Deregistration of Bajaj Finserv limited as an NBFC.

Bajaj Finserv Limited is the holding company of Bajaj Finance Limited. Bajaj Finserv Limited is now classified as a “Core investment company” as it does not have any public funds including deposits or borrowings.

Core Investment Companies (CICs)

Core Investment Companies, (CIC) are those companies which have their assets predominantly as investments in shares for holding stake in group companies but not for trading, and also do not carry on any other financial activity. These companies a minimum 90% of their assets in the group concerns either in the form of equity, preference shares or convertibles bonds or loans. Further the component of equity holdings should not be less than 60% of their assets.

RBI has now recognized that such CICs justifiably deserve a differential treatment in the regulatory prescription applicable to Non-Banking Financial Companies which are non deposit taking and systemically important.  It is now decided by RBI that only those CICs having an asset size of Rs.100 crore and above would be treated as systemically important core investment companies. Systemically important core Investment Company means a Core Investment Company fulfilling both the following conditions:

1. Having total assets of not less than Rs.100 crore, either individually or in aggregate along with other Core Investment Companies in the Group;
2. Raises or holds public funds;

The rules covering Systemically important CICs are as under:

1. They would require registration with the Reserve Bank and would be given exemption from maintenance of net owned fund and exposure norms subject to certain conditions.

2.      Capital Requirements:  Every CIC-ND-SI shall ensure that at all times it maintains a minimum Capital Ratio whereby its Adjusted Net Worth shall not be less than 30% of its aggregate risk weighted assets on balance sheet and risk adjusted value of off-balance sheet items as an the date of the last audited balance sheet as at the end of the financial year.

3.      Leverage Ratio:  Every CIC-ND-SI shall ensure that its outside liabilities at all times shall not exceed 2.5 times its Adjusted Net Worth as on the date of the last audited balance sheet as at the end of the financial year.

The Core Investment Companies (Reserve Bank) Directions, 2011: Extent of the directions

These directions shall apply to every Core Investment Company, that is to say, a non-banking financial company carrying on the business of acquisition of shares and securities and which satisfies the following conditions as on the date of the last audited balance sheet:-

(i) it holds not less than 90% of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies;

(ii) its investments in the equity shares (including instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue) in group companies constitutes not less than 60% of its net assets as mentioned in clause (i) above;

(iii) it does not trade in its investments in shares, bonds, debentures, debt or loans in group companies except through block sale for the purpose of dilution or disinvestment;

(iv) it does not carry on any other financial activity referred to in Section 45I(c) and 45I(f) of the Reserve Bank of India Act, 1934 except investment in

i) bank deposits,

ii) money market instruments, including money market mutual funds

iii) government securities, and

iv) bonds or debentures issued by group companies,

granting of loans to group companies and

issuing guarantees on behalf of group companies.)

Due to this, Bajaj Finserv is not required to be registered with the Reserve Bank of India (RBI) and has surrendered its NBFC registration for cancellation as required by the RBI.

All lending and deposit business is carried out by Bajaj Finance Limited under the brand umbrella of Bajaj Finserv. Therefore, all lending and deposit businesses shall continue as usual under Bajaj Finance Limited which is registered with RBI as an NBFC.

Ref: 15^th December 2015 advt by RBI

RBI Announces New Methodology to Calculate Base Rate

EMIs on home and auto loans are likely to fall as the Reserve Bank has come
out  with  a new methodology for determining base or minimum lending rates.
Base rate is the minimum rate below which a bank can't lend to customers.

The new methodology will improve efficiency of monetary policy transmission

Banks   will  review  and  publish  the  lending  rate  every  month  on  a and      will  come  into effect from April 1,2016.
The  new methodology would require banks to calculate base rate on marginal cost  of  funds, which will make it easier for lenders to pass rate cuts to  borrowers.

Marginal  cost  of  funds  is  typically  calculated  using the latest rate
payable on current and savings deposits.

pre-announced  date.  Existing  loans  will  continue as it is and existing
borrowers   can  also  move  to  this  new  base  rate  regime,  RBI  said.

Traditionally,  the  base  rate has been calculated on overall (or average)
cost of funds.

The  changes  in  average  rate happen slowly due to longer tenure of fixed
deposits,  making  it difficult for lenders to transmit repo rate reduction
in real time, analysts say.

Since the rate reduction cycle that commenced in January, less than half of the  cumulative  policy  repo  rate  reduction of 125 basis points has been  transmitted by banks,the RBI said yesterday.

The  median  base  lending  rate  has  declined only by 60 basis points, it
added.

Analysts  say  once banks move to the new methodology, further transmission
of  repo rate cuts are likely. As a result, EMIs on home and auto loans are
likely to head lower in coming days, they added.

Disclosure of Remuneration in Board Report [(Section 197 (14) and Rule 5(1)5(2)companies(appointment & remuneration) rules ,2014

Every listed company shall disclose in the Board’s report, the ratio of the remuneration of each director to the median employee’s remuneration and such other details as may be prescribed. The central government through rules prescribed the following disclosure by a listed company in its Board’s report:

(i) the ratio of the remuneration of each director to the median remuneration of the employees of the company for the financial year;

(ii) percentage increase in remuneration of each director and CEO in the financial year;

(iii) percentage increase in the median remuneration of employees in the financial year;

(iv) number of permanent employees on the rolls of company;

 (v) explanation on the relationship between average increase in remuneration and company performance;

 (vi) comparison of the remuneration of the Key Managerial Personnel against the performance of the company;

 (vii) variations in the market capitalisation of the company, price earnings ratio as at the closing date of the current financial and previous financial year and percentage increase over decrease in the market quotations of the shares of the company in comparison to the rate at which the company came out with the last public offer in case of listed companies, and in case of unlisted companies, the variations in the net worth of the company as at the close of the current financial year and previous financial year;

(viii) average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration;

 (ix) comparison of the each remuneration of the Key Managerial Personnel against the performance of the company;

(x) the key parameters for any variable component of remuneration availed by the directors;

(xi) the ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year;

 (ix) affirmation that the remuneration is as per the remuneration policy of the company.

 The board’s report shall include a statement showing the name of every employee of the company who-

 (i) if employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than sixty lakh rupees;

(ii) if employed for a part of the financial year, was in receipt of remuneration for any part of that year, at a rate which, in the aggregate, was not less than five lakh rupees per month;

(iii) if employed throughout the financial year or part thereof, was in receipt of remuneration in that year which, in the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the managing director or whole-time director or manager and holds by himself or along with his spouse and dependent children, not less than two percent of the equity shares of the company.

The above statement shall also indicate - (i) Designation of the employee; (ii) Remuneration received; (iii) Nature of employment, whether contractual or otherwise; (iv) Qualifications and experience of the employee; (v) Date of commencement of employment; (vi) The age of such employee; (vii) The last employment held by such employee before joining the company; (viii) The percentage of equity shares held by the employee in the company within the meaning of sub-clause (iii) of sub-rule (2) above; and (ix) Whether any such employee is a relative of any director or manager of the company and if so, name of such director.

 The particulars of employees posted and working in a country outside India, not being directors or their relatives, drawing more than 60 lakh rupees per financial year or 5 lakh rupees per month, as the case may be, shall not be included in the above statement of the Board’s report but such particulars shall be filed with the Registrar of Companies while filing the financial statement and Board Reports and such particulars shall be made available to any shareholder on a specific request made by him during the course of annual general meeting wherein financial statements for the relevant financial year are proposed to be adopted by shareholders.

An analysis of the pay ratio disclosures of companies was conducted by In govern research, bengaluru, a corporate governance research and advisory firm

The analysis show that the top brass of nifty companies stood at 9 cr,whereas the average Median employee remuneration was Rs 5.87 lacs  

At the top of the chart comes the Lupin Ltd promoters and then Hero MotoCrop promoters  who had 777 and 600 times higher remuneration than the average employee of their company while average remuneration is Rs 9cr.

Many companies have not disclosed this information in annual report and some companies having different accounting period have excused themselves.

The remuneration of 11 directors was more than 400 times the median employee remuneration of their companies.

Shareholders activism is required. In Tata motors case the shareholders did not consent to companies’ resolution.