India Union Budget 2019 Expectations: With Union Budget 2019 just a day away, the financial markets are hoping that the government would take steps to tackle the ongoing liquidity crisis in the NBFC sector, and also provide a framework for bankruptcy resolution, among others.
Apart from these, the financial markets would also be looking forward to rationalization of FPI investment in corporate debt, streamlining of stamp duty on financial instruments, and investments by FPIs into debt instruments issued by InVITs and REITs. Leena Chacko, Partner, Cyril Amarchand Mangaldas shares the key expectations of financial markets from Union Budget 2019 in an interaction with Financial Express Online.
Rationalization of FPI investment in corporate debt
Allowing FPIs to subscribe to corporate debt without any issue-wise limit: The present limits are increasing the cost of borrowing and the constant changes are affecting debt raising since FPIs are not investing as much as they did. Further, relaxing (if not doing away with) group-wise investment limits.
Exemption of applicability of circular dated June 15, 2018 for FPIs to securitized debt instruments
Clarification that requirements set out for corporate debt will not be applicable to investment by FPIs in securitized debt investments. While the exemption has been made for security receipts a similar clarification for securitized debt investments will deepen the market and also help the NBFCs in terms of liquidity.
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Streamlining of stamp duty on financial instruments
This has been a constant ask from the industry. Uniform stamp duty rates on issue and transfer of financial instruments and security creation is needed in order to ensure that duties are duly paid and actions required to be Taken and thereby strengthen the market.
Dealing with liquidity crisis in the NBFC and banking sector
Infusing new funds, relaxation of requirements for issue of retail bonds by NBFCs could be explored. Currently, NBFCs largely depend on banks for their financial requirements.
Bankruptcy and resolution framework for financial institutions
Government should propose a framework for effective resolution of financial firms. The framework should include a mechanism for early recognition of stress in the system and appropriate corrective actions plans being put in place by the regulator at each stage.
Framework for dealing with stressed power-sector companies
Given the unique situation of the sector, providing relaxations in terms of implementation timelines for restructuring plans as compared to the other sectors before the debtor is pushed into a corporate insolvency resolution process.
Investment by FPIs into debt instruments issued by InVITs and REIT
Investment by FPIs into debt instruments issued by InVITs and REITs: allowing FPIs to invest in these entities will give the much required boost to these investment vehicles.
