Ministry Relaxes Disclosures For Financial Institutions
Feb. 11–NEW DELHI — The ministry of corporate affairs (MCA) has in a notification limited the disclosures to be made by financial institutions about their investments in the annual profit and loss accounts.
The move comes on the heels of a similar move effected with respect to corporate disclosures, as reported in Mint on Thursday.
According to a senior official at the MCA who did not want to be identified, this will allow public financial institutions, or PFIs, a general exemption as against the current practice of obtaining one on a case-to-case basis.
“These exemptions, which are otherwise required under schedule VI of the Companies Act, were earlier granted on a case-to-case basis. Now, they have been granted provided they fulfil certain conditions,” the official said.
According to Arun Gupta, director, Corporate Professionals India Ltd, which advises companies on investments and restructuring, this will help PFIs maintain confidentiality of vital data relating to their investments. “This will also allow them filter some data which competitors cannot access but the government can as also shareholders if they want to,” Gupta said.
Gupta added while PFIs have to reveal total investment in different securities such as bonds, debentures and shares for quoted categories, they need not give names of individual companies in which they have invested.
IFCI Ltd, Life Insurance Corporation of India (LIC), Unit Trust of India (UTI), Infrastructure Development Finance Co. Ltd (IDFC) and India Infrastructure Finance Co. Ltd (IIFCL) are some PFIs. The government may incorporate more through notifications.
The official added that PFIs have several kinds of expenditure and investments, and putting them all in the balance sheet results in cluttering of data. “Seeking some kind quantitative details may not be required, and that’s why the ministry has exempted them to furnish those details subject to certain conditions,” said the official.
He said this will not cover banks.
Schedule VI of the Companies Act has a detailed format where companies as also PFIs have to furnish information on expenditure on items such as goodwill, leaseholds, railway sidings, furniture and fittings, patents, trademarks and designs, and foreign exchange outgo, besides that on government and trust securities and shares.
According to a press note issued by the ministry, all these nondisclosures are subject to two conditions.
One, PFIs have to make complete disclosures about investments in the balance sheet in respect of immovable property, capital of partnership firms, all unquoted investments, and investments in subsidiary companies.
Two, PFIs have to disclose the total value of quoted investments in government and trusts securities, shares, debentures, bonds and other securities.
A senior official at a leading PFI, not wishing to be identified, said the exemptions don’t mean much to them. “Since there is a condition specifying that full disclosure has to be made in categories where investments exceed 1 crore, or 2% of the total value, very little will remain undisclosed,” he said. “Besides, banks are not asked for these details, so why PFIs? So the ministry has not done anything big.”
The official added that in the past, PFIs have been seeking exemptions for investments made for ‘2 crore and above and the ministry has granted these on a case-to-case basis.
The MCA official said: “Well, they don’t have to come to the ministry every year seeking exemptions if they meet these conditions.”
The press note added: “The PFIs shall also give an undertaking to the effect that as and when any of the shareholders ask for specific particulars the same shall be provided.”
Along with the PFIs, the, MCA has granted exemption to six categories of companies from providing details of certain quantitative details required under schedule VI.
“This is to avoid competition (in) accessing and making use of certain vital data such as those on inventory, raw materials, brand promotion, etc.” said the same ministry official.