SEBI enables two-way fungibility of IDRs

SEBI enables two-way fungibility of IDRs

current affairs in 2013

 March 6th, 2013

Holders of Indian Depository Receipts (IDRs) will now have an option to convert it into shares of the issuing company. The Securities and Exchange Board of India (SEBI) has issued detailed guidelines which will allow shareholders to convert their depository receipts into equity shares of the issuer company and vice-versa.
The issuer could provide exchangeability to IDR holders by converting IDRs into underlying shares; or converting IDRs into underlying shares and selling the underlying shares in the foreign market where the shares of the issuer are listed and providing the sale proceeds to the IDR holders.
Existing IDR issuers can follow the new framework, and have to provide the option of redemption/conversion within three months from the date of completing a year of listing.
What are IDRs?

• IDRs are generally instruments denominated in rupees and allow overseas companies to raise funds from the Indian market.

How this step would help India’s capital market?

• This move of allowing for two-way fungibility of IDRs will encourage greater foreign participation in the Indian capital market. 
• So far only the UK-based banking major Standard Chartered PLC was listed as an IDR.

Tags: Banking • March 2013 • SEBI

Impose monetary limit for overseas use of cards: RBI

March 6th, 2013

The RBI has asked banks to fix a monetary limit for international transactions on credit and debit cards.More directives by the RBI:

• Banks should refrain from issuing cards with global access unless specifically sought by the customer.
• A monetary limit of $500 should be imposed by the issuing bank on all global cards which had not been used in the past.
• There should be a threshold limit for international usage for all active international cards issued by banks.
• Banks should evolve a system that enables implementation of additional factor of authentication for cards issued in India and used internationally to make electronic modes of payment such as RTGS, and NEFT safer.
• Banks should introduce a system to put a limit to number of beneficiaries that could be added in one day by each account.

Why all these steps are needed?

• The RBI has notified this following cyber attacks which have become more unpredictable and electronic payment systems becoming vulnerable to new types of misuse.
• These initiatives are needed to ensure that transactions effected through electronic channels are safe and secure and not easily amenable to fraudulent usage.