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Jan 19
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Cryptocurrency regulation laws

Cryptocurrency Regulation Laws in India and Abroad

By cryptocurrency No Comments

Cryptocurrency Regulation Laws Around the World

It is no news that the cryptocurrency community around the world and especially in India is ever increasing. One might call it enticement of humungous profits or rather no relations, but one cannot deny the fact that the contentious asset’s admirers community is here to stay.

But with the governments around the world trying to regulate digital assets, the community is every now and then seen sweltering with tension whenever there is the mere mention of regulation.

Recently, in India, whenever Parliament has been in session, the cryptocurrency community has been abuzz with nervousness and anxiety.

The anxiety is due to the pressing questions that lie will the law on cryptocurrencies be finally passed? If yes, will it ban the private currencies in India?

While there are few chances that one can exactly pinpoint when such laws will be passed in the parliament, there are even little chances to assume that will the crypto law in India will be passed in Parliament.

What especially incites the anxiety of an investor is the fact that it is unclear what form the regulation will ultimately take place in India?

regulation of cryptocurrencyQuite interestingly, India is not the only country that is in the race to regulate contentious digital assets. Given the difference in policymaking in different countries, the groupings emphatically have their own ways of regulating cryptocurrencies.

But it is safe to say that India has so far been among the most closed to cryptocurrencies. Going by the media reports, there is little reason to believe that the cryptocurrency will not be tabled in the parliament in India.

Amongst various other countries, the United Kingdom does not effectively have comprehensive legislation on cryptocurrency regulation. Under the current regulatory system, the Financial Conduct Authority effectively grants licenses to authorized cryptocurrency-related businesses.

It is to be noted that all the cryptocurrency-related businesses that seek a license from the FCA, have to stringently comply with the strategic set of rules that have been laid out.

cryptocurrency regulation in india

In fact, it is to be noted that the rules are all the more stringent for those companies that emphatically and effectively deal with crypto futures and options trading.

It is worthy of mentioning here that the UK is also concerned with its crypto taxation policy. All the businesses that effectively engage in crypto trading or crypto exchanges fall under corporate tax rules.

Thus, it can be argued that the UK taxes gains from cryptocurrency trading are treated equally as any gains from any other currency trading.

Unlike the UK, US and India, have a dual legislative system. Here the central government, as well as the State Governments, have the effective powers to legislate.

Thus, due to the dual legislative attribute, the regulations regarding cryptocurrencies usually vary across States. This is especially true for the US. But looking at the bigger picture, the country, overall, has been increasingly in favor of allowing all cryptocurrency activities.

New York, in recent times, is increasingly becoming the poster child for a favorable legislative environment. It was in 2016 when New York had effectively and emphatically launched a framework for licensing cryptocurrency business. Under the recent system, companies that are strategically looking forward to transmitting, or selling, or holding cryptocurrencies need to obtain a license from the New York State Department of Financial Services.

crypto regulation indiaHaving talked about the US and the UK, it would be a gross error to not indulge in the subject of crypto regulations in the European Union. In comparison to the UK and the US, Legislation in the European Union is a complicated matter. This is due to the fact that some topics are being dealt with by the Union and some by the member states.

As a matter of fact, cryptocurrencies have been regulated by each country in the EU. Most opted for the framework for the regulation of the cryptocurrency that has come to the fore is the soft-touch regulatory framework.

Though a consolidated framework is on the way, for a while soft touch, the bifurcated regulatory framework is at play.
China, on the other hand, has held a long grudge against the cryptocurrency holders and the ones dealing with cryptocurrencies. One can state that cryptocurrency has been such a roller-coaster ride.

Whereat first, it was witnessed that the Chinese government was quite welcoming but in recent times, it has effectively become the most restricted crypto-markets in the world. Given the fact that China constitutes about 75% of all crypto-mining in the world, such an antagonistic stance gains importance for crypto regulators around the world.

In June 2021, the crypto regulators saw the banning of the mining of cryptocurrencies. This effectively led to about a 40% fall in global mining operations.

Talking about India, the spectators have usually witnessed India’s conservative approach towards cryptocurrencies, with high chances of banning the private contentious digital asset.

With glaring news of the RBI trying to ban the cryptocurrency, the private investors might witness a change from private crypto trading to regulated CBDC trading in the country.

It is to be noted that the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 is effectively listed for introduction in Parliament’s Winter Session.

The bill effectively seeks to create a facilitative framework for the creation of the offline digital currency to be issued by the apex bank of India.

Given the RBI’s antagonistic attitude towards cryptocurrency, the Indian government is trying to follow the dual path of looking to strictly control or even ban cryptocurrencies.

On the other hand, it is also trying to encourage the use of blockchain technologies which have immense potential for the economy.

Terms related to the article:

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Jan 19
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corporate social responsibility in india

Corporate Social Responsibility Regime in India

By Corporate Law One Comment

Importance of Corporate Social Responsibility

Capitalization has been a contentious topic for decades. With various social civilizations tilting towards the socialistic regime, the corporate world’s faster growth has been hard to miss.

With the mixed economy shenanigans and advantages, harmony between the public and the private sector is needed. With various high profits that accrue to the capitalistic economies, condemnations in the form of wage discrepancies and violations, corporations have to commit themselves to not sever the neutrality line between the socialists and themselves.

With the need to maintain harmony, the adoption of Corporate Social Responsibility becomes a pressing need for corporations.

It is to be noted if Corporate social responsibility is to be deconstructed, in simpler words, it means a concept that effectively tries to instill a sense of social responsibility amongst various corporations in the economy. Well, the need for corporate social responsibility comes from the fact that society essentially is of the opinion that it emphatically funds or contributes to the businesses of corporations in one way or the other.

importance of corporate social responsibilityThis provides impetus to the growth of most businesses. Thus, given the pertinent argument, corporations that in some way or the other benefit from the society should effectively recognize and realize such contribution through their share.

Thus, it can be maintained that CSR strategically nurtures a businesses’ sense of responsibility towards society.

 

Though around the world the activity of CSR is voluntary, India is one of the first few nations that had legalized mandate CSR in the year 2014.

CSR is all wonderful for society and the world, but do the corporations, whose sole motive is profits, find any utility in conducting such activity? As a matter of fact, there are various advantages for the well-established corporations that carry out their social responsibilities.

One of the advantages that the company enjoys when it fully discharges its responsibility is a good repute amongst the citizens and are normally considered and regarded as virtuous corporates amongst citizens.

It is no news, that in India, moral policing plays a huge role in determining the popularity and the fate of anything and everything.

Thus, conducting social responsibility adds brownie points for the corporations working in India.
Other than enjoying popularity amongst the masses, the corporations also can use the opportunity to make positive contributions towards cultural, social, economic, and environmental issues that are increasingly prevalent in society.

importance of corporate social responsibility

As a matter of fact, it cannot most certainly be denied that healthy corporate employee relationship leads to increased efficiency in the organization. Indulging in CSR activities presents an opportunity for the corporations to strengthen their bond with the employees.

But the key growth factor that does not lend the property or reluctance to the law is change. Though CSR was effectively mandated under the law by bringing amendments to the Companies Act of 2013, the provisions strategically regulating CSR activities of companies have been evolving with time.

What makes the act for the company less of a liability is the fact that the amendments caused to CSR were particularly aimed at mostly motivating the companies to develop a genuine desire to take up a social cause and not burden them with social work.

Thus, one can attribute the mild curtailment of freedom as the main driver of the success of CSR.
It is to be noted that prior to the Companies act of 2013, CSR activities in India were merely seen as a philanthropic activity.

But with the change in 2013, that saw replacement in the Companies Act of 1956, CSR activities become the work of every organization.

But this gives rise to a pertinent question what really is the role of the corporate social responsibility committee in India? It is to be noted that the committee works to formulate and effectively recommend to the board the amount of expenditure to be incurred on the activities.

Alternatively, it also assists in monitoring the Corporate Social Responsibility Policy of the company from time to time.

The board of the companies usually approves the Corporate Social Responsibility Policy. The board also strategically ensures that the activities are effectively included in the Corporate Social Responsibility Policy of the company and are in fact undertaken solemnly by the company.

In order to emphatically counter any discrepancy, the board also ensures that the company spends, every financial year.

The criteria are that at least 2% of the average net profits of the company that are made during the three immediately preceding financial years should be used for CSR activities.

Thus, in totality, one can maintain that the CSR activities in India are worked out efficiently under a system that solemnly ensures that the system is worked out in a proper manner.

In fact, given the higher scope of the policy, amendments were made in If the company fails to spend such amount, the financial year 2019.

In order to inculcate the responsibility in various corporations in India, the newer amendment has suggested that if any amount that is remaining unspent, shall emphatically be transferred by the company within a period of thirty days.

This should be transferred to a special account to be opened by the company, which will be effectively called the Unspent Corporate Social Responsibility Account.

socialThus, in recent years the government has been trying to incorporate responsibility amongst the corporations and making it arduous for them to skip their social responsibility.

The CSR has a high potential for the future, will the government be able to make any fruitful gains out of it, is something we’ll have to wait and scrutinize.

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Jan 19
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corporate compliance laws

Corporate Compliance Relaxations by MCA, and Other Agencies Due to Covid 19 Scenario

By Corporate Law No Comments

Relaxation of Corporate Compliance Laws Due to covid 19

Where many might agree to disagree on various range of topics, many will strongly agree on the fact that the global outbreak of coronavirus was a one. The pandemic has ruthlessly brought about unexpected restrictions in the economy in the form of blanket lockdown, that has curtailed the freedom of the citizens around the world.

The same is true not only for the general public but also for the corporate sector across the world, which has been dying under the weight of the pandemic mayhem. India serves as a prime example of extreme steps that are taken for the curtailment of the pandemic.

This included 3-month long blanket lockdown in the economy that had emphatically ordered all establishments, except the essential services to temporarily close down their physical offices. This has presented a humongous problem for the employees who are finding it arduous to coordinate.

corporate compliance issues

This is effectively and significantly due to the lack of office facilities, and how long the companies are taking an immense amount of time to face difficulties in undertaking timely compliances of various applicable laws.

Having mentioned the mayhem in the economy and the resultant lockdowns and precautions, it needs to be stated that the government has temporarily relaxed quite a number of compliance requirements. This has especially been embraced for the corporate sector that is having a hard time adjusting to the new normal.

corporate compliance policySome of the major relaxations that have been put in force by the securities and exchange board of India include exemptions from the cumbersome periodic filing requirements for select listed entities under the SEBI.

Thus, the extension of time has been provided for compilations as SEBI has extended the last date for the conduct of meetings. SEBI, in order to offload the burden of the executives, has also exempted the board of directors from observing the maximum stipulated time gap of 120 days between any two meetings.

It is to be noted that such time constraints had to follow under Regulations 17(2) and 18(2)(a) of the LODR respectively. Thus, in order to relax the norms, in view of the lingering pandemic, that can be described as uncertain and unpredictable at the best, one can expect the continuation of such exemptions for a while longer.

Along with the aforementioned relaxations that have been made by the SEBI, it has generously also provided relaxations to holders of 25% or perhaps more shares.

These could also include voting rights and to the promoters of listed entities. The aforementioned parties have been granted exemption from filing disclosure of their voting rights and aggregate shareholding.

It is to be noted that promoters were to be given their fair share of exemptions by not having the compulsion to promote along with the person acting in concert from filing the declaration on a yearly basis
But had only SEBI introduced certain restrictions and had the government not introduced any in the view of the welfare of the society and the employees in the economy?

corporate compliance program

It is to be noted that the Ministry of Corporate Affairs has emphatically issued a notice whereby it has clearly and strongly inserted a new sub-rule under Rule 4 of the Companies Rule of 2014. It has provided for the relaxation in holding board meetings.

This has been done to relax the compulsion of holding a meeting in the physical presence of directors under Section 173 (2).

In addition to the aforementioned, restrictions, the ministry had also come up with several important relief measures. These have been emphatically introduced to address the glaring threat that has been posted by the COVID-19. The compliance burden had been reduced through the moratorium freeze on the payments which was quite crucial for the people in the economy.

This is due to the pertinent and imperative fact that people’s economic and financial standing in society has been crippled by the pandemic. thus, this has led the government to graciously take the moratorium freeze with it for as long as it can.

Though the government might have taken care of the corporations in the financials, the government has not forgotten about corporate social responsibility. Though the government has taken an altered stance on corporate social responsibility, it has been clarified that the spending of CSR funds for the pandemic should be continued.

In fact, the government has maintained that positively and significantly making contributions to the PM-CARES Fund is quite well an eligible CSR activity. The government has strongly maintained that such funds will be judiciously used for the promotion of health care which will effectively include preventive health care and sanitation disasters in the medical system.

It is to be noted that given the wrath that has been inflicted on the corporations, such acts and exemptions will empathically allow them to avoid penalties. This can be delayed on the account of unavoidable delays in meeting their regulatory compliances. Though it is a fact that companies will have to eventually comply with such regulatory requirements until then such a breather can be enjoyed.

 

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evaluation of corporate compliance programs, corporate compliance laws and regulations, corporate legal compliance.

Jan 19
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upi platforms in india

Concerns Related to Digital Lending Apps in India or UPI Platform and Data Protection

By Banking No Comments

Digital Lending Apps or UPI Platforms in India

UPI platforms in India or digital lending apps may be a burgeoning business in the economy and is turning out to be a boon for financial inclusion. But given the haze concerning the regulations and its increasing popularity amongst the masses, it has become a regulatory bane for UPI .

With the rates of fraudulent apps on the rise targeting the innocent masses, the Reserve Bank of India is still increasingly finding it difficult to effectively weed out the fraudulent loan apps from the plethora of financial apps out there.

What makes it more difficult is the craze around the burgeoning BNPL sector which is attracting borrowers. The immense ease of borrowing that is being offered via Unified Payments Interface, is causing havoc in the economy with customers being lured by fraudulent apps.

It is to be noted that the customers are being offered credit instantly by just scanning a QR code. What more? The fraudulent apps are offering ridiculously easy credit at no or minimal interest. Thus, one can quite fathom the approachability of loan borrowing through UPI platforms in India and RBI’s Delima to counter such discrepancy.

While, as it has been established that the facility has been fast gaining acceptance, one can emphatically maintain that UPI credit is actually operating in a regulatory grey area. This is due to the significant fact that UPI is a product that is not allowed by the regulator i.e. there are no regulations regulating the ominous digital lending business.

digital lending apps in indiabut then how is UPI functioning with no regulations by the authorities? UPI is essentially a digital lending arrangement between a non-banking financial company and a fintech firm. It can also be a relationship between a firm and a bank, or any other regulated entity.

It is worthy of mentioning here that the fintech firm effectively acts as a sourcing agent. Thus, it merely acts as a front-end for customers, while the actual task of lending is undertaken from the balance sheet of the regulated lenders.

sensitive personal data
It is to be noted that UPI is managed by the National Payments Corporation of India. This effectively is an umbrella entity that has been set up by the apex bank to enable a digital payments system in India.

In 2018, according to the UPI 2.0 that was launched, platforms were allowed to be linked to overdraft accounts. This meant that credit through UPI was emphatically not allowed unless a customer avails of an overdraft facility. This facility was to be availed on the current bank account or savings account which was linked to the UPI.

But, quite interestingly, if the situation and functioning of most fintech firms are to be scrutinized, it can be seen that these firms offer UPI credit as a service that does not have any such specific, aforementioned requirements for customers. Though many senior executives allege and emphasize the fact that specifically offering UPI credit through an overdraft facility is not a serious compulsion, one cannot make sense of the ambiguity that looms large on the lending sector.

According to the reports, it has also been observed that not many customers, necessarily had opted for linking their bank accounts with an overdraft facility. This is merely due to the fact that the individuals who effectively and conveniently opt for short-term loans online, actually find it arduous to avail themselves through an overdraft facility.

But why is it so? It is emphatically due to a pertinent fact that the customers are stringently required by banks to pledge their overdraft loan against collateral. Moreover, given the fact that UPI services are being availed mostly by the new-to-credit accounts with low balances, they may not even get approval for an overdraft facility.

Thus, given the fact that such requirement of linking the UPI ids to an overdraft account, one can argue that this can potentially lead to slower growth for fintech firms that significantly and effectively offer easy credit in the economy to the new to credit and low on balance customers.

Though, given the alternate credit systems in India, including the credit card, UPI seems to be efficiently appreciable and easy to use. But encountering the unregulated status of the same, concerns about data protection surface. With easy money and low interest, far from the scrutiny of the banks and authority, the UPI system seems quite enticing.

But with high chances of misuse of personal information, the system is damned to fail and perish. For easy comprehension of the law and regulation, the RBI will have to clear the air around the issue of linkage of the accounts.

This view gains all the more traction due to the growing appeal of the UPI platforms in India due to its exemplary services. Where a plastic credit card might arrive in 15-20 working days at a customer’s doorstep, the customer can use a UPI credit line within 15 minutes to avail of the services.

what are the benefits of digital lending appsThus, in totality given India’s ascendence towards the UPI system and digital banking, stringent and stricter laws are required to monitor the same. With the increasing population falling in for the enticement of the easy scheme, the regulatory authorities need to step in to protect consumer interest through the enactment of effective data protection laws.

 

Terms related to the article:

digital lending apps in India, UPI payment platform, sensitive personal data, the general data protection regulation, data security and privacy, what are the benefits of digital lending apps, UPI payment platform in India.

Jan 19
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new labor codes in india

Changes in New Labor Codes in India

By Labour & Employment No Comments

Understanding Labor Laws & New Labor Codes in India

A labor-intensive country like India has revisited its new labor codes in India and its labor laws. In 2019, the Ministry of Labor and Employment had effectively introduced four Bills to strategically amalgamate 29 central laws.

It is to be noted that these 29 central laws were related to labor laws which were consequently simplified and modernized. Thus, the revision of the laws led to the much-needed revisal and simplification of the labor regulations in a labor-intensive country, like India.

To get a gist of what was strategically regulated in the laws, it is to be noted that wages, social security, and Industrial Relations were thoroughly scrutinized and regulated. On the other hand, attempts were also made to regulate the laws pertaining to health, Occupational Safety, and Working Conditions.

new labor codes

All such aforementioned provisions were codified and enacted effectively as the Code on Wages, 2019; the Occupational Safety, Health and Working Conditions Code, 2020; The Industrial Relations Code, 2020 and the Code on Social Security, 2020

Given the aforementioned acts, what actually were the changes on the ground level that were made by the government? In the labor laws, it was established that the Central Government will be emphatically the ‘appropriate government’. The central government will act as an “appropriate government” for the public sector undertakings.

Here, it is worthy of mentioning that the government will act in such capacity even if the central government’s holding in the entity is less than 50%. Certain industries that have qualified where the central government will act as the appropriate government are the specific industries banking, mines, telecom, and railways.

Talking about the occupational safety and health of the workers, an ‘Inspectnew changes in labour laws in indiaors-cum-Facilitators’ shall be established. This shall be effectively established as the new authority under the Code on Social Security, 2020, the Occupational Safety, Health and Working Conditions Code, 2020, and The Industrial Relations Code, 2020.

The duty of an inspector-cum-facilitator will emphatically be to provide information and reports to industry employees. Thus, the newer labor codes take into consideration the well-being and the interests of the laborers in the economy.

Given that India is a labor-intensive country, with a high contribution of the manufacturing sector in the economy, the address of core issues of the laborers will help in addressing the deep-seated problems and discrepancies that might threaten the efficiency of the labor.

labour law codes

Talking about the social security code, 2020, the code was emphatically introduced to provide social security benefits to the labor class, which are the most deprived social class. This has been strategically done by extending the goals of social security goals to employers and employees.

The code has also worked to emphatically simplify the labor laws by effectively amalgamating various enactments. such as:

The code positively states that the central government will be responsible to frame the social security schemes. This will be done by giving utmost importance to providing benefits under Employees‘ State Insurance Corporation (ESIC) for platform workers, gig workers, and unorganized workers.

In fact, the code also strongly empowers the central government to extend its social security benefit schemes to self-employed persons in the economy. Thus, given that the reins are in the hands of the government, one can maintain that welfare will be positively delivered as the state’s main motive is to deliver justice and protect the welfare of the society.

Thus, given the aforementioned changes and alterations in the new labor codes in India, one can emphatically state that it will lead to redressal of widespread hostilities and discrepancies in the labor system which has been haunting the efficiency and welfare of the labor class.

Given that the government will be gaining reins in the matters of labor laws, one can expect significant improvement in the conditions of the labor class in India, which is thoroughly deprived of justice and rightful means of survival and sustainability.

The act garners all the more important due to the fact that the labor class has suffered inexplicably due to the pandemic that has exacerbated the woes of the labor class. Thus, the new labor code emphatically introduces various special provisions for accommodating better regulations for industries.

This is being done by establishing flexible norms and allowing the industries to be flexible to foster efficiency and commitment to the work. Further, one can state that the ambiguity surrounding certain provisions has been cleared with clear codification and consolidation of the laws.

In fact, it can be positively stated that the codification and consolidation of such laws have positively led to the expansion of the ambit and effective applicability of the laws. Thus this has increasingly helped with ease of compliance and removal of an unnecessary multiplicity of definitions.

Thus, consequently, the reluctance that had seeped into the system due to inefficient and uncodified roles of the overlapping of authorities has been thoroughly removed.

What is more one can positively state about the newer labor code is that the new set of rules will definitely and positively empower the relationship between the employee, the employer, and the government, which will lead to faster resolution of the issue that plague the labor class.

impact of new labour codes in india

This will also be bn=beneficial for the employees if the labor class is appreciative of the system and thus, ultimately their employer. Thus, in totality, the newer laws will definitely lead to a positive long-term impact on the labor industry and will strengthen further contribute towards the idea of ease of doing business in the economy.

Given that the economy is still in the nascent stage of its recovery and is under threat from the newer variant namely omicron, a little breather for the employees and the employers will contribute highly to the industry’s revival.

 

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Jan 19
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Bankruptcy Spells Death For Too Many Business

By Banking No Comments

Does Bankruptcy Spell Death for Business?

Bankruptcy on business, an odious phenomenon seems to be getting a grip on many banking sectors and businesses around the world. When bankruptcy materializes, it seems imperative that bankruptcy protection laws allow companies to effectively shed their debt.

This allows the banks to start anew and reinvent themselves. Among various invested facets of the banks, most ideally, it is found that creditors recover most of what they’re owed. This is due to the fact that as a restructured firm’s ability to garner profits that help in turning a profit in the organization, the banks give priority to the creditors of the business.

Yet, given the enticing mechanism of restructuring, we encounter liquidation in more and more companies. This emphatically violates the second chance at the success of reinvention that the banking law aims to encourage in the system. In fact, it is to be noted that in the cumbersome process of liquidation, these effectively and ultimately shortchange creditors by billions of dollars a year.

“Chapter 11 allows for reorganization, which sounds like such a great thing. People get to keep their jobs, the creditors get paid equity, and the customers don’t lose this business that they loved.

It should be emphatically noted here that at a serious time when the COVID-19 pandemic has been rampant and incessant, the chances or the propensity of bankruptcy hitting many companies hard has increased. This is merely due to supply chain constraints, incessant lockdowns to contain the spread and various macroeconomic factors that contribute to the debacle of a business.

Thus, where the law might highly encourage reconstruction, reorganization in the organization, where jobs are sustained and creditors get paid equity, such a scenario can be best described as a euphoric dream that remains miles from being achieved.

But what really contributes to the process of liquidation that is the most sought-after mechanism for bankruptcy? The trend has been recently seen with senior managers going for liquidation instead of reorganizing. The scenario that usually plays out in court is that of a manager usually trying to persuade the judge to approve a speedy asset sale.

bankruptcy on business

This is due to the fact that managers usually prefer and priorities a fast resolution over a more long-drawn beneficial reorganization of the company. It is to be noted that such a hasty resolution often leads managers to steer firms into liquidations that perpetually harm the employees, junior creditors, and customers.

In fact, in the case of US bankruptcy laws is to be scrutinized, it can be known that under Section 363, judges can emphatically and powerfully grant the request of the managers without the consent of the creditors if a legitimate “business justification” for the aforementioned move has been provided.

This emphatically implies the fact that managers call major shots for the future of the company. The rationale behind the fast or warp speed sale is the fact that assets in the firm usually lose their value at a high speed if not sold in a definite small-time frame. Thus, in order to curb the losses in the firm, we encounter faster sales by the managers before little value is left of the firm.

But is this process or mechanism an effective way of dealing with the crisis? Many might believe that effectively rushing the process of liquidation may be short-sighted for many creditors and the companies and creditors. This is due to the huge costs that will be incurred by both parties in the long run.

A prime example of the same is Sears, which witnessed the most expensive retail bankruptcy in the history of retail. In this particular case, it was encountered that the firm had lost its value through its short-sighted, hasty asset sales in the market.

bankruptcy law in indiaIn fact, according to various analysts and researchers, it has been found that reconstruction of the company is a better way out of the bankruptcy debacle. According to the reports, creditors can effectively gain a potential 52 cents on each dollar owed when a company is strategically restructured.

Another study puts forward the fact that at least 60 percent of the liquidations cost the creditors more than a simulated reorganization would effectively or subsequently have. Talking about liquidation, more losses were recorded when some bankrupt company was effectively acquired. This is also true for the reorganization of the company, where creditors haven’t lost as much as in the liquidation criteria.

But why does a reorganized company offer better profits or returns for the creditors than liquidation? Firstly, hasty sales of the assets might lead to a lower valuation of the firm’s assets leading to losses. Secondly, the companies emerging from bankruptcy may perform quite well when reorganized.

This might serve as a boon for the firm if the idea or the mechanism is implemented. Here, again the managers play a huge role. If their charming personality, at least in the business, can convince all the creditors to agree to lower the specific debt load and to effectively accept a write-down, then the equity in that company has a great potential to become really valuable.

company bankruptciesReconstruction, on the other hand, is quite beneficial for the creditors themselves. This is due to the pertinent fact that the creditors can significantly negotiate equity stakes in the new firm. This negotiation can be carried out in the form of payment for outstanding debt.

Thus, in totality, for a firm that is going through bankruptcy, the best way out is negotiation and ideation. Before effectively heading for the court, the managers that are considering bankruptcy should strategically meet with key creditors. This can lead to the hammering of innovative ideation and stall risky warp speed sale of the assets.

Meanwhile, though managers should be cautious, the creditors too should be open to working more intently and closely with management. The discussion should be centered around the plan for reorganization before heading into court.

This should be done while keeping in mind that the firm is experiencing only temporary setbacks as a result of the pandemic that has made the conduction of business arduous. thus, in totality, communication between the management and the creditors is the key, which might not value, but is the most beneficial.

 

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Jan 19
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pca framework for nbfc

A Shot for NBFC Health: Given the Public Money at Stake, Revised PCA Framework for NBFCs is welcome

By Other No Comments

A Shot for NBFC Health: The Revised PCA Framework for NBFCs

After years of ignorance, the NBFC sector might be getting the attention it deserves. Having been termed as the non-prominent finance sector, the NBFC sector has been going against all the odds to prove its mettle in the finance world

what is pca frameworkThe Reserve Bank of India, in a recent turn of events, has proposed the rollout of the Prompt Corrective Action (PCA) Framework for the NBFC sector. It is to be noted that such prompt corrective action was undertaken last for the Scheduled Commercial Banks in the financial year 2002.

Given the humongous years that have lapsed by what has suddenly motivated the RBI to roll out yet another prompt corrective action? It is to be noted that the scheme has been launched with the prime objective of the PCA framework that will emphatically and effectively enable supervisory intervention at the appropriate time for the sector.

This will lead the authorities to effectively and timely initiate and implement remedial measures for the sector which might be showing signs of weakening or inefficiency. Thus, one can clearly witness RBI’s timely intervention that is aimed at improving the financial health of a potential sector.

It is to be noted here that the prompt corrective action will be effective as it will be also used to act as a tool for effective market discipline. In the form of market discipline, we can expect reviewed checks on the quality of governance.

This will significantly and positively include the board and senior management decisions that might be having a significant detrimental impact on the financial health of the corporation.

The banking sector, for years, has been considered the prime source of finance in the economy. But in recent years, NBFCs, have significantly grown their share in credit and savings intermediation. This has led the sector to emphatically acquire and capture a humungous role in the economy.

Thus, given such an increased share in the finance market, their financial health imposes a high systemic risk for the economy. Given, that India is still in its nascent stage of recovery, which is expected to fall due to the arrival of the newer variant, such corrective actions are needed. This, primarily, leads to the acceptance of the fact that such NBFC corrective norms are welcome.

It is to be noted here that the RBI has introduced the extent of applicable supervisory interventions and regulations specifically based on the size of operations of an NBFC. Though such a characteristic was quite vague and ambiguous, in December clarity in the form of the extent of intervention, and compliance on the part of NBFCs was introduced as well.

This was effectively introduced to reduce the surprises of NBFC failures by keenly and diligently observing the financial health of the NBFCs.

But on what grounds is the apex bank articulating or regulating the NBFCs in the sector? It is to be noted that capital, profitability, quality of assets, leverage ratios, and net worth and leverage ratios will form the facets of evaluation. In addition to the aforementioned criteria, risk thresholds too will be used to critically evaluate and determine the financial health of an NBFC.

The risk threshold criteria for evaluation

Having mentioned that risk thresholds will be used for the critical evaluation of the NBFCs, what does it effectively mean? It is to be noted that different thresholds have been defined for an NBFC once it crosses the basic health line. Starting from threshold 1, the suggested framework will impose corrective actions.

Such actions that will be suggested will be of discretionary and mandatory nature. After such supervisory norms are put in place, if an NBFC emphatically improves its financial health and manages to come out of threshold 1, the corrective actions will be effectively and immediately withdrawn.

Thus, one can state that the RBI, in no sense, is trying to unfairly scrutinize or meddle in the affairs of the NBVFCs that are technically financially wealthy.

Having stated the euphoric scenario, what holds for an NBFC if its financial health deteriorates? Or what is in store for the entity which is in threshold 2 or 3? Here, it is to be noted that in such a case, in addition to the first threshold’s corrective actions, NBFC will witness further actions that will be put in place to further monitor the entity.

revised pca framework for nbfcBut will such corrective actions be beneficial in the long run? It is to be noted that through a critical evaluation of the banking system, it has been seen that out of the total number of banks that were effectively placed under the PCA framework, about 11 banks have already come out.

This has been achieved through the positive and substantial strengthening of the financial parameters of the banks, which has proved quite beneficial for the banks. Thus, in totality, it can be stated that the introduction of the PCA in the NBFC sector is a welcomed step given its huge success with the commercial banks in 2002.

 

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Jan 10
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cbdc cross border payments india

Will CBDCs Help Ease Cross Border Payments?

By Economy No Comments

CBDC Cross Border Payments

It is no news that the onset of the pandemic has helped cryptocurrency gain traction around the world. To state that it has wrapped investors around its fingers would be an understatement. This is due to the fact that various countries, who initially had been seen opposing the idea of digital currency, have been now seen changing their stance. In fact, El Salvador went ahead to grant the digital currency the title of fiat currency.

cbdc central bank digital currency

This has emphatically led various countries in recent months, to invest in the flurry of initiatives to announce CBDCs. CBDC will effectively be the digital form of a fiat currency which will be effectively regulated and issued by the monetary authorities of the country. But what makes us think that the development and adoption of digital currency around the world are positive? Such a claim has been corroborated by the reports by Bank for International Settlements’ 2021 that had emphatically reported that 85% of central banks are already in the process of developing a CBDC (Central Bank Digital Currency).

In fact, the claims are strong enough to suggest that the stage of speculation has been passed and various countries are in the process of developing their digital currency. But this gives rise to a pertinent question that the digital currency schemes will help simplify cross-border payments ambiguities and difficulties?
The utilities

It is to be noted that the application of digital currency in the economy can unleash various unlocked benefits pertaining to cross-border transactions and national transactions as well. With the introduction of the newer payment system which is digitalized, support and harmony can be provided to a resilient payments landscape.

This will also help in effectively countering some detestable attributes like the risks of new forms of private money creation leading to storing of wealth amongst a few. In fact, various reports suggest that with the introduction of CBDC, support to efficiency will be provided by fostering greater competition and innovation in payments.

Some other more obvious advantages of the same are that it will help counter the problem of decline in cash that is usually faced by the public, especially during arduous times. Thus, it can be rightfully be stated that the introduction of CBDC will lead to the rectifying of the future payment needs in a digital economy.

Thus, with the rectification of such attributes of the credit economy in the country, it can be stated that it will help provide a more secure and efficient building block for improved, faster, and more secure cross-border payments.

But will such rectification and introduction of CBDC be implemented anytime soon? It is to be noted that the answer is quite ambiguous. This is due to the fact that though various countries are in the development stage of CBDC, the process is being carried out in terms of retail CBDCs. Subsequently, with a larger inclination towards the retail side, even the wholesale side has garnered little attention from the authorities.

Thus, with the unformed connection between the economy itself, cross-border transactions can look like a farfetched idea.

central bank digital currency rbiThe other trend on which the future of CBDC depends is the building network of countries across continents. This shows the brighter side of the story as on 14 July the European Central Bank had confirmed the launch of its digital euro.

Also, various collaborations in the EU to are erupting to develop a wider cross-border payment system. With newer initiatives, innovations, and tests, it has been found that the blockchain-based digital euro could effectively in theory, support unlimited numbers of payments. This is a positive attribute as such payments can be processed simultaneously with a very large money supply.

The cross-border payment structure can also be carried out by rectifying and conforming with one definition of CBDC that is adhered to. Given the various kinds of CBDC like token-based and account-based, discrepancies in cross-border payments can arise.

what is cbdc in india Another classification is wholesale and retail CBDC. It is to be noted that wholesale CBDCs work by putting existing central bank reserve accounts effectively onto a blockchain. Thus, by the process of tokenizing the central bank money, one can emphatically improve the efficiency of cross-border payments.

this will be due to the fact that there would be an effective removal of intermediaries and reconciliation processes. Thus inefficiencies and lack of immediate action will be done away with which will highly improve the cross-border payment structure.

This will in fact also help in the promotion of business transactions without the effect of the intermediaries affecting business transitions and smooth business dealings. Thus, CBDC holds a lot for the development of an effective cross-border transaction scheme, but with various discrepancies and ambiguities, it is quite unclear at the moment that will such an ambitious scheme materialize anytime soon.

What actually is needed is a series of steps for the central bank to decide that whether it should expand its CBDC’s horizon to retail CBDC that would include all. Thus, the question that central banks face is that whether they should make central bank reserves exclusively for the banks to own or to make them more accessible to non-banks.

This is crucial due to the fact that once everybody has access to an account with the central bank, the central bank will need to decide whether CBDC will be available on an account or as a digital token. But given the character of both, a retail CBDC would effectively offer the added benefit of making cross-border payments more smooth and much more efficient. Thus, the future of CBDC depends on the decisions of the central banks and we hope it will be a sagacious one.

 

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Jan 10
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tech startups in india

Why Tech Startups Should Worry as India Strengthens Its Competition Law

By Others No Comments

Tech Startups in India & Its Competition Law

It is quite undeniable to state that an individual’s life revolves around new tech especially given the odious times of the pandemic. with its increased usage in our daily lives, companies like Facebook and Google seem to be omnipresent.

Thus the influence they present on anybody’s life is tremendous and sometimes unwarranted. This especially presents a problem for the individual if such an undeniably tremendous power goes unchecked and unregulated.

Given the burgeoning influence it has on society and the catastrophic circumstances it might have in the future given the spread of fake information, the Government has taken matters into its own hand.

This has led to the initiation of newer regulations and rules with regard to competition. These laws are more geared to deal with the burgeoning, unchecked power of big tech firms. It can, in fact, be stated that such laws are being passed to curtail the growing influence and power of the big techs.

tech startupshistorical development of the MRTP act

the monopolies and restrictive trade practices law was passed in 1962 to regulate and curtail the monopolistic trade in the Indian economy. It is here to be noted that initially it was initially had a socialistic character and did not apply to the public sectors.

It was due to this attribute of non-regulation of the public-owned entities like the banks, corporations, etc. that led to the passage of the Competition Act in 2002. Its main objective was to emphatically deal with anti-competitive agreements. In compliance, it also wanted to end the abuse of a dominant position and the acquisitions in the economy.

But what actually led to the debacle of the MRTP act? It was mainly due to the inefficiency that had crept in the system due to bias that had seeped in the system. It had led to the bias against the private sector which wasn’t quite accommodating.

On the other hand, the liberalization in 1991 had shaken the foundation of the robust MRTP structure in the Indian economy. It was also perhaps due to a lack of clarity on a variety of definitions that made it quite ambiguous.

Thus with liberalization in trade, robust competition law was effectively needed as trade and competition are effectively intertwined. But this also meant that Competition laws had effectively monitored the cutthroat competition that was presented by the foreign corporations to promote healthy competition and protect consumer interest.

It is to be noted that with increasing Competition law regulation, the system has become reductant and crippling. It with its regulatory authority has started to emphatically affect the tech companies in big ways in order to regulate their size and market dominance. In fact, internationally, the authority of Google and Microsoft have been challenged.

Coupled with it the Indian authorities have also invariably placed allegations against Flipkart and Amazon for their increasing discount sales in the economy. On the other hand, allegations have been filed against Facebook for renewing its investment with Reliance Jio.

best tech startups

Though the government in India is emphatically trying to control the competition and monopoly in India, its measures are increasingly becoming reluctant. It is to be noted that free trade is itself a competition regulator where the inefficient move out of the market.

With extra ostentatious and complex competition laws for a developing country, these are usually crippling. Competition laws are a luxury for the developed country that developing countries like India can ill afford.

On the other hand, the government’s new attitude towards regulating the big tech firms has been strongly reflected in the new amendment bill of 2020. This emphatically molds and changes the regulatory structure of the CCI in restructuring procedures for effectively regulating the guidelines.

The new bill also increasingly seeks to expand the Act to invariably and quite detestably include the digital markets. A recent example of the same is the heavy regulations that have been proposed for the arrangement and buyers cartel. With various reductant measures to regulate the digital world with the chief compliance officer and a series of measures, inefficiency is bound to seep in.

technology startups in indiaWith the increasing popularity of the tech companies and corporations, it has been seen how the tech world is increasingly dealing with the cases such as the ola uber pricing issue and the other google antitrust allegations.

Talking about the mergers laws and the applicability of the competition laws, it is to be noted that the current merger control framework is traditional and hence reductant as CCI approval is needed if the two companies involved in the merger cross a certain limit of assets and turnover thresholds.

But given the nature of the tech firms, these are very asset-light and might actually not earn revenue for many years. This is due to the fact that the company’s more immediate goal is to expand and gain a consumer base in the market. Thus, this might lead to overlooking high-value transactions that might escape scrutiny.

In fact, the regulation of the digital framework regulation by just CCI will not help. This is due to the fact that it might also require the help of a data protection bill and more importantly of the broadcast company of India. Thus, the increasing number of regulations is not the need of the hour but the accommodation of the same is.

 

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Jan 10
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retail sector in india

Why India Needs a National Policy for Its Retail Sector?

By Economy No Comments

National Policy on Retail Sector in India

To state the matter quite plainly, a holistic retail policy is the need of the hour. This is a suggestion that needs to be implemented for the effective working of the sector and for moving up the ladder of the ease of doing business.

The battle against corona is not over yet. The economy may be recuperating but one thing one cannot expect is complacency. With various sectors that were crippled by the covid pandemic, the retail sector was one of them.

Secondly, given the ongoing battle against the virulent virus, one cannot deny the crucial role of the retail supply chains that are facilitating essential movements and delivery in the economy. Though, it is to be noted that the first wave was quite crippling for the retail sector due to the blanket lockdown but the second wave was quite lenient given its nature of being partial.

retail tradeOne fact that is worthy of being mentioned is that the retail sector has much to offer the economy but this comes only after prerequisite incentives and policy support can be provided for the same.

Certain reports have shown that the retail sector in India has great potential for employment. One quite comprehensive report that was published was a report by CII and Kearney. This report emphatically sheds light on the potential of the retail sector given a comprehensive National Retail Policy is implemented.

It states that the retail sector has an immense potential to effectively facilitate the creation of three million jobs by the financial year 2024. Also, given the unemployment woes of India, one can rightly state that the retail sector will be a boon for reviving the economy.

It is to be noted that since the trade effectively has upstream and downstream linkages, investments in the retail sector will beneficially generate an appreciable cascading effect.

This will help produce value for the stakeholders via employment generation, value chain modernization, upskilling of employees and consumer experience, etc. this will in turn also lead to increased investment in the sector due to its increasing lucrativeness.

retail industry in indiaIn addition to creating utilities and employment in the retail sector, one will also witness the increase in employment generation in allied sectors. Talking about the gender disparity in India, retail sector up-gradation will also lead to more employment of women as the retail industry is one of India’s largest employers of women.

Thus, with its upgradation, it will also lead to the closing value of gender disparity in India. This will also help generate women-centric policy reforms which will also help the government gain political capital.

But why is the support of the government so necessary and crucial? It is mainly due to the fact that 5-7 lakh retailers were emphatically forced to close down due to various policy changes. It is to be noted that due to unpredictable policy stance and environment in India, many companies and especially the retail sector have to bear the brunt.

Thus, a stable policy mechanism is the need of the hour. Another utility that can be created out of such policy implementation is the fact that enabling such stable policies actually helps in facilitating their return to business. This can consecutively lead to the generation of employment in the economy and will help contribute to the GDP of the country.
But how does the policy framework of such policy implementation be designed? It is to be noted that according to the CII National Committee on Retail stresses such a National Retail Policy emphatically should bring all categories of retail under a single rule.

Furthermore, what is most required for the strong efficiency of such a policy program is the fact that attention needs to be paid to technological development, ease of doing business, and ease of access to capital. Consecutively, the sector also requires up-skilling of workers for the usage of technological advancement in the sector.

indian retailThe government’s response too for such a sector has been accommodating. This has been seen due to the approval that was garnered by the government for its revelation of its accommodating policies in the financial budget 2022. However, various aspects of the same remain untouched.

The retail sector’s association has expressed its concern over the effective and emphatic withdrawal of import duty exemptions that own some of the products of interest.

This is mainly due to the fact that many retail sector owners rely on imports. Given that some government policies target the same, it has garnered some disapproval from the government.

Thus given the present situation at hand, many retailers and businesses may have to emphatically and crucially depend on domestic suppliers to safeguard their margins. Thus, a robust policy that does not offer such immediate shocks is needed for the betterment of the sector.

On the other hand, it is worthy of mentioning here that the government’s ambitious plan for effectively reviewing 400-plus customs duty exemptions that will come into effect from October 1 could heavily result in a revised duty structure. This could definitely eliminate major distortions at play.

Thus, one can state that when such ambiguities have been removed earnestly, traders that are importing goods can benefit immensely and joyously.

On that note, another major announcement that has been enthusiastically welcomed by the traders is the government’s thrust on EoDB.

This will effectively help and push women’s participation in the sector as it will permit women to work in all categories without any restrictions. Thus, is the situation being to be scrutinized, much work can be done to increase the gender diversity in the sector which will emphatically help in the betterment of the sector. But how long will a robust, efficient system take to materialize in the economy is still a mystery?

 

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