SEBI & RBI Amendments:
Securities and Exchange Board of India (SEBI) vide SEBI/CFD/DIL/LA/1/2009/24/04 dated April 24, 2009 has made amendments to the ‘Listing Agreement’:
Amendment No 1:
SEBI asks companies to declare dividend on a per share basis only.
Insertion of clause 20A - Listed companies shall declare their dividend on per share basis only
For instance, a company having shares of face value Rs 2, and declaring a dividend of Rs 2, will have to say that it has declared a dividend of Rs 2 per share and not a dividend of 100%.
Impact:
Very beneficial for the common man and shareholder to understand the exact amount of dividend he/she is supposed to receive. This Amendment will bring uniformity in the manner of declaring dividend among listed companies. Since face value of shares differs from company to company and the company announcement saying 'dividend declared at 100%' does not exactly give a clear picture of the amount of the dividend to the shareholder. This Order from SEBI will surely help in removing the confusions among the shareholder and also from the investment aspect, investors will be placed at a better position in respect of his/her investments. Though it may be somehow inconvenient to companies declaring dividend for example if the face value of their shares is Re.1 and they declare Re. 0.50 it will not give exact indication on sharing profitability (return), which is 50% as compared to declaration when made on percentage basis. But for the sake of understanding and bringing similarity / uniformity, the order sounds good, since now there is no liberty to the companies to declare dividend as per their discretion on per share / percentage / on any other basis.
Amendment No. 2:
SEBI reduces the timelines for the notice period by listed companies for all corporate actions like dividend and bonus, to name a few.
Amendments to Clause 16 and Clause 19 - The notice period for record date has been reduced to 7 working days and for board meeting has been reduced to 2 working days.
Impact:
It is very beneficial for all the stakeholders including the companies & shareholders. It will mitigate the chances of manipulation in share prices by providing less time to the concerned elements. For companies, it will help in reducing the chances of insider trading and provide flexibility in terms of time for taking internal decisions. The closure time for trading window under insider trading regulations will also get reduced. This will ensure faster dividend and bonus share delivery to the shareholders.
RBI Circular:
Payment of interest on 'daily basis' by banks on savings back account
At present, the interest (3.5 per cent per annum) is calculated on the minimum balance held in the account from the 10th of each month to the last day of that month. So, if a bank customer has Rs 1 lakh in his savings account one day and then Rs 100 another day, the minimum balance taken for calculation of interest in the period would be Rs 100.
But, from April 1, 2010, the interest paid on the savings account will be on the daily minimum balance. In other words, even the Rs 1 lakh balance in the savings account will earn the customer interest, even if it is withdrawn later.
As per the new directive issued by RBI, only commercial banks will need to follow this new method of interest payment on savings accounts. Commercial banks include all banks other than co-operative ones.
Impact:
The Circular is in the best interest of bank account holders and would like to term it as ‘path-breaking’. Customers were at loss due to the previous method of calculation of interest. Where banks charge interest for loan taken for every day (like in case of credit card), the Circular is very justified to make the customers benefit, since banks use their deposits and earn from it on daily basis because of the Money Multiplier mechanism. This will definitely motivate people to hold more money in their savings bank accounts. This means that the money will start earning higher interest even as it remains liquid and safe.
RBI Circular:
Banking Companies (Nomination) Rules, 1985 – Acknowledgement of Nomination and indicating the Name of the Nominee in Pass Books / Fixed Deposit Receipts
Impact:
This is yet another investor friendly order from the RBI. This will ensure security and record keeping for the customer. Any investment done should ideally have a nominee registered. This will also ensure that banks also do not get into unnecessary formalities at the time of maturity or pre-mature withdrawal, since the nominee details will be available with both – the bank and the customer.
Securities and Exchange Board of India (SEBI) vide SEBI/CFD/DIL/LA/1/2009/24/04 dated April 24, 2009 has made amendments to the ‘Listing Agreement’:
Amendment No 1:
SEBI asks companies to declare dividend on a per share basis only.
Insertion of clause 20A - Listed companies shall declare their dividend on per share basis only
For instance, a company having shares of face value Rs 2, and declaring a dividend of Rs 2, will have to say that it has declared a dividend of Rs 2 per share and not a dividend of 100%.
Impact:
Very beneficial for the common man and shareholder to understand the exact amount of dividend he/she is supposed to receive. This Amendment will bring uniformity in the manner of declaring dividend among listed companies. Since face value of shares differs from company to company and the company announcement saying 'dividend declared at 100%' does not exactly give a clear picture of the amount of the dividend to the shareholder. This Order from SEBI will surely help in removing the confusions among the shareholder and also from the investment aspect, investors will be placed at a better position in respect of his/her investments. Though it may be somehow inconvenient to companies declaring dividend for example if the face value of their shares is Re.1 and they declare Re. 0.50 it will not give exact indication on sharing profitability (return), which is 50% as compared to declaration when made on percentage basis. But for the sake of understanding and bringing similarity / uniformity, the order sounds good, since now there is no liberty to the companies to declare dividend as per their discretion on per share / percentage / on any other basis.
Amendment No. 2:
SEBI reduces the timelines for the notice period by listed companies for all corporate actions like dividend and bonus, to name a few.
Amendments to Clause 16 and Clause 19 - The notice period for record date has been reduced to 7 working days and for board meeting has been reduced to 2 working days.
Impact:
It is very beneficial for all the stakeholders including the companies & shareholders. It will mitigate the chances of manipulation in share prices by providing less time to the concerned elements. For companies, it will help in reducing the chances of insider trading and provide flexibility in terms of time for taking internal decisions. The closure time for trading window under insider trading regulations will also get reduced. This will ensure faster dividend and bonus share delivery to the shareholders.
RBI Circular:
Payment of interest on 'daily basis' by banks on savings back account
At present, the interest (3.5 per cent per annum) is calculated on the minimum balance held in the account from the 10th of each month to the last day of that month. So, if a bank customer has Rs 1 lakh in his savings account one day and then Rs 100 another day, the minimum balance taken for calculation of interest in the period would be Rs 100.
But, from April 1, 2010, the interest paid on the savings account will be on the daily minimum balance. In other words, even the Rs 1 lakh balance in the savings account will earn the customer interest, even if it is withdrawn later.
As per the new directive issued by RBI, only commercial banks will need to follow this new method of interest payment on savings accounts. Commercial banks include all banks other than co-operative ones.
Impact:
The Circular is in the best interest of bank account holders and would like to term it as ‘path-breaking’. Customers were at loss due to the previous method of calculation of interest. Where banks charge interest for loan taken for every day (like in case of credit card), the Circular is very justified to make the customers benefit, since banks use their deposits and earn from it on daily basis because of the Money Multiplier mechanism. This will definitely motivate people to hold more money in their savings bank accounts. This means that the money will start earning higher interest even as it remains liquid and safe.
RBI Circular:
Banking Companies (Nomination) Rules, 1985 – Acknowledgement of Nomination and indicating the Name of the Nominee in Pass Books / Fixed Deposit Receipts
Impact:
This is yet another investor friendly order from the RBI. This will ensure security and record keeping for the customer. Any investment done should ideally have a nominee registered. This will also ensure that banks also do not get into unnecessary formalities at the time of maturity or pre-mature withdrawal, since the nominee details will be available with both – the bank and the customer.
CS. Monika Bhardwaj
Anand Wadadekar