MCA turns up the heat on India Inc; seeks annual return on loans, other receipts

With a spate of corporate irregularities coming to the fore, the Centre has decided to make disclosure norms more stringent. Corporate India is now required to submit details of transactions involving receipt of money or loans taken by them, which are otherwise not considered deposits.

All companies — other than Government companies — have been asked to file a one-time return covering all such outstanding receipts of money or loans from April 1, 2014 to January 22, 2019. The latter date is when the Ministry of Corporate Affairs (MCA) issued a notification in this regard.

The reporting requirement is expected to continue in the coming years as well.

Already, there is a strict reporting regime for companies that accept deposits.

Critics, however, see the latest MCA move as a part of ‘surveillance capitalism’, a phenomenon that is widespread in the Western world and which is gaining currency in other parts of the globe.

Putting off lenders

Besides adding another layer of processes and procedures, the reporting requirement, with its emphasis on source of funds, would discourage lenders, some observers feel.

Vaibhav Kakkar, Partner, L&L Partners, a law firm, said: “The exercise seems to have been undertaken with the objective of determining the various categories under which such amounts, not being deposits, are being held and the details thereof.

“Upon this determination, the possibility of the government regulating this exempted space, to align it with its policy objectives and prevent any potential misuse, cannot be ruled out.”

Sai Venkateshwaran, Partner and Head CFO Advisory at KPMG India, said: “While the disclosures are required only at an aggregate level, this is likely to impose an additional burden on companies as they compile information and get it certified by the auditors.”

Sweeping coverage

The disclosure norm covers most financial transactions including amounts received from governments, both Indian and foreign, including government bodies; loans from banks and financial institutions; advances from customers for goods, services and property; inter-corporate receipts; proceeds from the issue of commercial paper, bonds and debentures; share application money; and loans from directors, he said.