Indian Economy Current Affairs - 2019
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A formal Memorandum of Understanding (MOU) was signed between Union Ministry of Corporate Affairs (MCA) and Securities and Exchange Board of India (SEBI) for data exchange between two regulatory organizations and to tighten regulatory oversight.
Key Highlights of MoU
- The MoU was signed by Shri K.V.R. Murty, Joint Secretary (MCA) and Smt. Madhabi Puri Buch, Whole Time Member of SEBI in presence of senior officers from both organisations.
- Need: As private sector plays an increasingly vital role in economic growth of India, thus need of the hour is a robust Corporate Governance mechanism for transparent functioning.
Key Features of MoU
- It facilitates sharing of data & information and ensures seamless linkage for regulatory purposes between MCA and SEBI on a regular and automatic basis. In addition to regular exchange of data, both SEBI and MCA will also exchange with each other, any information available in their respective databases on request, for purpose of carrying out scrutiny, investigation, inspection and prosecution.
- It enables sharing of specific information like sharing details of suspended/delisted companies, financial statements filed with Registrar by corporates, shareholding pattern of companies, returns of shares allotment and audit reports relating to corporates.
- The MoU is an ongoing initiative of MCA and SEBI, who are already collaborating via various existing mechanisms. It comes into force with immediate effect from date it was signed.
- Data Exchange Steering Group has been constituted for fulfillment of undertaken initiative. It will meet periodically to review data exchange status and also take steps to further improve effectiveness of the data sharing mechanism.
- Significance: This MoU comes in wake of increasing need for surveillance in context of Corporate Frauds affecting important sectors of economy. Thus MoU marks beginning of a new era of cooperation and synergy between two crucial regulators in Indian economy.
About Securities and Exchange Board of India
- It is the regulator for securities market in India.
- Background: It was established on 12 April 12 1988 as a non-statutory body. It was accorded statutory status in accordance with provisions of Securities and Exchange Board of India Act, 1992.
- Function: It is a quasi-legislative, quasi-executive and quasi-judicial body. It can draft regulations, conduct inquiries, pass rulings and even impose penalties.
Tags: Indian Economy • Memorandum of Understanding • MoU • SEBI • Securities and Exchange Board of India • Shri K.V.R. Murty • Smt. Madhabi Puri Buch • Statutory Body • Union Ministry of Corporate Affairs
The Reserve Bank of India (RBI) constituted a task force on secondary market development in corporate loans.
About Task Force on Development of Secondary Market for Corporate Loans
- Composition: It is a six-member body and is headed by Canara Bank chairman T. N. Manoharan.
- The task force shall submit its report to RBI by end of August 2019.
- Objective: To make recommendations to RBI on required policy and regulatory interventions for-
- Facilitating development of secondary market in corporate loans, which includes loan transaction platform for stressed assets
- Creating loan contract registry and ownership structure to remove information asymmetries between buyers and sellers.
Globally, there is a healthy corporate loan market where banks can sell their stressed assets and those assets get traded. But in India banks sell their stressed loans to Asset Reconstruction Companies (ARC’s) and sometimes ad hoc sale to other lenders (banks) but practically there is no other alternative to this and no formalised mechanism. Therefore-
- a vibrant, deep and liquid secondary market for debt would increase efficiencies of debt market in general and would aid in resolution of stressed assets..
- a well-developed secondary market for debt will aid in transparent price discovery of inherent riskiness of debt being traded.
- The task force would design market structure for loan sales and auctions which will also include online platforms and other related trading and transaction reporting infrastructures.
- It will suggest how participation can be enhanced in market and will also give suggestions on need for, and role of, third party intermediaries, like market makers, servicers, arrangers, etc.
Tags: Asset Reconstruction Companies (ARC’s) • Indian Economy • Loan Contract Registry • Loan Transaction Platform for Stressed Assets • Reserve Bank of India (RBI) • Secondary Market for Corporate Loans • Task Force on Development of Secondary Market for Corporate Loans