veritas finance private limited regulatory update 2019 · while some of the current regulatory...
TRANSCRIPT
REGULATORY UPDATE
Veritas Finance Private Limited
www.veritasfin.in
NOVEMBER2019
INTRODUCTION
Keeping up to date with Legisla�ons, Rules and Prac�ces applicable to our NBFC sector to stay compliant and be aware of repercussions, to plan consequen�al ac�ons, to add value to business and to achieve a compe��ve edge.
Objec�ve:
Period: November 2019
Coverage:
The Newsle�er would broadly cover the following applicable areas:
Par�culars
Reserve Bank of India
Securi�es and Exchange Board of India
Ministry of Corporate Affairs
Page No.
Veritas Finance Pvt Ltd
SKCL Central Square 1, South Wing, 1st Floor,
Unit # C28 – C35, CIPET Road,
Thiru Vi Ka Industrial Estate, Guindy, Chennai-600 032.
2
3
4
6
8
10
10
www.veritasfin.in
Insolvency and Bankruptcy code, 2016 (IBC)
GST Updates
Liquidity management framework’ for Non-Banking Financial Companies (NBFCs).
RESERVE BANK OF INDIA
Image courtesy : Reserve Bank of India (website: h�ps://rbi.org.in/)
RESERVE BANK OF INDIA
3
SECURITIES AND EXCHANGE BOARD OF INDIA
Image courtesy : Securi�es and Exchange Board of India (website :h�ps://www.sebi.gov.in/)
4
SECURITIES AND EXCHANGE BOARD OF INDIA
5
MINISTRY OF CORPORATE AFFAIRS
Image courtesy : Ministry of Corporate Affairs (website h�p://www.mca.gov.in/MinistryV2/homepage.html)
6
MINISTRY OF CORPORATE AFFAIRS
7
INSOLVENCY AND BANKRUPTCY CODE, 2016(IBC)
8
9
GST UPDATES
The due date for GSTR-9 and GSTR-9C has been extended to 31st December 2019 and 31st March 2020 for FY 2017-18 and FY 2018-19 respec�vely.
GST UPDATE
The net cumula�ve nega�ve mismatches between payments and receivables in the maturity
buckets of 1-7 days, 8-14 days, and 15-30 days shall not exceed 10-20% of the cumula�ve cash
ou�lows in the respec�ve �me buckets.
Liquidity Risk Management Framework for Non-Banking Financial Companies (NBFCs) and Core
Investment Companies (CICs)” to be adopted by all deposit taking NBFCs; non-deposit taking NBFCs with
an asset size of � 100 crore and above; and all CICs registered with the Reserve Bank.
The monitoring shall be by way of predefined internal limits as decided by the board for various
cri�cal ra�os pertaining to liquidity risk.
In addi�on, the dra� proposes to introduce Liquidity Coverage Ra�o (LCR) for all deposit taking NBFCs;
and non-deposit taking NBFCs with an asset size of � 5000 crore and above. With a view to ensuring a
smooth transi�on to the LCR regime, the proposal is to implement it in a calibrated manner through a
glide path over a period of four years commencing from April 2020 and going upto April 2024.
NBFCs are expected to monitor their cumula�ve mismatches (running total) across all other �me
buckets up to one year by establishing internal pruden�al limits with the approval of their
respec�ve boards.
The central bank has mandated NBFCs to also monitor liquidity risk based on a “stock” approach
to liquidity.
The 1-30 day �me bucket (for payments) in the statement of structural liquidity is segregated into
mul�ple buckets of one-seven days, eight-14 days, and 15-30 days.
Key points:
While some of the current regulatory prescrip�ons applicable to NBFCs on ALM framework have been
updated / recast, certain new features have been added. Among others, the dra� guidelines cover
applica�on of generic ALM principles, granular maturity buckets in the liquidity statements and tolerance
limits, liquidity risk monitoring tool and adop�on of the “stock” approach to liquidity.
The above granularity in the �me buckets would also be applicable to the interest rate sensi�vity
statement required to be submi�ed by NBFCs.
The Reserve Bank of India (RBI) has introduced ‘liquidity management framework’ for
Non-Banking Financial Companies (NBFCs).
10
RBI earlier introduced Liquidity Coverage Ra�o (LCR), a measure aimed at maintaining enough
cash with an NBFC. All non-deposit taking NBFCs with asset size of Rs 10,000 crore and above, and all deposit taking
NBFCs irrespec�ve of their asset size, shall maintain a liquidity buffer in terms of LCR.
RBI also advised extending relevant principles to cover other aspects of monitoring and
measurement of liquidity risk, viz., off-balance sheet and con�ngent liabili�es, stress tes�ng,
intra-group fund transfers, diversifica�on of funding, collateral posi�on management, and
con�ngency funding plan.
The stock of HQLA to be maintained by the NBFCs shall be a minimum of 100% of total net cash
ou�lows over the next 30 calendar days.
Indica�ve liquidity ra�os are short-term liabili�es to total assets, short-term liabili�es to long-
term assets, commercial papers to total assets, non-conver�ble debentures (NCDs) (original
maturity less than one year) to total assets.
Such liquidity measure should promote resilience of NBFCs to poten�al liquidity disrup�ons by
ensuring that they have sufficient High Quality Liquid Asset (HQLA) to survive any acute liquidity
stress scenario las�ng 30 days.