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All you wanted to know about NBFCs

B. Entities Regulated by RBI and applicable regulations

21. Will the circular on Lending against shares be applicable on restructured accounts? +

No. the Circular will not be applicable on restructured accounts

Foreign Investment in India

Q.21: Can a foreign investor invest in Rights shares issued by an Indian company at a discount ? +

Answer: There are no restrictions under FEMA for investment in Rights shares issued at a discount by an Indian company under the provisions of the Companies Act, 2013. The offer on rights basis to the persons resident outside India shall be:

in case of shares of a company listed on a recognized stock exchange in India, at a price, as determined by the company; and
in case of shares of a company not listed on a recognized stock exchange in India, at a price, which is not less than the price at which the offer on right basis is made to resident shareholders.

FAQs on Non-Banking Financial Companies

Mutual benefit financial companies (nidhis)

21. The nidhi companies have been precluded from accepting deposits in the nature of a Current Account. Whether they can open Savings Bank Account ? +

A. There is no prohibition for Nidhi companies opening Savings Bank Account.

Coordinated Portfolio Investment Survey – India

Some important definitions and concepts

Q21. What are short-term debt securities? +

Ans: Debt securities with original maturity of one year or less is classified as short-term debt securities. Examples of short-term securities are treasury bills, negotiable certificates of deposit, bankers’ acceptances, promissory notes, and commercial paper.

Business restrictions imposed on Paytm Payments Bank Limited vide Press Releases dated January 31 and February 16, 2024

Merchants using Paytm Payments Bank to receive payments

21. I am a merchant and I accept payments using a Paytm QR code, Paytm soundbox or Paytm POS terminal, linked to another bank account (not with Paytm Payments Bank). Can I continue to use this set-up even after March 15, 2024? +

Yes. If your receipt and transfer of funds is linked to any bank account other than Paytm Payments Bank, you can continue to use this arrangement even after March 15, 2024.

Annual Return on Foreign Liabilities and Assets (FLA) under FEMA 1999

Procedure for submission of the FLA return

Q21. How can an entity get approval for revising the previous year returns? +

Ans: Please follow the below given step to revise the FLA return for a previous year:

Visit https://flair.rbi.org.in/fla/faces/pages/login.xhtml → Login to FLAIR → Click on MENU tab on the left-hand side of the homepage → ONLINE FLA FORM → FLA ONLINE FORM → “Please click here to get the approval to fill revised FLA form for current year after due date /previous year” → select "Year" and click on → Click “Request”.

Your request status will be visible in the table below available on the screen. After sending request to RBI through FLA portal, entities need to wait for at least one working day for approval. Entities can check the status of their request in “Multiple Year Enable Screen” under menu on the left corner. Once approved by DSIM, RBI, the entity can revise FLA return for selected year.

External Commercial Borrowings (ECB) and Trade Credits

G. ALL-IN-COST

21. Does all-in-cost ceiling apply on a continuous basis or can it be calculated even on an average basis? +

All-in-cost should be within the applicable ceiling at all times, e.g., breach of all-in-cost ceiling in the first year and a much lower all-in-cost in the second year so as to comply on an average, is not permitted.

Government Securities Market in India – A Primer

21. What are the basic mathematical concepts one should know for calculations involved in bond prices and yields? +

The time value of money functions related to calculation of Present Value (PV), Future Value (FV), etc. are important mathematical concepts related to bond market. An outline of the same with illustrations is provided in Box II below.

BOX II

Time Value of Money

Money has time value as a Rupee today is more valuable and useful than a Rupee a year later.

The concept of time value of money is based on the premise that an investor prefers to receive a payment of a fixed amount of money today, rather than an equal amount in the future, all else being equal. In particular, if one receives the payment today, one can then earn interest on the money until that specified future date. Further, in an inflationary environment, a Rupee today will have greater purchasing power than after a year.

Present value of a future sum

The present value formula is the core formula for the time value of money.

The present value (PV) formula has four variables, each of which can be solved for:

Present Value (PV) is the value at time=0
Future Value (FV) is the value at time=n
i is the rate at which the amount will be compounded each period
n is the number of periods

The cumulative present value of future cash flows can be calculated by adding the contributions of FV_t, the value of cash flow at time=t

An illustration

Taking the cash flows as;

Period (in Yrs)	1	2	3
Amount	100	100	100

Assuming that the interest rate is at 10% per annum;

The discount factor for each year can be calculated as 1/(1+interest rate)^no. of years

The present value can then be worked out as Amount x discount factor

The PV of ₹100 accruing after 3 years:

Year	Amount	discount factor	P.V.
1	100	0.9091	90.91
2	100	0.8264	82.64
3	100	0.7513	75.13

The cumulative present value = 90.91+82.64+75.13 = ₹ 248.69

Net Present Value (NPV)

Net present value (NPV) or net present worth (NPW) is defined as the present value of net cash flows. It is a standard method for using the time value of money to appraise long-term projects. Used for capital budgeting, and widely throughout economics, it measures the excess or shortfall of cash flows, in present value (PV) terms, once financing charges are met.

Formula

Each cash inflow/outflow is discounted back to its present value (PV). Then they are summed. Therefore

Where
t - the time of the cash flow
N - the total time of the project
r - the discount rate (the rate of return that could be earned on an investment in the financial markets with similar risk.)
C_t - the net cash flow (the amount of cash) at time t (for educational purposes, C₀ is commonly placed to the left of the sum to emphasize its role as the initial investment.).

In the illustration given above under the Present value, if the three cash flows accrues on a deposit of ₹ 240, the NPV of the investment is equal to 248.69-240 = ₹ 8.69