Aadhaar and Bank Account Linkage Mandatory, MPS Norms for Listed Companies – India Regulatory Brief

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RBI clarifies linking Aadhaar to bank accounts mandatory

Putting an end to any legal confusion, the Reserve Bank of India (RBI) recently issued a clarification on the linking of Aadhaar to bank accounts.

In its statement, the RBI announced that the linkage of Aadhaar with bank accounts is mandatory under the Prevention of Money-laundering (Maintenance of Records) Second Amendment Rules, 2017 – published in the government Gazette on June 1.

Accordingly, existing bank account holders must furnish their Aadhaar number by December 31, 2017; failure to do so will invalidate the bank account. It is also mandatory to link one’s Permanent Account Number (PAN) with Aadhaar.

Only small accounts – where the aggregate of all credit in a financial year does not exceed US$1,538 (Rs 100,000), withdrawal and transfers in a month do not exceed US$154 (Rs 10,000), and the account balance at any point of time does not exceed US$769 (Rs 50,000) – fall outside the purview of this linkage requirement.

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SEBI applies pressure on shell companies with stringent MPS norms

In an attempt to curb listing of shell companies in the stock market, the Securities and Exchange Board of India (SEBI) has directed stock exchanges to be stringent with companies on minimum public shareholding (MPS) norms. The move follows the government’s ongoing crackdown on shell companies.

SEBI requires listed companies to maintain an MPS of 25 percent. According to the directive, companies found to be in non-compliance with MPS norms will be fined US$77 (Rs 5,000) for each day of non-compliance. Further, the exchange can tell depositories to freeze the entire shareholding of a promoter or promoter group in the company.

In cases where the listed company continues to be non-compliant with MPS norms for more than a year, the penalty will increase to US$154 (Rs 10,000) per day. The exchanges will also intimate depositories to freeze all the securities held in the demat account of the promoter and promoter group. 

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New reporting requirements for bank and financial transactions above 50,000 rupees

A new rule notified under the Prevention of Money Laundering Act (PMLA) mandates India’s banking and financial institutions to match the original identification documents of persons dealing in financial transactions above the prescribed limit of US$769 (Rs 50,000) – with the photocopies of the same.

Through this rule, the government aims to wipe out forged documents used in black money generation and money laundering in India. The Official Gazette notification was issued on October 16.

Currently, individuals opening new accounts have to provide banks with their Aadhaar information and other official documents. The new rule requires individuals to produce these documents – used in the opening of the bank account – for all subsequent cash dealings of more than US$15,379 (Rs 1 million).  

The rule also applies to cross-border wire transfers of more than US$7,689 (Rs 500,000) in foreign currency, and in the sale and purchase of immovable property valued at US$76,894 (Rs 5 million) or more.

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