The weekly messenger | Edition 13.22

Auditing news

Implementation Guide on Reporting under Rule 11(e) and Rule 11(f) of the Companies (Audit and Auditors) Rules, 2014 – 26 April 2022

The Ministry of Corporate Affairs vide its notification dated 24 March 2021 had issued the Companies (Audit and Auditors) Amendment Rules, 2021, wherein three new sub-rules i.e. (e), (f) and (g) were introduced in Rule 11 of the aforesaid Rules.

Now, in order to guide the members on these reporting requirements, the ICAI has issued an ‘Implementation Guide on Reporting under Rule 11(e) and Rule 11(f) of the Companies (Audit and Auditors) Rules, 2014’, , which deals with reporting on lending or receiving funds through pass through entities marked for ultimate beneficiary and reporting on the payment/declaration of dividend respectively, the reporting requirements for which are applicable for audits of companies for the financial year 2021-22 and onwards.

For more information, click here.

Regulatory news

SEBI (LODR) (Fourth Amendment) Regulations, 2022 – 25 April 2022

The Securities and Exchange Board of India (SEBI) has issued the SEBI (Listing Obligations and Disclosure Requirements (LODR)) (Fourth Amendment) Regulations, 2022 wherein, it has been stated that now the listed entities would also be required to comply with the procedural requirements as provided under Schedule VII w.r.t. the transmission of securities as well.

These regulations shall come into force w.e.f 25 April 2022.

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Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio – 18 April 2022

The Reserve Bank of India (RBI) has issued the ‘Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio (LCR)’, wherein the RBI has decided to permit the banks to reckon Government securities as Level 1 High Quality Liquid Assets (HQLA) under Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR) within the mandatory SLR requirement up to 16 per cent of their Net Demand and Time Liabilities (NDTL).

Accordingly, the total HQLA carve out from the mandatory SLR, which can be reckoned for meeting LCR requirement will be 18 per cent of NDTL (2 per cent MSF plus 16 per cent FALLCR).

These Instructions shall come into force with immediate effect.

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Large Exposures Framework for Non-Banking Financial Company - Upper Layer (NBFC-UL) – 19 April 2022

The RBI vide its Circular dated 22 October 2021 had issued ‘Scale Based Regulation: A Revised Regulatory Framework for NBFCs’, in which a Large Exposure Framework was prescribed for NBFCs in the Upper Layer.

Now, the RBI has issued detailed guidelines on Large Exposure Framework.

The guidelines shall be applicable to NBFC-UL, both at the solo level and at the consolidated (group) level.

These instructions will be applicable from 1 October 2022.

For more information, click here.

Disclosures in Financial Statements - Notes to Accounts of NBFCs – 19 April 2022

The RBI vide its Circular dated 22 October 2021 had issued a revised regulatory framework for NBFCs i.e., ‘Scale Based Regulatory Framework for NBFCs’, which inter-alia envisages certain specific disclosures.

Now, the RBI has issued the Disclosure Templates of the additional disclosure requirements as required under the revised framework.

These guidelines shall be effective for annual financial statements for the year ending 31 March 2023, and onwards.

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Scale Based Regulation for NBFCs: Capital requirements for – Upper Layer (NBFC-UL) – 19 April 2022

The RBI vide its circular dated 22 October 2021 had issued a revised regulatory framework for NBFCs i.e., ‘SBR framework for NBFCs’ which encompasses different facets of Regulation of NBFCs covering capital requirements, governance standards, prudential Regulation, etc.

As per the aforesaid Circular, NBFC - UL shall maintain Common Equity Tier 1 capital of at least 9 % of Risk Weighted Assets. Now, the RBI issued the detailed guidelines w.r.t same.

This Circular is applicable to all NBFCs identified as NBFC-UL, except Core Investment Companies.

For more information, click here.

Guidance Note on disclosure of Related Party Transactions – 25 April 2022

The Bombay Stock Exchange has issued a Guidance Note on disclosure of Related Party Transactions (RPT), which inter-alia includes guidance on various aspects of related party disclosures such as:

• From which period is the new format, as prescribed by SEBI in the annexure to circular dated 22 November 2021, applicable for submitting RPT disclosure?

• Are the companies required to provide RPT disclosures for the second half year, on year-to-date basis or on six-months end basis?

• Whether the definitions/provisions effective from 1 April 2022 apply on transactions for the half year ended commencing from 01 October 2021 to 31 March 2022, that are required to be disclosed in new SEBI format?

• Whether the disclosure must be in standalone or consolidated basis?

• Is the RPT disclosures required even if there are no related party transactions during the reporting period?

For more information, click here.