Regulations – Dutch Uncles https://dutchuncles.in Market Intelligence & Mentoring Resources for Startups and Small businesses | Dutch Uncles Wed, 13 Oct 2021 13:10:33 +0000 en-US hourly 1 https://dutchuncles.in/wp-content/uploads/2020/12/favicon.png Regulations – Dutch Uncles https://dutchuncles.in 32 32 Facts About LRS That Every Investor Should Know https://dutchuncles.in/academy/liberalised-remittance-scheme-lrs/ https://dutchuncles.in/academy/liberalised-remittance-scheme-lrs/#respond Thu, 14 Oct 2021 03:35:11 +0000 https://dutchuncles.in/?p=38498&preview=true&preview_id=38498 Whether you plan to invest in foreign markets, take a vacation abroad, or send your children outside India to study, the RBI’s Liberalised Remittance Scheme (LRS) can help you solve all your currency-related concerns. In addition to remittances and transfers, you can use foreign exchange facilities covered under the LRS. The Reserve Bank of India […]

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Whether you plan to invest in foreign markets, take a vacation abroad, or send your children outside India to study, the RBI’s Liberalised Remittance Scheme (LRS) can help you solve all your currency-related concerns. In addition to remittances and transfers, you can use foreign exchange facilities covered under the LRS.

The Reserve Bank of India (RBI) oversees the Liberalised Remittance Scheme. The scheme allows resident individuals to pay for international investments and expenses in one fiscal year. An individual is said to be a resident in the tax year for 60 days or more in India in the relevant tax year and a total of 365 days or more in the previous four tax years.

Current laws and regulations allow residents to transfer up to $250,000 per tax year. They can use the money for travel expenses (personal or professional), medical care, studies, gifts and donations, care of relatives, etc. 

The remitted funds can also be used to purchase stocks, bonds, and real estate in foreign markets. Individuals may open, manage, and maintain foreign currency accounts with banks outside India to complete program-approved transactions.

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As the name suggests, the liberalised remittance scheme (LRS) is formulated for the remittances (investing in foreign lands) that a resident individual is permitted to make.

However, trade in foreign entities, including buying lottery tickets, proscribed magazines, etc., or any items prohibited under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000 is not allowed. Resident individuals cannot, directly or indirectly, send remittances to countries designated by the Financial Action Task Force (FATF) as non-co-operating countries and territories. 

LRS and international transactions

Before international trade and transactions, you need to convert the Indian rupee into US currency for foreign investment or consumer purposes. The Liberalised Remittance Scheme describes how these transactions work. As an Indian resident, you must purchase dollars using the Indian rupees (INR) from an authorised dealer (the bank) in India. 

The dollars can then be remitted or spent abroad for buying property or diversified assets like equity dividends. Here, the allusion of the dollar as a currency is easier as remittance can be in any openly adjustable foreign currency, including dollars.

Types of LRS transactions

LRS current account transactions

If you are engaging in international travel, the foreign exchange facility determines if LRS is allowed for you. In addition to remittance, you also have the forex facility at your disposal for specific purposes. These are referred to in Paragraph 1 of Schedule III of FEM (CAT) Amendment Rules 2015, which consist of the rules for the period of the surrender of foreign exchange. The individual must maintain the usage of forex within the limit of $2,50,000 only. 

Purposes for which LRS can be utilised under current account transactions

    • While making a private visit to any country except Nepal and Bhutan, this facility could be availed. You can use your credit card and ATM cash withdrawals if the card allows international transactions.
    • Travelling for business or attending a conference or specialised training abroad are also legitimate reasons for this transaction.
    • Medical overheads abroad or accompanying a patient going abroad for medical treatment/ check-up.
    • It covers the costs of education/studies abroad and employment opportunities. 

All such transactions are under the purview of current account transactions. In addition, the Authorised Dealer (banks) can initiate the remittance without RBI’s permission if the transactions are not listed in the prohibited category. However, the person remitting the funds must bear the responsibility to comply with the Foreign Exchange Management Act (FEMA) rules. 

LRS capital account transactions

LRS rules define transactions such as investing abroad in shares, property etc., as capital account transactions. Only specific capital account transactions are allowed under LRS rules. 

Purposes for which LRS can be utilised under capital account transactions

    • Opening a bank account abroad, i.e., a Foreign Currency Account is covered.
    • Purchase real estate property overseas can be done under this form.
    • For making investments overseas, including investing in shares, mutual funds, debt instruments, etc., LRS can be used. 
    • It can also set up Wholly Owned Subsidiaries and Joint Ventures outside India for business operations.

Permissible Transactions under LRS | Dutch Uncles

Retaining and reinvesting the funds 

When you invest in stocks and investments overseas, LRS rules allow you to hold and support your profits in that country (unless it is an overseas direct investment). Investing abroad and accruing interest or dividends on the deposits and investments made abroad do not need to repatriate. This allows you to retain the premium earned on your stocks or interest earned from the assets held as bonds and other foreign securities. 

This type of earned income can then be utilised to reinvest or to fulfil other expenses abroad. Gains from investments in real estate and ETFs can be reinvested in foreign markets without sending it back to the domestic bank account.

LRS limits

Currently, all residents, including a minor (countersigned by an administrator), can remit up to 2.5 lakh US dollars (USD 2,50,000) per year, according to the Liberalised Remittance Scheme. At the exchange rate of Rs 76 for a dollar, the limit is about Rs 1.90 crore. There is no limit to the number of annual transactions. Even if one sends the remitted amount back in the same year, no further remittance is permitted as the limit is set for individual fiscal years.

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]]> https://dutchuncles.in/academy/liberalised-remittance-scheme-lrs/feed/ 0 Security Ban: All You Need To Know https://dutchuncles.in/academy/mwpl-and-security-in-ban-the-stock-market-under-sebi-rules/ https://dutchuncles.in/academy/mwpl-and-security-in-ban-the-stock-market-under-sebi-rules/#respond Tue, 12 Oct 2021 03:35:08 +0000 https://dutchuncles.in/?p=38470&preview=true&preview_id=38470 When the open interest of market-wide position limit (MWPL) for a stock surpasses 95%, the stock comes under a ban in the futures and options (F&O) division. The open interest combines the total F&O contracts for all the months. If a security comes under the trading ban, you can only square off the position of […]

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When the open interest of market-wide position limit (MWPL) for a stock surpasses 95%, the stock comes under a ban in the futures and options (F&O) division. The open interest combines the total F&O contracts for all the months.

If a security comes under the trading ban, you can only square off the position of that stock holding in futures and options. You cannot open new places either in futures or in options if a trading ban is imposed.

Market-wide position limit (MWPL)

Market-wide position limit (MWPL) is a limit that shows the maximum number of unsettled option contracts for a derivative stock. Currently, the MWPL for Indian derivative stocks is 95%.

If the open interest of a share’s MWPL is greater than 95 per cent, the share is banned from trading in the futures and options market. Open interest is the final number of outstanding obligations held by market members at the end of each day. Open interest measures the fundamental level of activity in the futures market.

The concept of market-wide position limit is applied to securities in the futures and options (F&O) section. Every month, the stock exchange publishes data for MWPL of each security in the F&O section. Index derivatives are not subjected to the MWPL. 

The MWPL of securities should be:

    • Less than (or equal to) 20 per cent of the free float stock, and
    • Thirty times the previous month’s average quantity of stocks regularly traded in the exchange’s cash market.

The National Stock Exchange (NSE) gives a trading system that notifies when the open interest of futures and contracts in security exceeds 60% of the security’s market-wide position limit. These notifications are highlighted at the 10-minute time frame.

Exemplified explanation of market-wide position limit (MWPL)

To understand the securities ban, it is essential to grasp the basics of market-wide position limit (MWPL). MWPL is determined by calculating 20% of the free float market cap of a company. 

Suppose a company has a 10 crore net share volume. From this market cap of shares, five crore shares are held by promoters and thus form the restricted stock. The remaining stock of five crore constitutes the free-float market cap, which is open for trade on the free market.

Taking the above example, 20% of the free float market cap will be,

20% x 5 crore = 1 crore 

Therefore, the company’s market-wide position limit is 1 crore shares.

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20% of the free float market cap is called the market-wide position limit (MWPL). When MWPL-to-open interest crosses 95%, a trading ban is imposed on a share for the next trading session. The ban continues until the MWPL comes below 80%.

MWPL And Security In Ban | Dutch Uncles

During Security in Ban

When security is under the ban, the only transaction that traders can do is reducing their position. They can reduce the place by selling the original position. To put it simply, you cannot open a new position until the security ban is lifted in F&O Segment. However, traders may opt for intraday positions as it is not related to open interest.

Why is a ban on securities imposed?

The vital reason why exchanges impose a ban on security in the F&O segment is to reduce the volatility in particular shares on both sides. The ban saves retail investors from significant losses. It also gives time to investors for rethinking their positions. Traders are not permitted to open any new positions in securities during a ban period. But they can exit already opened positions.

Penalty for breaching the ban

If a trader breaches the F&O ban, i.e., raises or opens a new position in security during the ban period, they are levied a fine of 1% of the rising position’s value. The lowest penalty limit is set at Rs 5,000, and the upper limit is Rs 1,00,000.

Ban resumption and normal F&O trading 

After the ban, regular trading in securities only resumes when total open interest on all exchanges comes below 80% or less of the MWPL. In simple terms, when the open interest drops to 80% or less, stocks come out of the ban, and regular trading resumes.

Suppose a company’s market wide position limit is 80 crore shares and open interest is 78 crore shares. By calculating the percentage, i.e., 

    • {Open Interest / MWPL} x 100

{78 / 80} x 100 = 97.5, 

The open interest comes out to be 97.5%. As the percentage is above 95%, the ban will remain on the company’s securities. It will only come out of the prohibition if the rate slips below 80%.

So, if the open interest reaches, say, 60 crore shares, which will mean 

60/80 x 100 = 75%. 

Thus, the share will be under 80% and will come out of the ban.

In the end, it is essential to remember that securities in the F&O segment that enter a ban period are the ones that are highly speculative and risky. Such shares are not a promising investment choice, especially for retail investors just beginning their investment journey. Still, even if you have entered such a risky transaction, you can trade the stock in the cash segment, where no such limits apply.

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]]> https://dutchuncles.in/academy/mwpl-and-security-in-ban-the-stock-market-under-sebi-rules/feed/ 0 NSDL vs CDSL: A Basic Guide For Beginners https://dutchuncles.in/academy/nsdl-vs-cdsl-a-basic-guide-for-beginners/ https://dutchuncles.in/academy/nsdl-vs-cdsl-a-basic-guide-for-beginners/#respond Thu, 07 Oct 2021 08:35:08 +0000 https://dutchuncles.in/?p=38346&preview=true&preview_id=38346 As an investor, you need to understand what depositories are and what is their role in the stock market. They are, after all, the most fundamental players in the market’s functioning. Depositories are entities that hold your shares or securities in electronic or intangible form (dematerialised format). They guard and store any type of stock […]

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As an investor, you need to understand what depositories are and what is their role in the stock market. They are, after all, the most fundamental players in the market’s functioning. Depositories are entities that hold your shares or securities in electronic or intangible form (dematerialised format). They guard and store any type of stock market security.

There are two major depositories in India: National Securities Depository Limited (NSDL) and Central Securities Depository Limited (CDSL). These two depositories facilitate your Demat transactions and make trading in the stock market easier. Opening a Demat account and a trading account is imperative for starting the investment journey. And these depositories are responsible for the opening and management of your accounts. 

Understanding depositories 

Both National Securities Depository Limited (NSDL) and Central Securities Depository Limited (CDSL) are depositories that maintain stock market participant’s financial records. They communicate with investors through Depository Participants (DPs). The DP acts as the intermediary’s representative between depositors and their clients. DPs are authorised by a depository under the relevant legislations of the SEBI Act. 

You need to open a Demat account to use depositories’ financial services. Usually, depository participants are the brokerage and trading platforms like Zerodha, Upstox, Groww, etc. These companies provide the demat account opening services along with market activity reports and other value-added services.

National Securities Depository Limited (NSDL)

The National Securities Depository Limited is affiliated to the National Stock Exchange (NSE). NSDL is the oldest and largest depository of electronic securities in India. It was established in 1996 and is based in Mumbai, Maharashtra. It is the first depository in India to exchange and pay for securities electronically or in Demat form. NSDL has around 1.7 crore investor accounts and 30,500 points of service in 2000 cities.

Central Depository Securities Limited (CDSL)

Central Depository Securities Limited (CDSL) trades on the Mumbai Stock Exchange (BSE). CDSL is the second depository of securities in India after NSDL. It was set up in 1999 in Mumbai. It is the second largest securities and stock market accounting depository in India. CDSL operates over 19,000 DP service centres with investor accounts of approximately 1.6 crore people.

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NSDL and CDSL hold various bonds and electronic securities in different segments such as stocks, cash, and assets. Both are government registered entities.

How do NSDL and CDSL work?

When you start trading in stocks and shares, they are debited or credited respectively from a depository and shown in your Demat account. Once the transaction has been validated, depositories shall provide the public company with information about the shareholders. For example, investors can receive delivery instructions from the depositories, among other actions. On the other hand, companies that trade on the stock exchange often contact depositories regarding information of shareholders for actions such as notifying them about their right to profits, shares, etc.

Transforming stock market investment

The depositories have transformed trading in Indian stock markets by making it possible to hold and trade stocks, securities etc., electronically. By using technology, they have paved the way for secure, reliable and convenient transactions in the stock market.

NDSL CDSL Depositories Functions | Dutch Uncles

Which is better – NSDL or CDSL? 

There is no significant difference between CDSL and NSDL’s working domains. Both depositories are registered with the Indian government, regulated by the Securities and Exchange Commission of India (SEBI), and provide electronic copies of the securities to investors.

On the customer side, depository services keep evolving. The question of superiority is thus rooted in an investor’s preference of the stock exchange they want to indulge in, i.e., either the National Stock Exchange or the Bombay Stock Exchange.

Moreover, the investor does not have the liberty of choosing the depository they want to open their Demat account with. The decision of choosing the depository lies with the brokerage firm or the agent. A broker or depository participant selects either NSDL or CDSL by analysing which depository will be more economical and conveniently accessible to open a Demat account. 

For clients, the brokers can debit or credit securities from either of these depositories, given that they hold valid power vested in them by an attorney permitting them to do so. 

Investor’s concern

There are no major concerns for investors regarding the depository with which their account gets registered. However, some brokers outline specialised benefits in opening CDSL or NSDL accounts as further leverage. This is just a marketing ploy to get you to create an account with them.

As an investor, you can easily open a Demat account and a trading account, with a DP linked to one of the depositories. If you are starting your investment journey in the stock market, never forget to choose a trusted and reliable broker. Always look for features like a free online Demat account and no annual maintenance fee (AMC). They can offer you the most advanced trading platform and the best Demat services.

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]]> https://dutchuncles.in/academy/nsdl-vs-cdsl-a-basic-guide-for-beginners/feed/ 0 Association of Mutual Funds in India (AMFI): The Referee for Mutual Funds https://dutchuncles.in/academy/association-of-mutual-funds-in-india-amfi-the-referee-for-mutual-funds/ https://dutchuncles.in/academy/association-of-mutual-funds-in-india-amfi-the-referee-for-mutual-funds/#respond Tue, 28 Sep 2021 03:35:09 +0000 https://dutchuncles.in/?p=38011&preview=true&preview_id=38011 The Association of Mutual Funds in India – AMFI – is an industry organisation established in 1995 for managing the Indian investment funds segment. Most Indian mutual fund managers and companies are members of AMFI. The organisation strives to develop the Indian investment fund market and maintain ethical and professional standards. AMFI is a government […]

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The Association of Mutual Funds in India – AMFI – is an industry organisation established in 1995 for managing the Indian investment funds segment. Most Indian mutual fund managers and companies are members of AMFI. The organisation strives to develop the Indian investment fund market and maintain ethical and professional standards.

AMFI is a government non-profit organisation supervised by the Securities and Exchange Board of India (SEBI). SEBI incorporated it on 22 August 1995. As of April 2015, AMFI had 44 registered members. AMFI members are the asset management companies that are registered with the organisation. These members have collective assets under management (AUM) worth over Rs. 27 lakh crores.

Objectives of Association of Mutual Funds in India (AMFI)

AMFI is a self-regulatory agency established collectively by Indian fund houses and asset management companies (AMC). It is an institution entitled to supervise the activities of investment funds and the financial management of investors.

The mutual funds’ sector in India is still an underdeveloped financial domain. There have been many misconceptions and fears regarding the stock market and investment funds due to the lack of awareness and financial education. 

The lack of knowledge initially hindered even minor participation in the mutual fund investment segment. Therefore, over the years, regulators such as SEBI and AMFI have become active and are playing an essential role in investing in financial education.

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The Association of Mutual Funds in India protects the interests of investors and financial management companies.

Role of AMFI: Creating investor awareness

AMFI is involved in developing a clear and transparent framework for the Indian mutual fund arena. Over decades, it has been an instrumental player in protecting the interests of investors and fund houses. It has made financial investments easier and more transparent to appeal to more people.

All fund houses, trustees, agents (intermediaries) and financial advisers have to register with AMFI. It presently has 44 members, including 42 SEBI-registered asset management firms. The Association of Mutual Funds in India’s foundation advocates for risk-free mutual fund investments and highlights the benefits of investing safely.

The Association of Mutual Funds in India aims to:

    • Demonstrate ethical and uniform professional standards in all member organisations under AMFI.
    • Encourage members and investors to comply with business rules and guidelines.
    • Get advisories, AMCs, distributors, agents, and other entities included in the capital market or financial service areas to comply with their guidelines.
    • Act as a bridge between SEBI and members and ensure that SEBI’s financial instructions are followed.
    • Represent the Reserve Bank of India, Finance Ministry, and SEBI on everything related to the industry.
    • Educate the public on investment opportunities and benefits.
    • Disseminate information on partnerships, as well as research and training in various contexts of mutual funds.

AMFI reviews the Code of Conduct rules and takes disciplinary action if its members violate the law. Mutual fund investors may contact AMFI to file a complaint and register their grievances against a fund manager or house in case of an irregularity. 

AMFI Registration Number (ARN)

The AMFI Registration Number (ARN) is a unique number assigned to financial agents, distributors and other financial market participants who act as brokers. It can only be attained by National Institute of Securities Markets (NISM) certified personnel or entities. If you are a senior citizen, qualifying for the CPE (Continuing Professional Education) is compulsory. Without this number, you cannot sell or trade any mutual fund.

AMFI Registration Number (ARN) | Dutch Uncles

AMFI offers ARN ID cards to companies and resellers operating in mutual funds trade. Please note that the NISM certificate is only valid for three years. This certificate includes AMC name, cardholder’s photo, AMFI Registration Number (ARN), and business address. It helps investors verify the legitimacy of brokers or AMCs 

ARN important is extremely important for investors

Financial market middlemen such as brokers, agents or intermediaries play an essential role in attracting potential investors for mutual funds. To ensure that only eligible people can sell, participate in mutual fund trade and engage with potential buyers, AMFI only authorises individuals or organisations with an AMFI Registration Number. 

All external applicants must register and pass the exams to become an AMFI entity of advisors. Never engage with an intermediary that does not have ARN while investing in mutual funds. Before you start investing money, you need to verify the AMFI registration number of your broker.

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]]> https://dutchuncles.in/academy/association-of-mutual-funds-in-india-amfi-the-referee-for-mutual-funds/feed/ 0 What is the Capital Gains Account Scheme (CGAS)? https://dutchuncles.in/academy/what-is-the-capital-gains-account-scheme-cgas/ https://dutchuncles.in/academy/what-is-the-capital-gains-account-scheme-cgas/#respond Mon, 27 Sep 2021 05:35:11 +0000 https://dutchuncles.in/?p=37965&preview=true&preview_id=37965 The Indian government instituted the Capital Gains Account Scheme (CGAS) to encourage investors to reinvest their capital gains made in the market in different avenues. The scheme gives tax benefits to investors who invest their capital gains into specified assets (accounts) provided under the CGAS. The plan is listed under sections 54 to 54GB of […]

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The Indian government instituted the Capital Gains Account Scheme (CGAS) to encourage investors to reinvest their capital gains made in the market in different avenues. The scheme gives tax benefits to investors who invest their capital gains into specified assets (accounts) provided under the CGAS. The plan is listed under sections 54 to 54GB of the Income Tax Act 1962, which has provisions for exemption from capital gains.

In some cases, taxpayers are unable to reinvest the capital gains in modes specified in the law before the filing of return of income or before the end date of profits investment. Thus, the government introduced the Capital Gains Account Scheme to enable taxpayers to park their funds till they are spent on the prescribed plan.

What is Capital Gains Tax (CGT)?

Earnings generated from the sale of capital assets are termed capital gains. Gains from the trade of capital assets are taxed in the income tax proceedings. Capital gains arise for a transaction where you trade the asset for a higher price than its buy price. 

Types of Capital Gains Tax

Capital assets are generally divided into short-term and long-term capital assets.

    • Long-term Capital Asset

Long-term capital assets are the assets that are held for more than 12 months. In India, the tax for long-term capital gains in stock markets is set at 10% of the profit volume.

    • Short-term Capital Asset

Short-term capital assets are the assets that are held for 12 months or less. These gains are taxed at 15% in stock market gains. 

Capital Gains Account Scheme (CGAS) | Dutch Uncles

Capital Gains Account Scheme

The time available for the beneficiary to reinvest and avail of the exemption is longer than the due date to register the return of assets. In this case, the taxpayer can deduct unused capital gains in the “Capital Gain Account” under the Capital Gains Account Scheme. Capital gains invested in the capital gains account are exempt from taxation and are treated as reinvested gains.

Availing Capital Gains Account Scheme benefits

Taxpayers who are unable to reinvest their investment income in a particular tax-exempted avenue before filing tax returns are eligible for CGAS. Before reporting it in income tax filings, taxpayers must bring in the investment income that was not used for re-investment purposes. This must be done before the tax filing deadline. Capital gains account can be opened for additional capital benefits at any branch of a public bank, except in rural areas where banks are not empowered with such features.

Procedure to open capital gains account 

You can open a capital gains account with your bank and apply via Form A. Information such as PAN details, proof of address, and photograph is required for the opening process. You can make deposits in many ways, such as cash, check, demand draft, etc. You can make the deposit either in lump sum or instalments. Separate applications shall be made for exemption under different sections, and you must open individual capital gains accounts.

Types of deposits

You can make two types of deposits under the capital gains account scheme.

    • Type A – Savings deposit

Type A account is like a regular savings bank account of any bank where interest at a rate similar to saving bank account interest is credited periodically. The bank also issues a passbook to the deposit holder. Like the savings deposit, a Type A account offers better liquidity, and you can withdraw at any time.

    • Type B – Term deposit

Type B account is similar to a bank’s fixed deposit account that offers interest at the rate applicable to a term deposit. It has restrictions identical to a term deposit. The maximum term allowed for a Type B account is three years. The depositor is required to choose the time based on his plan for specified investment, such as two years for the purchase of new house property or three years for construction. Like fixed deposits, depositors receive a deposit certificate containing all the deposit details. It has to be tendered at the time of withdrawal. Moreover, auto-renewal of term deposit is not permissible as a standard fixed deposit.

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The term deposit can be calculated on a cumulative or non-cumulative basis; interest is either consolidated and reinvested with the principal or paid out periodically.

Withdrawal from the scheme

You shall submit form C for withdrawal from an account for the first time and Form D for further withdrawal transactions. These are subject to furnishing the details of the manner of utilisation of money withdrawn previously. Hence, no debit card or chequebook is issued to the depositor.

There are no restrictions on using the Type-A account for withdrawing money. While the right to withdraw money from a Type-B account is granted, it is only allowed if the money is transferred to a Type-A account and then withdrawn. Failing to adhere to this rule levies penalty on the account holder. The individual amount withdrawn is expected to be utilised for designated purchase within 60 days of withdrawal, and any unutilised amount may be re-deposited to the Type A account immediately.

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]]> https://dutchuncles.in/academy/what-is-the-capital-gains-account-scheme-cgas/feed/ 0 SEBI’s Investor Protection Guidelines: All You Need To Know https://dutchuncles.in/academy/investor-protection-guidelines-by-sebi-all-you-need-to-know/ https://dutchuncles.in/academy/investor-protection-guidelines-by-sebi-all-you-need-to-know/#respond Wed, 15 Sep 2021 08:35:13 +0000 https://dutchuncles.in/?p=37436&preview=true&preview_id=37436 Investors, both retail and institutional, are fundamental to the economic and sustainable growth of a country’s stock market economy. They are the drivers of informed investments, and with their numerous transactions, the marketplace runs the show. If their money does not enter the market, everything, including stocks, bonds, and securities, is void. Investors are, without […]

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Investors, both retail and institutional, are fundamental to the economic and sustainable growth of a country’s stock market economy. They are the drivers of informed investments, and with their numerous transactions, the marketplace runs the show. If their money does not enter the market, everything, including stocks, bonds, and securities, is void. Investors are, without doubt, a key support system of the market and economic growth. 

Therefore, it is all the more necessary to protect the rights and activities of investors. Investor protection involves various measures that protect the interests of investors from malpractices, both visible and underlying. 

Securities and Exchange Board of India 

The Securities and Exchange Board of India – SEBI – is the primary market regulator in India set up on the 12th of April, 1992. The main objective of SEBI is to regulate and oversee India’s securities and commodity market while forming guidelines and rules. Investor protection measures by SEBI are in place to preserve the investors from malpractices in shares, the stock market, Mutual Fund, etc.

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SEBI is responsible for overseeing and protecting commercial investment funds and all securities-related activities in the country.

Investor interests’ safety and protection

Monetary investments in stock markets are undoubtedly one of the riskiest things to do with your money. But unlike other financial risks, stock markets give an excellent probability for your wealth to grow if you make intelligent decisions. Nevertheless, insurance and assurances on investors’ money are favourable to avert some of that risk element. The investor’s insurance money is a symbol of commitment. 

Put simply, investor protection is equivalent to returning the money to the investor when a brokering merchant reduces it or uses it for malicious activity. Insurance policies are essential to look for when opening a Trading Account or a record with an online dealer. When you open an exchange account at a brokerage, you are usually financially secure.

What does SEBI do?

SEBI’s general role consists of doing the following tasks:

Making sure that the financial backers are instructed on the mediators of protected markets.

Filtering the most popular acquisitions and take-over of organisations.

Preventing local securities trading like fake and preposterous trading moves in the insurance market.

Controlling vaulted assets, unfamiliar portfolio financial backers, FICO assessment agencies, and caretakers of protections.

SEBI’s role in investor protection

Over the years, SEBI has developed various methods and procedures to protect investors’ interests. It has published several guidelines, launched many enterprise awareness programs and established an Investor Protection Fund (IPF) to remunerate investors.

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SEBI has developed a solid financial support system to provide a fallback plan to investors. The goal is to ensure that more and more people participate in Indian markets.

SEBI engages investors and collects and uses the information they need to evaluate different financial options according to their goals. It assists investors to explain their privileges and responsibilities in a given project. The educational and training concept of financial aid by SEBI is crucial to protecting investors’ rights through financial aid relations with market participants.

Investor protection measures by SEBI

SEBI’s Investor Protection Act was enacted following Section 11(2) of the SEBI Act. Proceedings under it include the following measures:

Registering and regulating financial market participants like brokers, transfer agents, bankers, instructors, registrars, portfolio managers, investment advisors, commercial bankers, etc.

Eliminating false and unfair trading in the stock market

Knowledge development and educational issues.

Conducting training for business brokers.

Auditing and controlling of exchanges and intermediaries.

Estimating the costs, fees and other charges.

Recording and monitoring the work of market observers, foreign investors, shareholders, institutional assessors, etc.

Linking and attracting investment projects such as mutual and venture capital funds.

Encouraging and controlling mainstream self-regulatory companies.

Investor Protection Guidelines by SEBI: All You Need To Know

Investor Education and Protection Fund (IEPF)

As part of SEBI investor protection measures, the Indian government set up the Investor Education and Protection Fund (IEPF) under the Companies Act 1956. According to the act, a business that has completed seven years should hand over all the unclaimed fund dividends, matured deposits, debentures, share application money etc., to the government through integrated programmes.

Investor Awareness Program

SEBI’s investor protection measures follow the motto of “Informed investors are safe investors”. SEBI regularly manages awareness and advertising campaigns in the stock market to raise awareness and attract investors. It does so by conducting seminars on derivatives, stock trading, Sensex, etc.

The Investor Awareness Program covers essential market areas such as portfolio management, mutual funds, tax rules, investor protection funds and the SEBI investor complaint system. 

Undoubtedly, investor protection is one of the most critical topics in the stock market. Thus, protecting the interests of investors is one of the fundamental tasks of market regulators and participants on the managing side. SEBI’s numerous strict measures to protect investors is a culmination of this mantra.

In conclusion, safety guidelines and measures ensure that all aspects of investor interests are protected. The investor awareness program and other such initiatives have certainly helped and will continue to be effective – these steps go toward clear and transparent transactions.

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]]> https://dutchuncles.in/academy/investor-protection-guidelines-by-sebi-all-you-need-to-know/feed/ 0 Indian Edtech To See Foreign Capital Inflow As China Tightens Its Rules https://dutchuncles.in/discover/indian-edtech-to-see-foreign-captial-inflow-as-china-tightens-its-rules/ https://dutchuncles.in/discover/indian-edtech-to-see-foreign-captial-inflow-as-china-tightens-its-rules/#respond Tue, 03 Aug 2021 08:35:07 +0000 https://dutchuncles.in/?p=34886&preview=true&preview_id=34886 The Chinese government recently unveiled new rules for the country’s private education sector that prohibit after-school businesses, including education technology (edtech) companies, from making a profit, raising capital, or participating in IPOs. Central government agencies have issued instructions to “reduce the burden on students enrolled in compulsory education”. The administration requires private teaching and coaching […]

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The Chinese government recently unveiled new rules for the country’s private education sector that prohibit after-school businesses, including education technology (edtech) companies, from making a profit, raising capital, or participating in IPOs. 

Central government agencies have issued instructions to “reduce the burden on students enrolled in compulsory education”. The administration requires private teaching and coaching companies to re-register as non-profit organisations. The new rules prohibit authorities from approving new businesses and puts previously registered online education businesses under review.

Why does this move by the Chinese matter? 

At a time when India is witnessing some of its biggest tech start-up IPOs, including Zomato’s recent listing and Nykaa’s upcoming IPO, the new Chinese regulations have ended the hopes for an IPO for the country’s biggest online education start-ups like Yuanfudao and Zuoyebang. These rules also limit fundraising for educational tech start-ups that are already listed publicly.

China has called for transforming its for-profit after-school educational institutions into non-profit educational technology institutions. It aims to prevent edtech start-ups from raising funds and going public.

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With the hopes of cashing in on this new development, Indian edtech companies are already hiring public policy executives to weigh options.

Indian edtech market and possible impacts on it

The education sector in India is highly controlled. Most of these laws and regulations apply to traditional educational institutions that offer education up to class 12th or higher. However, some states such as Telangana, Andhra Pradesh, Karnataka, Uttar Pradesh and Goa have recently begun to pass laws to regulate online education service providers and edtech companies. States like Maharashtra and Rajasthan also have formed committees to pass legislations concerning edtech. 

As the Indian edtech sector continues to grow, governments may seek to regulate education technology platforms in specific ways for many reasons, but primarily to protect students’ rights.

The new Chinese laws certainly benefit India in the short term. The main reason for this is that venture capital financing has to go somewhere as it is deflected from the Chinese edtech sector. For this, India is a good and profitable opportunity in investors’ eyes. In the long run, however, the results of these events have no certainty.

India can anticipate more public-private collaborations in education in the coming days, similar to what Unacademy announced with the Government of Karnataka. Unacademy has signed a memorandum of understanding with the Karnataka government to offer free education to 4,500 students wishing to take the competitive exams. The three-year programme is part of the edtech giant’s corporate social responsibility (CSR) programme and offers tuition, scholarships and free Unacademy Plus membership through online testing to select qualified students.

What can India’s edtech players and new entrepreneurs take advantage of?

Considering that the fourth or fifth largest edtech firm in China is more extensive than BYJU’S (India’s biggest edtech player), the possibility for India to make the most of China’s policy disruption is immense. In the future, there will undoubtedly be much collaboration and cross partnerships between edtech companies, other industry segments and the government. 

As edtech gets bigger and holds more weight to impact policy-based decisions, edtech start-ups will want to be in the government’s good books. These changes will further help attract a chunk of the foreign capital earmarked for China to India.

As scales gradually shift towards India via the massive demand, large talent pool and regulatory support from the government, edtech entrepreneurs are bound to benefit. It is high time for entrepreneurs and every stakeholder to put themselves out there and utilise the benefits that come with the capacity to submerge into the global stage as a free-market superpower, using education and technology as tools for success.

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]]> https://dutchuncles.in/discover/indian-edtech-to-see-foreign-captial-inflow-as-china-tightens-its-rules/feed/ 0 Central Bank Digital Currency, Explained https://dutchuncles.in/discover/central-bank-digital-currency-explained/ https://dutchuncles.in/discover/central-bank-digital-currency-explained/#respond Wed, 28 Jul 2021 10:05:08 +0000 https://dutchuncles.in/?p=34524&preview=true&preview_id=34524 Central Bank Digital Currency – CDBC – is a digital currency issued by a central bank, and it generally takes on a digital form of the nation’s existing ‘fiat’ currency. To put it simply, in India, a Central Bank Digital Currency will be the digital form of the Indian rupee, regulated by the government laws […]

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Central Bank Digital Currency – CDBC – is a digital currency issued by a central bank, and it generally takes on a digital form of the nation’s existing ‘fiat’ currency. To put it simply, in India, a Central Bank Digital Currency will be the digital form of the Indian rupee, regulated by the government laws and under the respective financial regulator’s ambit.

T Rabi Shankar, Deputy Governor, Reserve Bank of India (RBI) recently delivered a speech highlighting the central bank’s perspective on a controversial yet fundamental issue: the central bank digital currency (CBDC) and the future of private cryptocurrencies.

Digital currencies are becoming more popular, and there is increasing pressure on central banks worldwide to create virtual “currencies”. With such a trend, the RBI is also ready to go down this road, but how it will make India’s CBDC remains to be seen.

What is a central bank digital currency?

A central bank digital currency is a legal tender issued in digital form by a country’s central bank. It is similar to legal tender currency but has a different (digital) structure and can be exchanged face-to-face with government-issued money. In other words, the CBDC is identical to the fiat currency; it is simply digital in form. Given the recent emphasis on the issue, it seems likely that India will soon start building its own CDBC.

When will the Indian CDBC be implemented?

The recent comments about CDBC by RBI’s top executive came after the European Central Bank stated that it would enter a 24-month “investigation phase” regarding the currency. If successful, a “digital euro” will be in place by 2025. The People’s Bank of China also said last week that trials of digital Yuan reached $5.3 billion in trading volume at the end of June.

Central banks around the world are paying more attention to digital currencies. CBDCs will be part of the arsenal of most, if not all, of the world’s central banks. As per the RBI, in India, a calibrated approach will be considered in consultation with management and stakeholders for CBDCs. For quite some time now, the central bank has been exploring the benefits and risks of issuing a CBDC. No time frame has yet been given for the implementation and launch of an Indian CBDC, but its development is undoubtedly underway.

Step-by-step implementation – what does it mean?

The RBI plans on a phased and gradual issuing of its own version of CBDC. This will be done after careful consideration of the implications for various issues, including the difficulty that will make it complex for banks to obtain deposits and the potential impact on monetary policy behaviour.

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There is a possibility that pilot tests for the CBDC can be done in wholesale and retail segments in near future as per the RBI's official stance.

The RBI is currently working towards a phased implementation strategy and examining cases which could be implemented with little or no disruption. The Indian central bank will also draw upon the lessons from other countries in various stages of introducing such a digital fiat currency.

How will this affect different sectors and industries?

With the introduction of the CBDC, there can be significant benefits such as reduced dependency on cash, slashed transaction costs and regulatory risks, and improved returns on the government currency. It will also promote more robust, efficient, reliable and more regulated fiat payment methods.

The adoption of the CBDC could also have a significant impact on the banking system. The CBDC can reduce the demand for trading bank deposits and reduce liquidity on the settlement of transactions. It could also cause a shift away from bank deposits.

What can start-up and small businesses expect from it?

By following global trends in CBDCs deployment practices, Indian start-ups can be nurtured through India’s own digital currency ecosystem. With substantial participation and exposure to modern-day digital tools, such as the CBDC, start-ups can plan wider and lay a solid foundation for their free-market businesses and financial models.

Additionally, by using central bank digital currencies, consumers can own and trade CBDCs without a bank account, thereby attracting a broader audience to start-ups for cross-industry transactions. It will provide consumers and businesses with a channel to receive and return CBDCs in exchange for cash and commercial bank funds and deliver immediate point-to-point value without clearing or settlement. 

Ultimately, the CBDC is traceable and controllable in terms of issuance and ownership, providing every user and business with a healthy and legitimate financial footprint.

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]]> https://dutchuncles.in/discover/central-bank-digital-currency-explained/feed/ 0 Highlights of Udyam Registrations, Why Is It Important? https://dutchuncles.in/build/highlights-of-udyam-registrations-why-is-it-important/ https://dutchuncles.in/build/highlights-of-udyam-registrations-why-is-it-important/#respond Tue, 20 Jul 2021 03:35:12 +0000 https://dutchuncles.in/?p=33665&preview=true&preview_id=33665 The Micro, Small, and Medium Enterprise sector has reached the brink of exhaustion with the onslaught of the pandemic. The situation is grim as there doesn’t seem to be hope for recovery post the second wave for small businesses without Government Intervention. In this regard, many measures are being taken by the Government, one of […]

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The Micro, Small, and Medium Enterprise sector has reached the brink of exhaustion with the onslaught of the pandemic. The situation is grim as there doesn’t seem to be hope for recovery post the second wave for small businesses without Government Intervention. In this regard, many measures are being taken by the Government, one of which is the Udyam Registration for recognition.

What is the Udyam Registration?

Udyam is a Portal where small enterprises can register themselves. It falls under the purview of the Ministry of Micro, Small and Medium Enterprises (MSME). It’s a portal where enterprises can get registered and recognised by the Government. Registration will facilitate easy access to enterprise information. It will also be helpful in quick linking with other Government schemes, regulations, and compliance norms like Income Tax and GST (Goods and Services Tax).

Why Udyam registration is important for SMEs

Udyam registration is important for SMEs due to the following key reasons

  • By registering on Udyam, your enterprise can acquire business tenders.
  • Your business can avail bank loans and credit at cheap interest rates of 1.5% lesser than regular bank loans.
  • You can also enjoy various tax holidays and exemptions post Udyam registration.
  • Small businesses across various industries will benefit from expedited license approvals, certifications, and Government registrations. Udyam registered enterprises will be prioritised over unregistered firms.
  • Other benefits include subsidies on tax, tariffs, and capital as well as reduced patent costs.

Eligibility Criteria and Application Process for Small Enterprises

Eligibility Criteria

Enterprises belonging to the manufacturing and services sector are mainly eligible for Udyam Registration. Earlier, wholesale and retail traders were not eligible for Udyam. But after their recent entry into the classification of Micro, Small, and medium enterprises, wholesalers and retailers are also eligible to apply.

Application Process

Here are some crucial pointers on the application process for enterprises.      

    • Irrespective of whether a business is involved in two or more activities, each enterprise needs to have one registration on Udyam.

    • Aadhaar provision

If the enterprise is a proprietorship firm, you need to submit the Aadhaar number of the owner.

If the enterprise is a partnership firm, you need to provide the Aadhaar number of the Managing Partner.

If it is a Hindu Undivided Family (HUF) business, the Aadhaar number of the Karta must be provided.

    • The application process is straightforward and it’s a one-time compliance for businesses.

Who comes under the ambit of micro, small and medium enterprises?

The following enterprises come under the ambit of Udyam Registration.

  • Micro enterprises are those having investment up to INR 1 Cr and turnover of up to INR 5 Cr.
  • Small enterprises with investment of up to INR 10 Cr and turnover of up to INR 50 Cr.
  • Medium enterprises with investment of up to INR 50 Cr and turnover of up to INR 250 Cr.
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Small businesses across various industries will benefit from expedited license approvals, certifications, and Government registrations.

What’s in it for me?

The Udyam registration was introduced as a unification of EM-II (Entrepreneurs Memorandum – II) and UAM (Udyog Aadhar Memorandum) registrations for small businesses. This compliance is aimed at improving the Ease of Doing Business for SMEs. The Government is keen on strengthening the MSME sector by facilitating faster recovery from the recent disruptions. Udyam Registration is also aimed at boosting economic activity as well as job creation among SMEs.

The new system created under Udyam will ease the process for small businesses registering as an MSME in India. After successful registration, your enterprise will receive an ‘Udyam Registration number along with an e-certificate which will be crucial documentation while availing benefits. Under Udyam, small enterprises have been classified as a ‘priority sector’ for lending by banks and financial institutions. Micro, small, and medium enterprises who have their registration and documentation in order will thus find it easier to avail collateral-free credit and loans.

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]]> https://dutchuncles.in/build/highlights-of-udyam-registrations-why-is-it-important/feed/ 0 Money Management and Kids, The Fintech’s Approach https://dutchuncles.in/featured/money-management-and-kids-the-fintechs-approach/ https://dutchuncles.in/featured/money-management-and-kids-the-fintechs-approach/#respond Mon, 05 Jul 2021 09:26:44 +0000 https://dutchuncles.in/?p=32156&preview=true&preview_id=32156 The Fintech Industry has discovered a very fresh and promising consumer base of children and teenagers in India. This is a very new-age approach by the fintech industry and one that’s producing much-needed, progressive results for the young generation of India. The age demographic for this novel consumer base is under 18 years of age. […]

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The Fintech Industry has discovered a very fresh and promising consumer base of children and teenagers in India. This is a very new-age approach by the fintech industry and one that’s producing much-needed, progressive results for the young generation of India. The age demographic for this novel consumer base is under 18 years of age. 

Vital Financial and Life Skills to be inculcated through Kids Fintech products

  • Growing wealth
  • Money Management
  • Pocket money tracking
  • Expenditure tracking
  • Savings and Compound Interest Rates
  • Financial literacy and independence

Market opportunity

The current market opportunity for children and teenagers is huge in fintech. Young adults and kids in India make up for 41% of the total Indian population. The market has newly been discovered and new entrants are only just cropping up. 

Fintech’s approach towards Kids’ Money Management

Fintech start-ups are approaching Kids Money Management through Gamification and AI (artificial intelligence) driven insights. They are using creative ways to garner children’s interest towards expense and savings tracking. 

By also involving parents into the solution, fintech products are firmly placing the safety net around kids’ money management.

What the Fintech industry stands to gain from Kids’ business

The Fintech industry is showing keen interest towards the kids’ business since they have identified several long-term benefits to the industry:

    • Increase in the user pool

By roping in children who constitute a major chunk of the Indian population, the fintech industry will gain a spike in its consumer base. 

    • Easier to enforce regulations and compliance

By onboarding the young demographic early on into financial services, it will be fairly easy for the fintech industry to enforce regulations and compliance. 

    • Strengthening online security

By raising awareness among kids and teens who are most vulnerable to cyber-attacks, online security and protection against payment data breach and scams can be strengthened. 

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Young adults and kids in India make up for 41% of the total Indian population. The market has newly been discovered and new entrants are only just cropping up.

What’s in it for me?

A number of fintech start-ups are introducing kids and teenagers to the regulated fintech space like FamPay, Fyp (Gurgaon-based start-up), Junio (kids digital pocket money start-up), Birdfin and EduFund. Investors are showing bullishness towards the teen neo-banking space in fintech because it’s being viewed as an unserved market with huge potential. 

Fintech start-ups getting into this space need to come up with a combination of in-app gamification, monetary prize giveaways and community building to align with the trends of GenZ. In terms of branding, it should be modern and attractive to the young audience. Although the digital pocket money and virtual card segment in India is still at its fledgling stage, it has huge growth potential. 

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