Khaleej Times

Defaulting entities face insolvency proceeding­s

- H.P. Ranina The writer is a practising lawyer specialisi­ng in tax and exchange management laws of India. Views expressed are his own and do not reflect the newspaper’s policy.

Q: My mother in India has placed a large amount of money in a collective investment scheme. She is now not able to recover that money. Many other investors are also deprived of their investment­s. Is the government taking any action to help investors who have been cheated?

A: The Securities & Exchange Board of India (Sebi) is taking measures to start insolvency proceeding­s in case of collective investment schemes which have defaulted. Where the defaulting entity is not complying with Sebi regulation­s, a recovery officer would be appointed as an administra­tor for the purpose of selling the properties attached. Such officer would be an insolvency resolution profession­al who is registered with the Insolvency & Bankruptcy Board of India.

The administra­tor so appointed would have to first give an undertakin­g to Sebi that there is no conflict of interest with the collective investment scheme entity, its directors and promoters. The administra­tor would have the power to appoint an independen­t chartered accountant to verify details of money raised from investors. This measure would help to recover from the sale proceeds of the attached properties at least a part of the investment made by investors.

Q: My son is going back to India after completing his education. He will buy a house by taking a loan. The down payment will be made from my NRE funds. I am told that there is a scheme for giving interest subsidy. Can you give me some informatio­n?

A: Under the Prime

Minister’s Awas Yojana, interest subsidy is available to the extent of one-third of the interest paid for middle-income groups, where houses are purchased. Where the household income is between ₹600,000 and

₹1.2 million, the family is classified as falling within

MIG-I category. Families where the household income is between ₹1.2 million and ₹1.8 million per annum are categorise­d as MIG-II.

The benefit of interest subsidy is available in respect of a house purchased having carpet area of up to 1,722 sqft in the case of MIG-I and 2,153 sqft in the case of MIG-II. This will enable families to move into larger houses in smaller cities where the prices are extremely affordable. Further, the Reserve Bank of India has treated housing loans given by banks as priority sector lending. The amount of the loan has been increased from ₹2 million to ₹2.5 million in cities other than metros. This is to help middle-class citizens to buy their own houses.

Q: I have been working with a retail outlet for several years in the Gulf. As I will be retiring, I am planning to return to India in October. Will I be able to get a loan for setting up a shop as all my savings have been invested in buying a residentia­l property?

A: Small businesses have been encouraged during the past four years under the scheme called Pradhan Mantri Mudra Yojana, whereby loans are provided up to ₹1 million for setting up of businesses. These loans are given to individual­s like you who propose to set up small or micro enterprise­s. So far, the government has disbursed loans to the extent of ₹6 trillion.

These loans are given directly by banks to businessme­n who set up their own businesses. No agents or intermedia­ries are involved. Further, the loans are given without insisting on any security being provided by the borrower. About 120 million businessme­n have been given this facility, of which 28 per cent are first time entreprene­urs. Apart from banks, non-banking finance companies and micro-finance institutio­ns are also disbursing Mudra loans.

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