Tag Archives: FDI

Business, India

Bill introduced in RS to raise FDI in insurance sector to 74%

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Newsroom24x7 Network

New Delhi: The Insurance (Amendment) Bill, 2021 was introduced in the Rajya Sabha on the 15 March, 2021 for amending the Insurance Act, 1938, in order to raise the limit of foreign investment in Indian insurance companies from the existing 49 per cent. to 74 per cent 

The limit of foreign investment insurance companies is being raised to achieve the objective of Government’s Foreign Direct Investment Policy of supplementing domestic long-term capital, technology and skills for the growth of the economy and the insurance sector, and thereby enhance insurance penetration and social protection.

The Insurance  Act, 1938 was enacted to consolidate and amend the law relating to business of insurance in the country. The foreign investment in insurance sector was permitted in the year 2000 by allowing the same up to 26 per cent. in an Indian insurance company. Subsequently,  vide   the Insurance Laws (Amendment) Act, 2015, this limit of foreign investment was raised to 49 per cent. of the paid-up equity capital of such company, which is Indian owned and controlled as per the rules made in this behalf.

Business, Corruption, India

Foreign Investment, Mauritius route and black money

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Lalit Shastri

Prime Minister Narendra Modi had promised during the 2014 election campaign that he would bring back the black money stashed abroad by Indian citzens after coming to power. The Modi led Government’s report card on this count draws a blank and people have started asking questions.

Date from RBI Annual Report 2017-2018

A lot has already been analysed and written by experts on Foreign Investment in India and the Mauritius connection. A particular piece of information available through the latest Annual Report released by Reserve Bank of India on Wednesday (29 August 2018) underscores that Foreign investment into India by companies that took the Mauritius route has surpassed all other channels during 2016-17 and 2017-18.

Taking the record smashing investment from Mauritius at face value, nothing appears to be amiss since money was invested in India by companies legally registered in Mauritius that took the benefit of the Double Tax Avoidance Agreement between India and Mauritius. This agreement provided for tax exemption to the foreign investors who were exempted from paying Capital Gains Tax arising on sale of shares of an Indan company till March 31 2017.

India’s treaty with Mauritius has been revised from April 1, 2017. Under the reformatted agreement, companies routing funds into India through Mauritius will have to pay short-term capital gains tax at half the rate as applicable during the 24-month transition period. The full rate of 15%, now applicable will apply from April 1, 2019.

The legal position notwithstanding, the enforcement authorities in India are aware of the benefit drawn by corrupt elements, smugglers and big time mafia within the country, who started following the Mauritius route to convert black money into white after India entered into the Double Tax Avoidance agreement with Mauritius.

Fly-by-night companies shown as running small time enterprises got registered in Mauritius. All kinds of unscrupulous elements, even politicians, it is said, invested in these companies. According to knowledgeable sources, cash or black money was physically transferred to these companies and shown as profit and the money invested in this way became white on payment of 1% tax on it in Mauritius. After this the Mauritius based companies invested in the Indian stock market by giving funds to Indian companies. A year later, this money was withdrawn and there was no tax liability on it since the Long Term Capital Gains Tax was 0% under the Indian law till recently. This money was then routed back to Mauritious and the tax avoidance business on the basis of the bilateral Double Tax Avoidance Agreement continued to flourish. In the process people stopped stashing black money abroad when they had the freedom to follow the Mauritius route.

With the revised treaty between India and Mauritius now in force, the round tripping should stop.

This analysis is based on data provided by Reserve Bank of India. It focuses on the modus operandi of those who could use the Mauritius route to convert black money into white. Newsroom24x7 has taken up this issue in public interest and it is for the enforcement authorities to go to the root of the problem and address the issue in its entirety.

India

Stressed assets with banks are unique opportunity for asset reconstruction companies and private equity firms: Arun Jaitley

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Newsroom24x7 Staff

New Delhi: Union Finance Minister Arun Jaitley today stated that the opportunities presented by the Insolvency and Bankruptcy Code (IBC) framework and Government’s emphasis on resolution represent a unique opportunity for Asset Reconstruction Companies (ARCs) and Private Equity firms (PE).

At a meeting today with leading ARCs and PE firms focused on stressed assets, Jaitley said that accounts classified as impaired or stressed still had inherent value. These were essentially productive assets which if turned around would not only create additional jobs but also contribute to national output. For this to happen, timely interventions, transparent price discovery and right management were required.

Jaitley underscored the legislative and regulatory changes made over the last 18 months that had created an enabling and supportive operational environment for ARCs and for takeover of stressed assets by PE firms and special situation funds. These, inter alia, include 100% ownership by sponsors, higher ceiling of 100% for FDI in ARCs, pass through status to ARC trusts for income tax, exemption from stamp duty, and enabling trading of security receipts. He noted that a number of new ARCs have sought and obtained registration during recent months. The increasing number of players in the market was indicative of an increasing interest in the sector but also presented an opportunity for banks to offload stressed assets before fully provisioning for them. The ratio of cost of acquisition to book value of assets acquired by ARCs has been rising. Within this overall context, the ARCs and PE funds were well placed to step up their activity levels as all the building blocks were there.

During discussions, ARCs and PE firms were appreciative of the steps taken so far by the Government and RBI. The need for evolution of targeted case specific solution by ARCs/PE funds was brought out, as these entities have higher operational flexibility. Prospects for capital raising and deployment were highlighted. It was suggested that sale of project loan by a consortium instead of individual banks selling their loan account could be a much more effective way of ensuring debt aggregation in a timely manner. Suggestions were also made regarding increase in activity levels of ARCs and PE funds.

Taking note of the feedback, Jaitley observed that Government and RBI had greatly facilitated the role of ARCs and Special Situation funds in effective resolution. Resultant collaboration between banks, ARCs, PE, Asset Management Companies and resolution professionals could pave the way to a virtuous cycle of fresh investments, new jobs and additional demand.

India

Credibility of Indian Economy has been restored during 3 years of NDA rule: Jaitley

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Newsroom24x7 Staff

New Delhi: Union Minster of Finance, Defence and Corporate Affairs Arun Jaitley today said that after the present NDA Government came to power at the Centre in May, 2014, it has been able to restore the credibility of the Indian Economy and also the image of the Government, which was at its rock-bottom due to serious charges of corruption, indecisiveness and policy paralysis during the earlier UPA regime.

The Finance Minster said that the three major achievements of the present NDA Government in the last three years include the ability to take decisions -even difficult decisions, drastic changes in the earlier system of governance which led to corruption, and making market mechanism as the basis of the Government decision making and eliminating the Government discretions in the process of decision making and overall governance.

Jaitley was making his Opening Remarks at a Press Conference in the national capital today. The meeting with the press was organized to highlight the key initiatives and achievements of the different Departments of the Ministry of Finance and Defence in the last three years – 2014-15 to 2016-17.

The Finance Minister said that another major contribution of the present Government was clear direction in decision making, creating an atmosphere for the growth of the economy at large so that it could be ensured that the benefits of the growth accrue to the poor and underprivileged section of society in particular.

Another major achievement of the present Government, Jaitley said, was Foreign Direct Investment (FDI) Reforms as a result of which India was the largest recipient of FDI in the world, especially in the last two years, 2015-16 and 2016-17. The Finance Minister said that despite the low private investment, FDI along with public investment played an important role in investment cycle. The Finance Minister said that the present Central Government also took special care to strengthen the State Governments by allocating more funds to them as per the recommendations of 14th Finance Commission.

Jaitley further said that the present NDA Government created a federal institution (GST Council) based on federal taxation i.e. Goods and Services Tax (GST) which is now at the last stage of its implementation. This will be a historical indirect tax reform which will bring transparency, simplicity and efficiency in the tax administration, Jaitley said adding the present Government also implemented JAM (Jandhan, Aadhar Mobile) Trinity based financial inclusion system under which a law relating to Aadhar was enacted so that resources are optimally utilised by plugging the leakages and eliminating the underserved category of beneficiaries.

Underscoring demonetisation as a major decision of the present Government, the Finance Minister said that it has helped the Government in three ways. Firstly by having greater movement towards digitization of transactions, secondly, helped in widening of the tax payers base which contributed to increase in the revenue collections by more than 18% during 2016-17 and thirdly, sending a strong message that it is no longer safe to deal in cash. The Finance Minister said that demonetization has established a ‘new normal’.

Highlighting other achievements of the present Government in the Financial Sector, the Finance Minister spoke about “Operation Clean Money”, constitution of Monetary Policy Committee (MPC) and enactment of Insolvency and Bankruptcy Code among others, He said that these have brought transformational changes in the Indian economy. Jaitley further said that we are conscious of various challenges including resolution of Public Sector Banks’ NPAs, challenge of how to increase private sector investment and the uncertainty in the global economic situation among others.

Jaitley also highlighted the achievements of the present Government in Defence Sector which include implementation of long pending One Rank One Pension (OROP) Scheme for the retired defence personnel, putting New Defence Procurement Policy in place and encouraging Defence Manufacturing within the county, balancing both public and private sector manufacturing in defence sector and Strategic Partnership Policy to supplement FDI among others. Shri Jaitley concluded his Opening Remarks by stating that the manner in which defence acquisitions were cleared during the last three years of the present Government is incomparable to inaction during the previous regime in this regard.

Along with the Union Minister for Finance, Defence and Corporate Affairs Arun Jaitley, the Press Conference was also attended by both the Ministers of State for Finance Santosh Kumar Gangwar and Arjun Ram Meghwal; Finance Secretary Ashok Lavasa; Revenue Secretary Dr. Hasmukh Adhia; Ms. Anjuly Chib Duggal, Secretary (DFS); Tapan Ray, Secretary (Economic Affairs & Corporate Affairs), Neeraj Kumar Gupta, Secretary (DIPAM); A.K. Gupta, Secretary, Defence Production; Dr. Arvind Subramanian, Chief Economic Adviser (CEA) and Ravi Kant, Additional Secretary (Defence) among others.

Click here for more details regardng the key initiatives and achievements of the five different Departments under the Ministry of Finance, Government of India during the last three years (2014-15 to 2016-17), as underscored by the Government