India Regulatory Brief: EPFO Relaxes PF Withdrawal Procedure, RBI Liberalizes Foreign Borrowing Norms

New EPF Regulation Changes Withdrawal Procedure

The Employees Provident Fund Organization (EPFO) has issued a circular informing that employees who are Aadhar-seeded Universal Account Number (UAN) holders will no longer need their employer’s approval in order to withdraw their Provident Fund. This will allow for fast settlement of claims as employees can submit claims in Form 19, Form 10c and Form 31 directly to the commissioner without their employer’s signature.

Previously, EPF (Employment Provident Fund) subscribers had to submit their PF claims manually through their present or former employers, compulsorily requiring their attestation of forms. The new facility therefore, makes the EPFO more subscriber-friendly, and helps employees avoid harassment from employers.

The EPFO today has a cumulative corpus of US$ 119 billion, which includes direct funds and funds from exempted trusts and company trusts that manage their own EPF under the EPFO.

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RBI Relaxes Foreign Borrowing Norms

The Reserve Bank of India (RBI) has approved the liberalization of external commercial borrowing (ECB) norms, which will be effective from April 1, 2016. This relaxation enables Indian firms to finance rupee resources from overseas lenders without incurring currency risks. Such rupee-denominated bonds are popular in the financial market, particularly with Japanese retail investors. The RBI relaxation will also increase the number of bonds issued and assist in making the rupee more international. According to new RBI guidelines, rupee resources can now be borrowed from sovereign wealth funds, pension funds and insurance companies, apart from the usual lenders like banks.

Meanwhile for ECB in foreign currency, the RBI has increased the limit for small-value bonds, with a minimum average maturity of three years, to US$ 50 million from the current US$ 20 million. For ECB of more than US$ 50 million, the minimum maturity period should be five years. The all-in cost for such ECB has been reduced by 50 basis points. Long-term ECB will see the all-in cost at 50 basis points higher. On the other hand, the rate for the rupee-denominated ECB will be commensurate with the prevailing market conditions.

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Regulations Stymie Foreign Media Groups

The recent liberalization of FDI norms has opened up India’s US$ 7 billion broadcasting sector to foreign investors. Foreign firms can now own 100 percent of cable and direct-to-home (DTH) satellite operators, up from the previous limit of 74 percent. While the liberalization targets investments from top global media groups such as Time Warner and Comcast, regulatory obstructions to cross-media ownership remains a problem.

This has meant that global media corporations, many of which are in effect diversified media companies (those with both satellite and content production divisions), cannot benefit from the new FDI norms. Currently, India’s regulations prevent diversified media groups from owning more than 20 percent of satellite businesses, which is why Star India – an arm of 21st Century Fox – has been unable to expand beyond a 20 percent stake in Tata Sky, a satellite joint venture with India’s Tata group.

Cable and satellite operators have expressed concerns over the regulatory barriers because they need to find fresh investments to refurbish broadband infrastructure to compete with telecom groups offering entertainment on smartphones. India’s television industry is projected to be worth US$ 15 billion by 2020, and was pegged at around US$ 7.1 billion in 2014. India is also one the largest broadcasting markets in the world, based on viewership, according to research group Broadcast Audience Research Council (BARC), with 154 million TV homes and an audience totaling 675 million.

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