Securities and Exchange Board of India Current Affairs - 2019
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As per a written reply given by Union Finance Minister Smt. Nirmala Sitharaman in Lok Sabha, the number of wilful defaulters in nationalised banks has increased by more than 60% to 8,582 in five years to March 2019.
The Finance Minister provided the written reply in Lok Sabha to a question asked that whether the cases of willful defaulters of banks have increased during the past five years.
Wilful Defaulter is an entity or a person that has not paid the loan taken back to the bank despite having the ability to repay it. Wilful defaulters are acted against comprehensively.
Data Provided by Government:
By end of fiscal year 2014-15, the figure of wilful defaulters in nationalised banks stood at 5,349, and since then the number of such borrowers has been consistently rising- with being 6,575 (2015-16), 7,079 (2016-17), 7,535 (2017-18) and now increased to 8,582 in 2018-2019 fiscal.
During the last 5 financial years about ₹7,654 crore has been recovered from wilful defaulters’ accounts.
Steps Taken By Government
As per data reported by 17 nationalised banks in India, till 31 March 2019, suits for recovery have been filed in 8,121 cases out of 8,582.
SARFAESI Act: In cases involving secured assets, action under provisions of SARFAESI Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002) has been initiated in 6,251 cases.
RBI Instructions: As per the instructions provided by Reserve Bank of India (RBI), wilful defaulters are not sanctioned any additional facilities by banks/financial institutions, their unit is debarred from floating new ventures for 5 year and even criminal proceedings are initiated wherever necessary. In accordance with this FIRs have been registered in 2,915 cases.
SEBI Regulations: Besides, vide Securities and Exchange Board of India (SEBI) regulations, wilful defaulters and companies who has with wilful defaulters as either promoters or directors have been debarred from accessing capital markets to raise funds.
IBC 2016: The Insolvency and Bankruptcy Code (IBC), 2016 has debarred wilful defaulters from participating in insolvency resolution process.
FEO Act 2018: The government has enacted Fugitive Economic Offenders Act, 2018 for effective action against wilful defaulters who flee Indian jurisdiction. It provides for attachment and confiscation of property of fugitive offenders and to disentitle them from defending any civil claim.
PSBs: Government has also advised all Public Sector Banks (PSB) to decide on publishing photographs of all concerned wilful defaulters and to obtain certified copy of passport of promoters/directors and other authorised signatories of companies availing loans of over ₹50 crore. The heads of PSBs have also been empowered to request for issuance of look out circulars (LoC) against wilful defaulters.
Tags: FEO Act 2018 • Fugitive Economic Offenders Act 2018 • Insolvency and Bankruptcy Code 2016 • Look out Circulars • Nirmala Sitharaman • Public sector banks • RBI • Reserve Bank of India • SEBI • Securities and Exchange Board of India • Union Finance Minister • Wilful Defaulters
The Securities and Exchange Board of India (SEBI), the capital markets regulator has set up a panel, to review current framework of margins in the futures and options (F&O) derivative segment.
The working group set up by SEBI is headed by the National Stock Exchange (NSE) Clearing Ltd., and will submit its recommendations to Secondary Market Advisory Committee.
Reason: This is review panel is set up based on the feedback that existing margin requirements in derivatives segment is pushing up cost of trading while not managing risk in most efficient manner,.
Need: The reviewing of Margin Derivatives assumes significance as lower cost of trading was the main reason why institutional investors preferred to trade in Nifty contracts on Singapore Exchange Limited (SGX) at Singapore rather than on highly liquid derivatives segment of NSE.
Findings of Study
High Margin requirements in India: In a recent study jointly conducted by Association of National Exchanges Members of India (ANMI) and consultancy firm Ernst & Young (EY), highlighted fact that trading in derivatives in Indian market costs much more when compared to most of other leading markets. This is due to a variety of margins that are imposed on traders.
Variety of Margins: It also disclosed that unlike other trading markets where higher event-based margins are applied temporarily (such as during instances of increased volatility), the Indian stock market levy a variety of margins during normal course which pushes up overall cost of trading.
Exposure Margin: Across global exchanges considered under review, only SPAN margin (or single margin system) is collected as initial margin but India levies exposure margin (or the margin charged over and above SPAN margin which is discretion of broker), excessive short option margin as part of initial SPAN margin and event-based margins for covering intermittent periods of higher volatility.
Way Ahead: Using margining as a tool should be to address risk of a given portfolio but should not be used to control market volumes/exposures.
Tags: Association of National Exchanges Members of India • Ernst & Young Consultancy • Exposure Margin • Futures and Options • SEBI • Securities and Exchange Board of India • SGX • Singapore Exchange Limited • SPAN margin