject to review thereafter. All other aspects of Trade Credit policy remain unchanged.

Delegation of Powers by the Central Government to RBI

The Ministry of Corporate Affairs ("MCA") has vide notification dated December 21, 2012 delegated to the RBI all powers in relation to banking companies falling within the purview of the Banking Regulation Act, 1949, relating to reference of cases against the managerial personnel to the Tribunal, power of application for an interim order by the Tribunal and power to remove managerial personnel on the basis of the Tribunal's decision.

The delegation has been made subject to the condition that the Central Government may at any time revoke such powers or may itself exercise such powers if, in its opinion, such an action is necessary in public interest.

Recognition of MCX Stock Exchange Limited by the Central Government

MCA has vide notification dated December 21, 2012 inserted MCX Stock Exchange Limited as a recognized stock exchange thereby bringing it within the purview of a "recognized stock exchange" under the Companies Act, 1956.

Amendment of The Companies (Central Government's) General Rules and Forms, 1956

MCA has vide Notification dated December 19, 2012 substituted Annexure A of Form 23 C (Form of application to the Central Government for appointment of cost auditor). The amendment is to be effective from December 23, 2012.

MCA has further, vide Notification dated December 24, 2012 substituted Annexure A of Form 18 (Pursuant to Section 146 of the Companies Act, 1956, for the notice of situation or Change of situation of Registered Office of the Company). The amendment became effective from December 25, 2012.

Amendment of Companies (Directors Identification Number) Rules, 2006

MCA has vide Notification dated December 24, 2012 amended Form DIN 1 (Application for allotment of Director Identification Number ("DIN")) by substituting Annexure A of the particular form.

The MCA has also amended Form DIN 4 (Form for the Intimation of change in particulars of Director to be given to the Central Government) to substitute the certification column of the form.

Filing of Form 68 for rectification of mistakes in Form 1, Form 1A and Form 44

The MCA has vide General Circular No. 42/2012 dated December 21, 2012 allowed companies that were incorporated prior to 2009 and other companies which could not avail this facility earlier to rectify the mistakes in Form 1, Form 1A and Form 44 by filing of Form 68 on payment of the stipulated fee of Rs. 1000 (Rupees One Thousand). The requisite Form 68 may be filed within a period of 180 days from the effective date. This Circular came into effect from December 23, 2012.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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