Govt, Irani panel differ on lending norms for brokers
Broking firms are unlikely to face additional regulatory checks as recommended by the JJ Irani committee as well as the government’s concept note on the proposed new company law.
By Souvik Sanyal, ET Bureau |
NEW DELHI : Stockbrokers will not be treated differently from companies in their efforts to borrow money from corporates. Broking firms are unlikely to face additional regulatory checks as recommended by the JJ Irani committee as well as the government���s concept note on the proposed new company law.
Officials in the ministry of corporate affairs are now in favour of maintaining status quo on the rights of companies in lending to brokers. Not imposing differential rules for such firms will be applicable in case of companies lending to stockbrokers too.
While the Irani committee report called for a prohibition on companies making inter-corporate loans to stockbrokers and stockbroking firms, the concept note favoured limits upto which stock brokers could receive such loans.
Officials in the ministry of corporate affairs say that the new company law, likely to be introduced this monsoon session of Parliament, will give up specific restrictions to opt for uniform compliance safeguards.
The proposed changes would require companies to be more transparent in their efforts to avail of such finance options. While the government does not seek to cap companies��� rights to raise funds through this route, the ministry of corporate affairs wants them to be transparent about loans.
The proposed move would ensure that corporates are made to follow greater standards of compliance before availing of such loans. To check fund manipulation, it is proposed that the capacity of the corporate houses to invest or lend surplus funds should be established transparently.
It is believed that detailed disclosures in the annual report of the lending company on the end-use of the loans and advances by the recipient entity for the intended purpose will usher greater transparency to such operations.
The present regulations say that no company will directly or indirectly grant any loan or guarantee to any corporate exceeding 60% of its paid-up share capital and free reserves or 100% of its reserves, whichever is more.
Officials in the ministry of corporate affairs are now in favour of maintaining status quo on the rights of companies in lending to brokers. Not imposing differential rules for such firms will be applicable in case of companies lending to stockbrokers too.
While the Irani committee report called for a prohibition on companies making inter-corporate loans to stockbrokers and stockbroking firms, the concept note favoured limits upto which stock brokers could receive such loans.
Officials in the ministry of corporate affairs say that the new company law, likely to be introduced this monsoon session of Parliament, will give up specific restrictions to opt for uniform compliance safeguards.
The proposed changes would require companies to be more transparent in their efforts to avail of such finance options. While the government does not seek to cap companies��� rights to raise funds through this route, the ministry of corporate affairs wants them to be transparent about loans.
The proposed move would ensure that corporates are made to follow greater standards of compliance before availing of such loans. To check fund manipulation, it is proposed that the capacity of the corporate houses to invest or lend surplus funds should be established transparently.
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It is believed that detailed disclosures in the annual report of the lending company on the end-use of the loans and advances by the recipient entity for the intended purpose will usher greater transparency to such operations.
The present regulations say that no company will directly or indirectly grant any loan or guarantee to any corporate exceeding 60% of its paid-up share capital and free reserves or 100% of its reserves, whichever is more.
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