RBI/DNBR/2016-17/39
Master Direction DNBR. PD. 003/03.10.119/2016-17
August
25, 2016
Master
Direction - Core Investment Companies (Reserve Bank) Directions, 2016
In exercise of the powers
conferred by sections 45JA, 45L and 45M of the Reserve Bank of India Act,
1934 (2 of 1934), and of all the powers enabling it in this behalf, the
Reserve Bank of India (hereinafter also referred to as the Bank) being
satisfied that it is necessary and expedient in the public interest and
being satisfied that for the purpose of enabling the Bank to regulate the
credit system to the advantage of the country to do so, hereby issues to
every Core Investment Company, in supersession of the Notification No. DNBS.(PD).219/CGM(US)-2011 and
the Notification No. DNBS. (PD).220/CGM(US)-2011 dated January 05, 2011,
the Core Investment Companies (Reserve Bank) Directions, 2016 (the Directions)
hereinafter specified.
Index
Subject
|
Section I :
Introduction
|
Chapter I –
Preliminary
|
Chapter II –
Definition
|
Chapter III – Registration
|
Section II :
Prudential Issues
|
Chapter IV –
Capital Requirements
|
Chapter V –
Prudential Regulations
|
Section III :
Governance Issues
|
Chapter VI –
Acquisition/Transfer of Control
|
Section IV :
Miscellaneous Issues
|
Chapter VII -
Opening of Branch/Subsidiary/Joint Venture/ Representative Office or
Undertaking Investment Abroad by NBFCs
|
Chapter VIII –
Miscellaneous Instructions
|
Chapter IX –
Reporting Requirements
|
Chapter X –
Interpretations
|
Chapter XI – Repeal
|
Annex
|
Annex I - Schedule
to the Balance Sheet of a non-deposit taking Core Investment Company
|
Annex II - Data on
Pledged Securities
|
Annex III-
Information about the proposed promoters/directors/shareholders of the
company
|
Annex IV -
Guidelines on Private Placement of NCDs (maturity more than 1 year) by
CICs
|
Section
– I
Introduction
Chapter
– I
PRELIMINARY
1. Short Title and Commencement.
(a) These Directions shall be
called the Core Investment Companies (Reserve Bank) Directions, 2016.
(b) These directions shall come
into force with immediate effect.
2. Applicability
(1) These directions shall apply
to every Core Investment Company (CIC), that is to say, a non-banking
financial company carrying on the business of acquisition of shares and
securities and which satisfies the following conditions as on the date of
the last audited balance sheet:-
i. it holds not less than 90% of
its net assets in the form of investment in equity shares, preference
shares, bonds, debentures, debt or loans in group companies;
ii. its investments in the equity
shares (including instruments compulsorily convertible into equity shares
within a period not exceeding 10 years from the date of issue) in group
companies constitute not less than 60% of its net assets as mentioned in
clause (i) above;
iii. it does not trade in its
investments in shares, bonds, debentures, debt or loans in group companies
except through block sale for the purpose of dilution or disinvestment;
iv. it does not carry on any
other financial activity referred to in Section 45I(c) and 45I (f) of the
Reserve Bank of India Act, 1934 except
(a) investment in
(i) bank deposits,
(ii) money market instruments,
including money market mutual funds and liquid mutual funds
(iii) government securities, and
(iv) bonds or debentures issued
by group companies,
(b) granting of loans to group
companies and
(c) issuing guarantees on behalf
of group companies.
(2) In exercise of the powers
conferred by section 45-NC of the Reserve Bank of India Act, 1934 (2 of
1934) (hereinafter referred to as the Act) and of all the powers enabling
it in this behalf, the Bank, on being satisfied that it is necessary so to
do, hereby declares as under.
(i) The provisions of section
45-IA of the Act shall not apply to a non-banking financial company being a
Core Investment Company referred to in the Core Investment Companies
(Reserve Bank) Directions, 2016, which is not a Systemically Important Core
Investment Company, as defined in clause (xxiv) of paragraph 3 of these
Directions;
(ii) The provisions of section
45-IA(1)(b) of the Act shall not apply to a non-banking financial company
being a Systemically Important Core Investment Company as defined in the
clause (xxiv) of paragraph 3 of these Directions, subject to the condition
that it meets the capital requirements and leverage ratio as specified in
these Directions.
(iii) The Bank may, if it
considers it necessary for avoiding any hardship for any other just and
sufficient reason, grant extension of time to comply with or exempt any
CIC-ND-SI from all or any of the provisions of these Directions either
generally or for any specified period, subject to such conditions as the
Bank may impose.
(3) These Directions consolidate
the regulations as issued by Department of Non-Banking Regulation, Reserve
Bank of India. However, any other Directions/guidelines issued by any other
Department of the Bank, as applicable to a Core Investment Company shall be
adhered to by it.
Chapter
- II
Definitions
3. For the purpose of these Directions, unless the
context otherwise requires, the terms herein shall bear the meanings
assigned to them below —
(i) “adjusted net worth” means –
(a) the aggregate, as appearing
in the last audited balance sheet as at the end of the financial year, of
Owned Funds as defined at (xx) below.
(b) as increased by:-
(A) 50% of the unrealized
appreciation in the book value of quoted investments as at the date of the
last audited balance sheet as at the end of the financial year (such
appreciation being calculated, as the excess of the aggregate market value
of such investments over the book value of such investments); and
(B) the increase, if any, in the
equity share capital since the date of the last audited balance sheet.
(c) as reduced by:-
(A) the amount of diminution in
the aggregate book value of quoted investments (such diminution being
calculated as the excess of the book value of such investments over the
aggregate market value of such investments) and
(B) the reduction, if any, in
the equity share capital since the date of the last audited balance sheet.
(ii) "Bank" means the
Reserve Bank of India constituted under Section 3 of the Reserve Bank of
India Act, 1934
(iii) “break up value” means the
equity capital and reserves as reduced by intangible assets and revaluation
reserves, divided by the number of equity shares of the investee company;
(iv) “carrying cost” means book
value of the assets and interest accrued thereon but not received;
(v) “Companies in the Group”
means an arrangement involving two or more entities related to each other
through any of the following relationships, viz. Subsidiary – parent
(defined in terms of AS 21), Joint venture (defined in terms of AS 27),
Associate (defined in terms of AS 23), Promoter-promotee [as provided in
the SEBI (Acquisition of Shares and Takeover) Regulations, 1997] for listed
companies, a related party (defined in terms of AS 18) Common brand name,
and investment in equity shares of 20% and above).
(vi) “Conduct of business
regulations” means the directions issued by the Bank from time to time on
Fair Practices Code and Know Your Customer guidelines.
(vii) "control" shall
have the same meaning as is assigned to it under clause (e) of
sub-regulation (1) of regulation 2 of Securities and Exchange Board of
India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
(viii) "current
investment" means an investment which is by its nature readily
realisable and is intended to be held for not more than one year from the
date on which such investment is made;
(ix) “customer interface” means
interaction between the CIC and its customers while carrying on its
business.
(x) “earning value” means the
value of an equity share computed by taking the average of profits after
tax as reduced by the preference dividend and adjusted for extra-ordinary
and non-recurring items, for the immediately preceding three years and
further divided by the number of equity shares of the investee company and
capitalised at the following rate:
(a) in case of predominantly
manufacturing company, eight per cent;
(b) in case of predominantly
trading company, ten per cent; and
(c) in case of any other
company, including non-banking financial company, twelve per cent;
Note: If, an investee company is
a loss making company, the earning value will be taken at zero;
(xi) “fair value” is the mean of
the earning value and the break up value;
(xii) “hybrid debt” means
capital instrument which possesses certain characteristics of equity as
well as of debt;
(xiii) “investment” means
investment in shares, stock, bonds, debentures or securities issued by the
Government or local authority or other marketable securities of a like
nature.
(xiv) “long term investment”
means an investment other than a current investment;
(xv) “market value of quoted
investments” means the average of the weekly highs and lows of the closing
price of the investments, on a recognized stock exchange where the
investment is most actively traded, during the period of 26 weeks
immediately preceding the end of the financial year at which date the last
audited balance sheet is available.
(xvi)"net assets"
means total assets excluding -
(i) cash and bank balances;
(ii) investment in money market
instruments and money market mutual funds
(iii) advance payments of taxes;
and
(iv) deferred tax payment.
(xvii) “net asset value” means
the latest declared net asset value by the mutual fund concerned in respect
of that particular scheme;
(xviii) “net book value” means:
(a) in the case of hire purchase
asset, the aggregate of overdue and future instalments receivable as
reduced by the balance of unmatured finance charges and further reduced by
the provisions made as per paragraph 17(2)(i) of these Directions;
(b) in the case of leased asset,
aggregate of capital portion of overdue lease rentals accounted as
receivable and depreciated book value of the lease asset as adjusted by the
balance of lease adjustment account.
(xix) “outside liabilities”
means total liabilities as appearing on the liabilities side of the balance
sheet excluding 'paid up capital' and 'reserves and surplus', instruments
compulsorily convertible into equity shares within a period not exceeding
10 years from the date of issue but including all forms of debt and
obligations having the characteristics of debt, whether created by issue of
hybrid instruments or otherwise, and value of guarantees issued, whether
appearing on the balance sheet or not.
(xx) “owned funds” means paid up
equity capital, preference shares which are compulsorily convertible into
equity, free reserves, balance in share premium account and capital
reserves representing surplus arising out of sale proceeds of asset,
excluding reserves created by revaluation of asset, as reduced by
accumulated loss balance, book value of intangible assets and deferred
revenue expenditure, if any;
(xxi)“public deposit” for the
purpose of these Directions shall have the same meaning as defined in the
Non-Banking Financial Companies Acceptance of Public Deposits (Reserve
Bank) Directions, 2016.
(xxii) “Public funds"
includes funds raised either directly or indirectly through public deposits,
inter-corporate deposits, bank finance and all funds received from outside
sources such as funds raised by issue of Commercial Papers, debentures etc.
but excludes funds raised by issue of instruments compulsorily convertible
into equity shares within a period not exceeding 10 years from the date of
issue.
(xxiii) “substantial interest”
means holding of a beneficial interest by an individual or his spouse or
minor child, whether singly or taken together in the shares of a company,
the amount paid up on which exceeds ten per cent of the paid up capital of
the company; or the capital subscribed by all the partners of a partnership
firm;
(xxiv) “systemically important
Core Investment Company (CIC-ND-SI)” means a core investment company having
total assets of not less than ?100 crore either individually or in
aggregate along with other CICs in the Group and which raises or holds
public funds.
(xxv) “total assets” means the
total of all assets appearing on the assets side of the balance sheet.
4. Words or expressions used and not defined in these
directions but defined in the Master Directions issued by the Bank, shall
have the meanings respectively assigned to them under that Act or
Directions. Any words or expressions used and not defined in these
directions or in the Act or any of the Directions issued by the Bank, shall
have the meanings respectively assigned to them under the Companies Act,
2013 (18 of 2013).
Chapter
– III
Registration
5. Every CIC-ND-SI shall apply to the Bank for grant
of Certificate of Registration, irrespective of any advice in the past,
issued by the Bank, to the contrary.
6. Every CIC shall apply to the Bank for grant of
Certificate of Registration within a period of three months from the date
of becoming a CIC-ND-SI.
7. Every CIC exempted from registration requirement
with Bank shall pass a Board Resolution that it will not, in the future,
access public funds. However CICs may be required to issue guarantees or
take on other contingent liabilities on behalf of their group entities. Before
doing so, all CICs must ensure that they can meet the obligations
thereunder, as and when they arise. In particular, CICs which are exempt
from registration requirement must be in a position to do so without
recourse to public funds in the event the liability devolves, else they
shall approach the Bank for registration before accessing public funds. If
unregistered CICs with asset size above ?100 crore access public funds
without obtaining a Certificate of Registration (CoR) from the Bank, they
shall be seen as violating Core Investment Companies (Reserve Bank)
Directions, 2016.
Section
– II
Prudential Issues
Chapter
– IV
Capital Requirements
8. Adjusted Net Worth of a CIC-ND-SI shall at no
point of time be less than 30% of its aggregate risk weighted assets on
balance sheet and risk adjusted value of off-balance sheet items as on the
date of the last audited balance sheet as at the end of the financial year.
Explanations
On balance sheet assets
(1) In these Directions, degrees
of credit risk expressed as percentage weights have been assigned to
balance sheet assets. Hence, the value of each asset / item requires to be
multiplied by the relevant risk weights to arrive at risk adjusted value of
assets. The aggregate shall be taken into account for reckoning the capital
ratio. The risk weighted assets shall be calculated as the weighted
aggregate of funded items as detailed hereunder:
Weighted
risk assets - On-Balance Sheet items
|
Percentage
weight
|
(i) Cash and bank balances
including fixed deposits and certificates of deposits with banks
|
0
|
(ii) Investments
|
|
(a) Approved securities[Except
at (c) below]
|
0
|
(b) Bonds of public sector
banks
|
20
|
(c) Fixed
deposits/certificates of deposits/bonds of public financial institutions
|
100
|
(d) Shares of all companies
and debentures / bonds/commercial papers of all companies and units of
all mutual funds
|
100
|
(iii) Current assets
|
|
(a) Stock on hire (net book
value)
|
100
|
(b) Intercorporate
loans/deposits
|
100
|
(c) Loans and advances fully
secured against deposits held
|
0
|
(d) Loans to staff
|
0
|
(e) Other secured loans and
advances considered good[Except at (vi) below]
|
100
|
(f) Bills purchased/discounted
|
100
|
(g) Others (To be specified)
|
100
|
(iv) Fixed Assets (net of
depreciation)
|
|
(a) Assets leased out (net
book value)
|
100
|
(b) Premises
|
100
|
(c) Furniture & Fixtures
|
100
|
(v) Other assets
|
|
(a) Income tax deducted at
source (net of provision)
|
0
|
(b) Advance tax paid (net of
provision)
|
0
|
(c) Interest due on Government
securities
|
0
|
(d) Others (to be specified)
|
100
|
(vi) Domestic Sovereign
|
|
(a) fund based claims on the
Central Government
|
0
|
(b) Direct loan / credit /
overdraft exposure and investment in State Government securities
|
0
|
(c) Central Government
guaranteed claims
|
0
|
(d) State Government
guaranteed claims, which have not remained in default / which are in
default for a period not more than 90 days
|
20
|
(e) State Government
guaranteed claims, which have remained in default for a period of more
than 90 days
|
100
|
Notes:
(i) Netting shall be done only
in respect of assets where provisions for depreciation or for bad and
doubtful debts have been made.
(ii) Assets which have been
deducted from owned funds to arrive at net owned funds shall have a weight
of ‘zero’.
(iii) While calculating the
aggregate of funded exposure of a borrower for the purpose of assignment of
risk weight, such CICs-ND-SI shall net off the amount of cash
margin/caution money/security deposits (against which right to set-off is
available) held as collateral against the advances out of the total
outstanding exposure of the borrower.
(iv) The counterparty credit
risk, arising out of exposure of CICs-ND-SI to CCIL on account of
securities financing transactions (CBLOs) shall carry a risk weight of
zero, as it is presumed that the CCP’s exposures to their counterparties
are fully collateralised on a daily basis, thereby providing protection for
the CCP’s credit risk exposures. The deposits / collaterals kept by
CICs-ND-SI with CCIL shall attract a risk weight of 20%.
Off-balance sheet items
2. In these Directions, degrees
of credit risk exposure attached to off-balance sheet items have been
expressed as percentage of credit conversion factor. Hence, the face value
of each item requires to be first multiplied by the relevant conversion
factor to arrive at risk adjusted value of off-balance sheet item. The
aggregate shall be taken into account for reckoning the minimum capital
ratio. This shall have to be again multiplied by the risk weight of 100.
The risk adjusted value of the off-balance sheet items shall be calculated
as per the credit conversion factors of non-funded items as detailed
hereunder: -
Nature
of item
|
Credit
conversion factor Percentage
|
i) Financial & other
guarantees
|
100
|
ii) Share/debenture
underwriting obligations
|
50
|
iii) Partly-paid
shares/debentures
|
100
|
iv) Bills
discounted/rediscounted
|
100
|
v) Lease contracts entered
into but yet to be executed
|
100
|
Leverage Ratio
9. The outside liabilities of a CIC-ND-SI shall at no
point of time exceed 2.5 times its Adjusted Net Worth as on the date of the
last audited balance sheet as at the end of the financial year.
Chapter
– V
Prudential Regulations
10. Prudential Regulations shall be applicable to
CIC-ND-SI as defined in clause (xxiv) of paragraph 3 of these Directions.
11. Income recognition
(i) The income recognition shall
be based on recognised accounting principles.
(ii) Income including interest/
discount/ hire charges/ lease rentals or any other charges on NPA shall be
recognised only when it is actually realised. Any such income recognised
before the asset became non-performing and remaining unrealised shall be
reversed.
12. Income from investments
(i) Income from dividend on
shares of corporate bodies and units of mutual funds shall be taken into
account on cash basis:
Provided that the income from dividend on shares of
corporate bodies shall be taken into account on accrual basis when such
dividend has been declared by the corporate body in its annual general
meeting and the CIC’s right to receive payment is established.
(ii) Income from bonds and
debentures of corporate bodies and from Government securities/bonds shall
be taken into account on accrual basis:
Provided that the interest rate on these instruments is
pre-determined and interest is serviced regularly and is not in arrears.
(iii) Income on securities of
corporate bodies or public sector undertakings, the payment of interest and
repayment of principal of which have been guaranteed by Central Government
or a State Government shall be taken into account on accrual basis.
13. Accounting standards
Accounting Standards and
Guidance Notes issued by the Institute of Chartered Accountants of India
(referred to in these Directions as “ICAI”) shall be followed insofar as
they are not inconsistent with any of these Directions.
14. Accounting of investments
(1) (a) The Board of Directors
of every CIC-ND-SI shall frame investment policy for the company and shall
implement the same;
(b) The criteria to classify the
investments into current and long term investments shall be spelt out by
the Board of the company in the investment policy;
(c) Investments in securities
shall be classified into current and long term, at the time of making each
investment;
(d) In case of inter-class
transfer –
(i) There shall be no such
transfer on ad-hoc basis;
(ii) such transfer, if
warranted, shall be effected only at the beginning of each half year, on
April 1 or October 1, with the approval of the Board;
(iii) the investments shall be
transferred scrip-wise, from current to long-term or vice-versa, at book
value or market value, whichever is lower;
(iv) the depreciation, if any,
in each scrip shall be fully provided for and appreciation, if any, shall
be ignored;
(v) the depreciation in one
scrip shall not be set off against appreciation in another scrip, at the
time of such inter-class transfer, even in respect of the scrips of the
same category.
(2) (a) Quoted current
investments shall, for the purposes of valuation, be grouped into the
following categories, viz.
(i) equity shares,
(ii) preference shares,
(iii) debentures and bonds,
(iv) Government securities
including treasury bills,
(v) units of mutual fund, and
(vi) others.
(b) Quoted current investments for
each category shall be valued at cost or market value whichever is lower.
For this purpose, the investments in each category shall be considered
scrip-wise and the cost and market value aggregated for all investments in
each category. If the aggregate market value for the category is less than
the aggregate cost for that category, the net depreciation shall be
provided for or charged to the profit and loss account. If the aggregate
market value for the category exceeds the aggregate cost for the category,
the net appreciation shall be ignored. Depreciation in one category of
investments shall not be set off against appreciation in another category.
(3) Unquoted equity shares in
the nature of current investments shall be valued at cost or breakup value,
whichever is lower. However, CICs-ND-SI may substitute fair value for the
breakup value of the shares, if considered necessary. Where the balance
sheet of the investee company is not available for two years, such shares
shall be valued at one Rupee only.
(4) Unquoted preference shares
in the nature of current investments shall be valued at cost or face value,
whichever is lower.
(5) Investments in unquoted
Government securities or Government guaranteed bonds shall be valued at
carrying cost.
(6) Unquoted investments in the
units of mutual funds in the nature of current investments shall be valued
at the net asset value declared by the mutual fund in respect of each
particular scheme.
(7) Commercial papers shall be
valued at carrying cost.
(8) A long term investment shall
be valued in accordance with the Accounting Standard issued by ICAI.
Note: Unquoted debentures shall
be treated as term loans or other type of credit facilities depending upon
the tenure of such debentures for the purpose of income recognition and
asset classification.
15. Need for policy on demand/
call loans
(1) The Board of Directors of
every CIC-ND-SI granting/intending to grant demand/call loans shall frame a
policy for the company and implement the same.
(2) Such policy shall, inter
alia, stipulate the following,-
(i) A cut-off date within which
the repayment of demand or call loan shall be demanded or called up;
(ii) The sanctioning authority
shall, record specific reasons in writing at the time of sanctioning demand
or call loan, if the cut-off date for demanding or calling up such loan is
stipulated beyond a period of one year from the date of sanction;
(iii) The rate of interest which
shall be payable on such loans;
(iv) Interest on such loans, as
stipulated shall be payable either at monthly or quarterly rests;
(v) The sanctioning authority
shall, record specific reasons in writing at the time of sanctioning demand
or call loan, if no interest is stipulated or a moratorium is granted for
any period;
(vi) A cut-off date, for review
of performance of the loan, not exceeding six months commencing from the
date of sanction;
(vii) Such demand or call loans
shall not be renewed unless the periodical review has shown satisfactory
compliance with the terms of sanction.
16. Asset classification
(1) Every CIC-ND-SI shall, after
taking into account the degree of well-defined credit weaknesses and extent
of dependence on collateral security for realisation, classify its
lease/hire purchase assets, loans and advances and any other forms of
credit into the following classes, namely:
i.
Standard
assets;
ii.
Sub-standard
assets;
iii.
Doubtful
assets; and
iv.
Loss
assets.
(2) The class of assets referred
to above shall not be upgraded merely as a result of rescheduling, unless
it satisfies the conditions required for the upgradation.
(3) For CIC-ND-SIs with total
assets of less than ?500 crore the asset classification norms shall be as
follows:
(i) Standard asset shall mean
the asset in respect of which, no default in repayment of principal or
payment of interest is perceived and which does not disclose any problem or
carry more than normal risk attached to the business;
(ii) Sub-standard asset shall
mean
a.
an
asset which has been classified as non-performing asset for a period not
exceeding 18 months;
b.
an
asset where the terms of the agreement regarding interest and/ or principal
have been renegotiated or rescheduled or restructured after commencement of
operations, until the expiry of one year of satisfactory performance under
the renegotiated or rescheduled or restructured terms:
(iii) Doubtful asset shall mean:
a term loan, or
a lease asset, or
a hire purchase asset, or
any other asset,
which remains a sub-standard
asset for a period exceeding 18 months;
(iv) loss asset shall mean:
(a) an asset which has been
identified as loss asset by the CIC-ND-SI or its internal or external
auditor or by the Bank during the inspection of the CIC-ND-SI, to the
extent it is not written off by the CIC-ND-SI; and
(b) an asset which is adversely
affected by a potential threat of non-recoverability due to either erosion
in the value of security or non-availability of security or due to any
fraudulent act or omission on the part of the borrower.
(v) Non-Performing Asset
(referred to in these Directions as “NPA”) shall mean:
(a) an asset, in respect of
which, interest has remained overdue for a period of six months or more;
(b) a term loan inclusive of
unpaid interest, when the installment is overdue for a period of six months
or more or on which interest amount remained overdue for a period of six
months or more;
(c) a demand or call loan, which
remained overdue for a period of six months or more from the date of demand
or call or on which interest amount remained overdue for a period of six
months or more;
(d) a bill which remains overdue
for a period of six months or more;
(e) the interest in respect of a
debt or the income on receivables under the head ‘other current assets’ in
the nature of short term loans/ advances, which facility remained overdue
for a period of six months or more;
(f) any dues on account of sale
of assets or services rendered or reimbursement of expenses incurred, which
remained overdue for a period of six months or more;
(g) the lease rental and hire
purchase instalment, which has become overdue for a period of twelve months
or more;
(h) in respect of loans,
advances and other credit facilities (including bills purchased and
discounted), the balance outstanding under the credit facilities (including
accrued interest) made available to the same borrower/ beneficiary when any
of the above credit facilities becomes non-performing asset:
Provided that in the case of lease and hire purchase
transactions, a CIC-ND-SI shall classify each such account on the basis of
its record of recovery.
(4) For CIC-ND-SIs with total
assets of ? 500 crore and above the asset classification norms shall be as
follows:
(i) “standard asset” shall mean
the assets in respect of which, no default in repayment of principal or
payment of interest is perceived and which does not disclose any problem or
carry more than normal risk attached to the business;
(ii) “sub-standard asset” shall
mean:
(a) an asset which has been
classified as non-performing asset for a period not exceeding 18 months;
Provided that the period ‘not exceeding 18 months’
stipulated in this sub-clause shall be ‘not exceeding 16 months’ for the
financial year ending March 31, 2016; ‘not exceeding 14 months’ for the
financial year ending March 31, 2017; and ‘not exceeding 12 months’ for the
financial year ending March 31, 2018 and thereafter.
(b) an asset where the terms of
the agreement regarding interest and / or principal have been renegotiated
or rescheduled or restructured after commencement of operations, until the
expiry of one year of satisfactory performance under the renegotiated or rescheduled
or restructured terms:
(iii) Doubtful asset shall mean:
a.
a term
loan, or
b.
a
lease asset, or
c.
a hire
purchase asset, or
d.
any
other asset,
which remains a sub-standard
asset for a period ‘exceeding 18 months’ for the financial year ended March
31, 2015; ‘exceeding 16 months’ for the financial year ended March 31,
2016; ‘exceeding 14 months’ for the financial year ending March 31, 2017
and ‘exceeding 12 months’ for the financial year ending March 31, 2018 and
thereafter.
(iv) loss asset shall mean:
(a) an asset which has been
identified as loss asset by the CIC-ND-SI with asset size of ? 500 crore
and above or its internal or external auditor or by the Bank during its
inspection, to the extent it is not written off by it; and
(b) an asset which is adversely
affected by a potential threat of non-recoverability due to either erosion
in the value of security or non-availability of security or due to any
fraudulent act or omission on the part of the borrower
(v) Non-Performing Asset
(referred to in these Directions as “NPA”) shall mean:
(a) an asset, in respect of
which, interest has remained overdue for a period of six months or more;
(b) a term loan inclusive of
unpaid interest, when the instalment is overdue for a period of six months
or more or on which interest amount remained overdue for a period of six
months or more;
(c) a demand or call loan, which
remained overdue for a period of six months or more from the date of demand
or call or on which interest amount remained overdue for a period of six
months or more;
(d) a bill which remains overdue
for a period of six months or more;
(e) the interest in respect of a
debt or the income on receivables under the head ‘other current assets’ in
the nature of short term loans/advances, which facility remained overdue
for a period of six months or more;
(f) any dues on account of sale
of assets or services rendered or reimbursement of expenses incurred, which
remained overdue for a period of six months or more;
Provided that the period of ‘six months or more’ stipulated
in sub-clauses (a) to (f) shall be ‘five months or more’ for the financial
year ending March 31, 2016; ‘four months or more’ for the financial year
ending March 31, 2017 and ‘three months or more’, for the financial year
ending March 31, 2018 and thereafter.
(g) the lease rental and hire
purchase instalment, which has become overdue for a period of twelve months
or more;
Provided that the period of ‘twelve months or more’
stipulated in this sub-clause shall be ‘nine months or more’ for the
financial year ending March 31, 2016; ‘six months or more’ for the
financial year ending March 31, 2017; and ‘three months or more’ for the
financial year ending March 31, 2018 and thereafter.
(h) in respect of loans,
advances and other credit facilities (including bills purchased and
discounted), the balance outstanding under the credit facilities (including
accrued interest) made available to the same borrower/beneficiary when any
of the above credit facilities becomes non-performing asset:
Provided that in the case of lease and hire purchase
transactions, a CIC-ND-SI with asset size of ? 500 crore and above shall
classify each such account on the basis of its record of recovery.
17. Provisioning requirements
Every CIC-ND-SI shall, after
taking into account the time lag between an account becoming
non-performing, its recognition as such, the realisation of the security
and the erosion over time in the value of security charged, make provision
against sub-standard assets, doubtful assets and loss assets as provided
hereunder:-
Loans, advances and other credit
facilities including bills purchased and discounted-
(1) The provisioning requirement
in respect of loans, advances and other credit facilities including bills
purchased and discounted shall be as under:
(i) Loss Assets
|
The entire asset shall be
written off. If the assets are permitted to remain in the books for any
reason, 100% of the outstanding shall be provided for;
|
(ii) Doubtful Assets
|
(a) 100% provision to the
extent to which the advance is not covered by the realisable value of the
security to which the CIC-ND-SI has a valid recourse shall be made. The
realisable value shall be estimated on a realistic basis;
(b) In addition to item (a)
above, depending upon the period for which the asset has remained
doubtful, provision to the extent of 20% to 50% of the secured portion
(i.e. Estimated realisable value of the outstanding) shall be made on the
following basis:-
|
Period
for which the asset has been considered as doubtful
|
Per
cent of provision
|
Up to one year
|
20
|
One to three years
|
30
|
More than three years
|
50
|
(iii) Sub-standard assets
|
A general provision of 10
percent of total outstanding shall be made.
|
(2) Lease and hire purchase
assets - The provisioning requirements in respect of hire purchase and
leased assets shall be as under:
(i) Hire purchase assets - In
respect of hire purchase assets, the total dues (overdue and future
instalments taken together) as reduced by
(a) the finance charges not
credited to the profit and loss account and carried forward as unmatured
finance charges; and
(b) the depreciated value of the
underlying asset, shall be provided for.
Explanation: For the purpose of
this paragraph,
(1) the depreciated value of
the asset shall be notionally computed as the original cost of the asset to
be reduced by depreciation at the rate of twenty per cent per annum on a
straight line method; and
(2) in the case of second hand
asset, the original cost shall be the actual cost incurred for acquisition
of such second hand asset.
Additional provision for hire
purchase and leased assets
(ii) In respect of hire purchase
and leased assets, additional provision shall be made as under:
(a) Where hire charges or
lease rentals are overdue upto 12 months
|
Nil
|
(b) Where hire charges or
lease rentals are overdue for more than 12 months but upto 24 months
|
10 percent of the net book
value
|
(c) Where hire charges or
lease rentals are overdue for more than 24 months but upto 36 months
|
40 percent of the net book
value
|
(d) where hire charges or
lease rentals are overdue for more than 36 months but upto 48 months
|
70 percent of the net book
value
|
(e) where hire charges or
lease rentals are overdue for more than 48 months
|
100 percent of the net book
value
|
(iii) On expiry of a period of
12 months after the due date of the last instalment of hire purchase/leased
asset, the entire net book value shall be fully provided for.
Notes:
(1) The amount of caution
money/margin money or security deposits kept by the borrower with the
CIC-ND-SI in pursuance of the hire purchase agreement shall be deducted
against the provisions stipulated under clause (i) above, if not already
taken into account while arriving at the equated monthly instalments under
the agreement. The value of any other security available in pursuance to
the hire purchase agreement shall be deducted only against the provisions
stipulated under clause (ii) above.
(2) The amount of security
deposits kept by the borrower with the CIC-ND-SI in pursuance to the lease
agreement together with the value of any other security available in
pursuance to the lease agreement shall be deducted only against the provisions
stipulated under clause (ii) above.
(3) It is clarified that income
recognition on and provisioning against NPAs are two different aspects of
prudential norms and provisions as per the norms are required to be made on
NPAs on total outstanding balances including the depreciated book value of
the leased asset under reference after adjusting the balance, if any, in
the lease adjustment account. The fact that income on an NPA has not been
recognised shall not be taken as reason for not making provision.
(4) An asset which has been
renegotiated or rescheduled as referred to in paragraph 16.3(ii)(b) and
16.4(ii)(b) of these Directions shall be a sub-standard asset or continue
to remain in the same category in which it was prior to its renegotiation
or reschedulement as a doubtful asset or a loss asset as the case may be.
Necessary provision shall be made as applicable to such asset till it is
upgraded.
(5) The balance sheet to be
prepared by a CIC-ND-SI shall be in accordance with the provisions
contained in sub-paragraph (2) of paragraph 19 of this Chapter.
(6) All financial leases written
on or after April 1, 2001 shall attract the provisioning requirements as
applicable to hire purchase assets.
18. Provision for Standard
Assets
(1) A CIC-ND-SI with total asset
of less than ? 500 crore, shall make provision for standard assets at 0.25
percent of the outstanding, which shall not be reckoned for arriving at net
NPAs. The provision towards standard assets shall not be netted from gross
advances but shall be shown separately as ‘Contingent Provisions against
Standard Assets’ in the balance sheet.
(2) A CIC-ND-SI with total asset
size of ? 500 crore and above shall make provision for standard assets at
0.25 per cent by the end of March 2015; 0.30 per cent by the end of March
2016; 0.35 per cent by the end of March 2017 and 0.40 per cent by the end
of March 2018 and thereafter, of the outstanding, which shall not be
reckoned for arriving at net NPAs. The provision towards standard assets
shall not be netted from gross advances but shall be shown separately as
‘Contingent Provisions against Standard Assets’ in the balance sheet.
19. Disclosure in the Balance
Sheet
(1) Every CIC-ND-SI shall
separately disclose in its balance sheet the provisions made as per
paragraph 17 above without netting them from the income or against the
value of assets.
(2) The provisions shall be
distinctly indicated under separate heads of account as under:-
(i) provisions for bad and
doubtful debts; and
(ii) provisions for depreciation
in investments.
(3) Such provisions shall not be
appropriated from the general provisions and loss reserves held, if any, by
a CIC-ND-SI.
(4) Such provisions for each
year shall be debited to the profit and loss account. The excess of
provisions, if any, held under the heads general provisions and loss
reserves shall be written back without making adjustment against them.
(5) CIC-ND-SIs with total assets
? 500 crore and above shall disclose the following particulars in the
Balance Sheet:
i. Exposure to real estate
sector, both direct and indirect; and
ii. Maturity pattern of assets
and liabilities.
20. Accounting year
Every CIC-ND-SI shall prepare
its balance sheet and profit and loss account as on March 31 every year.
Whenever a CIC-ND-SI intends to extend the date of its balance sheet as per
provisions of the Companies Act, it shall take prior approval of the Bank
before approaching the Registrar of Companies for this purpose.
Further, even in cases where the
Bank and the Registrar of Companies grant extension of time, a CIC-ND-SI
shall furnish to the Bank a proforma balance sheet (unaudited) as on March
31 of the year and the statutory returns due on the said date. Every
CIC-ND-SI shall finalise its balance sheet within a period of 3 months from
the date to which it pertains.
21. Schedule to the balance
sheet
Every CIC-ND-SI shall append to
its balance sheet prescribed under the Companies Act, 2013, the particulars
in the schedule as set out in Annex I.
22. Transactions in Government
securities
Every CIC-ND-SI shall undertake
transactions in Government securities through its CSGL account or its demat
account:
Provided that no CIC-ND-SI shall undertake any transaction
in government security in physical form through any broker.
23. Loans against CICs own
shares prohibited
No CIC-ND-SI shall lend against
its own shares.
24. Information with respect to
change of address, directors, auditors, etc. to be submitted
Every CIC-ND-SI shall
communicate, not later than one month from the occurrence of any change in:
a.
the
complete postal address, telephone number/s and fax number/s of the
registered/corporate office;
b.
the
names and residential addresses of the directors of the company;
c.
the
names and the official designations of its principal officers;
d.
the
names and office address of the auditors of the company; and
e.
the
specimen signatures of the officers authorised to sign on behalf of the
company;
to the Regional Office of the
Department of Non-Banking Supervision of the Bank under whose jurisdiction
the CIC is registered.
25. CICs not to be partners in
partnership firms
(1) No CIC-ND-SI shall
contribute to the capital of a partnership firm or become a partner of such
firm.
(2) CIC-ND-SI which had already
contributed to the capital of a partnership firm or was a partner of a
partnership firm shall seek early retirement from the partnership firm.
(3) In this connection it is
further clarified that;
a. Partnership firms mentioned
above shall also include Limited Liability Partnerships (LLPs).
b. Further, the aforesaid
prohibition shall also be applicable with respect to Association of
persons; these being similar in nature to partnership firms
26. Loans against security of
shares
CIC-ND-SI lending against the
collateral of listed shares shall,
(i) maintain a Loan to Value
(LTV) ratio of 50% for loans granted against the collateral of shares. LTV
ratio of 50% is required to be maintained at all times. Any shortfall in
the maintenance of the 50% LTV occurring on account of movement in the
share prices shall be made good within 7 working days
ii) in case where lending is
being done for investment in capital markets, accept only Group 1
securities (specified in SMD/Policy/Cir-9/2003 dated March 11, 2003 as
amended from time to time, issued by SEBI) as collateral for loans of value
more than 5 lakh, subject to review by the Bank.
iii) report on-line to stock
exchanges on a quarterly basis, information on the shares pledged in their
favour, by borrowers for availing loans in format as given in Annex II.
Section
– III
Governance Issues
Chapter
VI
Acquisition / Transfer of Control of Systemically important CICs
27. (i) A systemically important CIC as defined in
para 3 (xxiv) of these Directions, shall require prior written permission
of the Bank for the following:
a) any takeover or acquisition
of control of CIC, which may or may not result in change of management;
b) any change in the
shareholding of CIC, including progressive increases over time, which
results in acquisition / transfer of shareholding of 26 per cent or more of
the paid up equity capital of the CIC.
Provided that, prior approval
shall not be required in case of any shareholding going beyond 26% due to
buyback of shares / reduction in capital where it has approval of a
competent Court. The same is to be reported to the Bank not later than one
month from its occurrence;
c) any change in the management
of the CIC which results in change in more than 30 per cent of the
directors, excluding independent directors.
Provided that, prior approval
shall not be required in case of directors who get re-elected on retirement
by rotation.
(ii) Notwithstanding clause (i),
CICs shall continue to inform the Bank regarding any change in their directors
/ management not later than one month from the occurrence of any change.
28. Application for prior
approval
(i) CICs shall submit an
application, in the company letter head, for obtaining prior approval of
the Bank as above, along with the following documents:
a) Information about the
proposed directors / shareholders as per the Annex
III;
b) Sources of funds of the
proposed shareholders acquiring the shares in the CIC;
c) Declaration by the proposed
directors / shareholders that they are not associated with any
unincorporated body that is accepting deposits;
d) Declaration by the proposed
directors / shareholders that they are not associated with any company, the
application for Certificate of Registration (CoR) of which has been
rejected by the Bank;
e) Declaration by the proposed
directors / shareholders that there is no criminal case, including for
offence under Section 138 of the Negotiable Instruments Act, against them;
and
f) Bankers' Report on the
proposed directors / shareholders.
(ii) Applications in this regard
shall be submitted to the Regional Office of the Department of Non-Banking
Supervision in whose jurisdiction the Registered Office of the CIC is
located.
29. Requirement of Prior Public
Notice about change in control / management
(i) A public notice of at least
30 days shall be given before effecting the sale of, or transfer of the
ownership by sale of shares, or transfer of control, whether with or
without sale of shares. Such public notice shall be given by the CIC and
also by the other party or jointly by the parties concerned, after
obtaining the prior permission of the Bank.
(ii) The public notice shall
indicate the intention to sell or transfer ownership / control, the
particulars of transferee and the reasons for such sale or transfer of
ownership / control. The notice shall be published in at least one leading
national and in one leading local (covering the place of registered office)
vernacular newspaper.
Section
– IV
Miscellaneous Issues
Chapter-
VII
Overseas Investment
30. These directions are in addition to those
prescribed by Foreign Exchange Department for overseas investment.
31. Investment in 1financial sector overseas
All CICs investing in Joint
Venture/Subsidiary/Representative Offices overseas in the financial sector
shall require prior approval from the Bank. CICs desirous of making
overseas investment in financial sector shall hold a Certificate of
Registration (CoR) from the Bank and shall comply with all the regulations
applicable to CIC-ND-SI. CICs that are presently exempted from the
regulatory framework of the Bank (exempted CICs), shall be required to be
registered with the Bank and shall be regulated like CICs-ND-SI, where they
intend to make overseas investment in financial sector.
32. Investment in non-financial
sector
Exempted CICs making overseas
investment in non-financial sector shall not require registration from the
Bank and hence, these Directions are not applicable to them. Further, a
CIC-ND-SI need not obtain prior approval from Department of Non-Banking
Supervision (DNBS), RBI, for overseas investment in non-financial sector.
However it shall report to the Regional Office of DNBS where it is
registered within 30 days of such investment in the stipulated format and
at the prescribed periodicity.
The eligibility criteria for
investments abroad and other conditions prescribed for CICs are given in
the following paragraphs
33. Eligibility Criteria
i. The Adjusted Net Worth (ANW)
of the CIC shall not be less than 30% of its aggregate risk weighted assets
on balance sheet and risk adjusted value of off-balance sheet items as on
the date of the last audited balance sheet as at the end of the financial
year. The CIC shall continue to meet the requirement of minimum ANW, post
overseas investment. For this purpose, the risk weights applicable shall be
as provided for in these directions.
ii. The level of Net
Non-Performing Assets of the CIC shall not be more than 1% of the net
advances as on the date of the last audited balance sheet.
iii. The CIC shall generally be
earning profit continuously for the last three years and its performance
shall be satisfactory during the period of its existence.
34. General Conditions
i. Direct investment in
activities prohibited under FEMA shall not be permitted.
ii. The total overseas
investment shall not exceed 400% of the owned funds of the CIC.
iii. The total overseas
investment in financial sector shall not exceed 200% of its owned funds.
iv. Investment in financial
sector shall be only in regulated entities abroad.
v. Entities set up abroad or
acquired abroad shall be treated as wholly owned subsidiaries (WOS) /joint
ventures (JV) abroad.
vi. Overseas investments by a
CIC in financial /non-financial sector shall be restricted to its financial
commitment. However with regard to issuing guarantees/Letter of Comfort in
this regard the following shall be noted:
(a) The CIC can issue guarantees
/ letter of comfort to the overseas subsidiary engaged in non-financial
activity;
(b) CICs must ensure that
investments made overseas shall not result in creation of complex
structures. In case the structure overseas requires a Non-Operating Holding
Company, there shall not be more than two tiers in the structure. CICs
having more than one non-operating holding company in existence, in their
investment structure, shall report the same to the Bank for a review.
(c) CICs shall comply with the
regulations issued under FEMA, 1999 from time to time;
(d) An annual certificate from
statutory auditors shall be submitted by the CIC to the Regional Office of
DNBS where it is registered, certifying that it has fully complied with all
the conditions stipulated under these Guidelines for overseas investment.
The certificate as on end March every year shall be submitted by April 30
each year;
(e) If any serious adverse
features come to the notice of the Bank, the permission granted shall be
withdrawn. All approvals for investment abroad shall be subject to this
condition.
35. Specific Conditions
i. Opening of Branches
As CICs are non-operating
entities, they shall not, in the normal course, be allowed to open branches
overseas.
ii. Opening of WOS/JV Abroad by
CICs
In the case of opening of a
WOS/JV abroad by a CIC, all the conditions as stipulated above shall be
applicable. The NoC to be issued by the Bank is independent of the overseas
regulators’ approval process. In addition, the following conditions shall
apply to all CICs:
(a) The WOS/JV being established
abroad shall not be a shell company i.e "a company that is
incorporated, but has no significant assets or operations." However
companies undertaking activities such as financial consultancy and advisory
services shall not be considered as shell companies;
(b) The WOS/JV being established
abroad by the CIC shall not be used as a vehicle for raising resources for
creating assets in India for the Indian operations;
(c) In order to ensure
compliance of the provisions, the parent CIC shall obtain periodical
reports/audit reports at least quarterly about the business undertaken by
the WOS/JV abroad and shall make them available to the inspecting officials
of the Bank;
(d) If the WOS/JV has not
undertaken any activity or such reports are not forthcoming, the approvals
given for setting up the WOS/JV abroad shall be reviewed;
(e) The WOS/JV shall make
disclosure in its Balance Sheet the amount of liability of the parent
entity towards it and also whether it is limited to equity / loan or if
guarantees are given, the nature of such guarantees and the amount
involved;
(f) All the operations of the
WOS/JV abroad shall be subject to regulatory prescriptions of the host
country.
iii. Opening of Representative
Offices Abroad by CICs
CICs shall need prior approval
from the DNBS, RBI for opening representative offices abroad. The
representative offices can be set up abroad for the purpose of liaison
work, undertaking market study and research but not for undertaking any
activity which involves outlay of funds. The representative offices shall
also comply with regulations, if any, in this regard stipulated by a
regulator in the host country. As it is not envisaged that such offices
would be carrying on any activity other than liaison work, no line of
credit shall be extended.
The parent CICs shall obtain
periodical reports about the business undertaken by the representative
offices abroad. If the representative offices have not undertaken any
activity or such reports are not forthcoming, the Bank may advise the CIC
to wind up the establishment.
Chapter
- VIII
Miscellaneous Instructions
36. Participation in Currency
Options/Futures
CIC-ND-SIs shall participate in
the designated currency options / futures exchanges recognized by SEBI as
clients, subject to RBI (Foreign Exchange Department) guidelines in the
matter, only for the purpose of hedging their underlying forex exposures.
Disclosures shall be made in the balance sheet relating to transactions
undertaken in the currency futures market, in accordance with the
guidelines issued by SEBI.
37. Operative instructions
relating to relaxation / modification in Ready Forward Contracts,
Settlement of Government Securities Transactions and Sale of securities
allotted in Primary Issues
All CIC-ND-SIs shall follow the
guidelines on transactions in Government Securities as given in the circular IDMD.PDRS.05/10.02.01/2003-04 dated March 29,
2004 and IDMD.PDRS.4777, 4779 & 4783/10.02.01/2004-05
all dated May 11, 2005 as amended from time to time. In case of
doubt they may refer to IDMD.
38. Introduction of Interest
Rate Futures
CIC-ND-SIs shall participate in
the designated interest rate futures(IRF) exchanges recognized by SEBI, as
clients, subject to RBI / SEBI guidelines in the matter, for the purpose of
hedging their underlying exposures. CIC-ND-SIs participating in IRF
exchanges shall submit the data in this regard half yearly, in the
prescribed format, to the Regional Office of the Department of Non-Banking
Supervision in whose jurisdiction their company is registered, within a
period of one month from the close of the half year.
39. Raising Money through
Private Placement of Debentures etc. by CIC-ND-SIs
All CIC-ND-SIs shall follow the
guidelines on private placement of Non-Convertible Debentures (NCDs) (given
in Annex IV) for compliance. It may be
noted that the provisions of Companies Act, 2013 and Rules issued there
under shall be applicable wherever not contradictory.
40. Applicability of Know Your
Customer (KYC) Direction, 2016
All CIC-ND-SIs shall be required
to follow the Know Your Customer (KYC) Direction, 2016, issued and as
amended from time to time by the Department of Banking Regulation.
41. Rounding off transactions to
the Nearest Rupee by CIC-ND-SIs
CIC-ND-SIs shall ensure that all
transactions, including payment of interest on deposits/ charging of
interest on advances, are rounded off to the nearest rupee, i.e. fractions
of 50 paise and above shall be rounded off to the next higher rupee and
fractions of less than 50 paise should be ignored. Further, they shall also
ensure that cheques / drafts issued by clients containing fractions of a
rupee are not rejected by them.
42. Ratings for CIC-ND-SIs
CICs also issue financial
products like Commercial Paper, Debentures etc. to which rating is assigned
by rating agencies. The ratings assigned to such products may undergo
changes for various reasons ascribed to by the rating agencies. All
CIC-ND-SIs shall furnish the information about downgrading / upgrading of
assigned rating of any financial product issued by them, within fifteen
days of such a change in rating, to the Regional Office of the Bank under
whose jurisdiction their registered office is functioning.
43. Guidelines on Investment in
Insurance - Entry into insurance business
The aspirant CICs shall make an
application along with necessary particulars duly certified by their
statutory auditors to the Regional Office of Department of Non-Banking
Supervision under whose jurisdiction the registered office of the CIC is
situated. Any CIC registered with the Bank which satisfies the eligibility
criteria given below may be permitted to set up a joint venture company for
undertaking insurance business with risk participation, subject to
safeguards. No ceiling is prescribed for CICs in their investment in an
insurance joint venture. The maximum equity contribution such a CIC can
hold in the joint venture company shall be as per IRDA approval.
(1) The eligibility criteria for
joint venture participant shall be as under, as per the latest available
audited balance sheet.
a.
The
owned funds of the CIC shall not be less than ? 500 crore;
b.
The
level of net non-performing assets shall be not more than 1% of the total
advances;
c.
The
CIC shall have registered net profit continuously for three consecutive
years;
d.
The
track record of the performance of the subsidiaries, if any, of the
concerned CIC shall be satisfactory;
e.
The
CIC shall comply with all applicable regulations including these
Directions. Thus, CICs-ND-SI are required to maintain adjusted net worth
which shall be not less than 30% of aggregate risk weighted assets on
balance sheet and risk adjusted value of off-balance sheet items.
(2) No CIC shall be allowed to
conduct such business departmentally. Further, a NBFC (in its group /
outside the group) shall normally not be allowed to join an insurance
company on risk participation basis and hence shall not provide direct or
indirect financial support to the insurance venture.
(3) Within the group, CICs shall
be permitted to invest up to 100% of the equity of the insurance company
either on a solo basis or in joint venture with other non-financial
entities in the group. This shall ensure that only the CIC either on a solo
basis or in a joint venture with the group company is exposed to insurance
risk and the NBFC within the group is ring-fenced from such risk.
(4) In case where a foreign
partner contributes 26 per cent of the equity with the approval of
Insurance Regulatory and Development Authority/Foreign Investment Promotion
Board, more than one CIC may be allowed to participate in the equity of the
insurance joint venture. As such participants shall also assume insurance
risk, only those CICs which satisfy the criteria given Paragraph 43(1)
above, shall be eligible.
(5) CICs shall not enter into
insurance business as agents. CICs that wish to participate in insurance
business as investors or on risk participation basis shall be required to
obtain prior approval of the Bank. The Bank will give permission on case to
case basis keeping in view all relevant factors. It shall be ensured that
risks involved in insurance business do not get transferred to the CIC.
Notes:
(1) Holding of equity by a
promoter CIC in an insurance company or investment in insurance business
shall be subject to compliance with any rules and regulations laid down by
the IRDA/Central Government. This shall include compliance with Section 6AA
of the Insurance Act as amended by the IRDA Act, 1999, for divestment of
equity in excess of 26 per cent of the paid up capital within a prescribed
period of time.
(2) CICs exempted from
registration with the Bank in terms of these Directions, shall not require
prior approval provided they fulfill all the necessary conditions of
exemption.
Chapter
- IX
Reporting Requirements
44. The reporting requirements in respect of
CIC-ND-SIs as prescribed by Department of Non-Banking Supervision shall be
adhered to.
Chapter
-X
Interpretations
45. For the purpose of giving effect to the provisions
of these Directions, the Bank may, if it considers necessary, issue
necessary clarifications in respect of any matter covered herein and the
interpretation of any provision of these Directions given by the Bank shall
be final and binding on all the parties concerned. Violation of these directions
shall invite penal action under the provisions of Act. Further, these
provisions shall be in addition to, and not in derogation of the provisions
of any other laws, rules, regulations or directions, for the time being in
force.
Chapter
- XI
Repeal Provisions
46. With the issue of these directions, the
instructions / guidelines contained in the following circulars issued by
the Bank stand repealed (list as provided below).All approvals /
acknowledgements given under the above circulars shall be deemed as given
under these directions. Notwithstanding such repeal, any action
taken/purported to have been taken or initiated under the
instructions/guidelines having repealed shall continue to be guided by the
provisions of said instructions/guidelines.
Sr.
No.
|
Notification
No.
|
Date
|
Subject
|
1
|
DNBS.(PD).CC.No.197/03.10.001/2010-11
|
August 12, 2010
|
Regulatory Framework for Core
Investment Companies (CICs)
|
2
|
Notification
No.DNBS.(PD).219/CGM (US)-2011
|
January 5, 2011
|
Core Investment Companies
(Reserve Bank) Directions, 2011
|
3
|
DNBS.PD.CC.No.274/03.02.089/2011-12
|
May 11, 2012
|
Core Investment Companies
(Reserve Bank) Directions, 2011 – Clarification on CICs Issuing Guarantees
|
4
|
DNBS.PD.CC.No.311/03.10.01/2012-13
|
December 06, 2012
|
Core Investment Companies -
Overseas Investment (Reserve Bank) Directions, 2012
|
5
|
DNBS.CC.PD.No.312/03.10.01/2012-13
|
December 07, 2012
|
Checklist for NBFCs, Non
Banking Financial Company-Micro Finance Institutions, Non Banking
Financial Company-Factoring Institutions and Core Investment Companies
|
6
|
DNBS(PD)CC.No.322/03.10.001/2012-13
|
April 01, 2013
|
Core Investment Companies –
Guidelines on Investment in Insurance
|
(C.
D. Srinivasan)
Chief General Manager
Annex
II
Data
on Pledged Securities
Name of the NBFC Lender
|
PAN
|
Date of Reporting
|
Share holding Information
|
Name
of the Company
|
ISIN
|
No
of Shares held against loans
|
Type
of the Borrower (Promoter / Non Promoter)
|
Name
of the Borrower
|
PAN
of the Borrower
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annex
III – Part (i)
Information
about the Proposed Promoters / Directors / Shareholders of the Company
Sr.
No.
|
Particulars
Required
|
Response
|
1.
|
Name
|
|
2.
|
Designation
|
Chairman / Managing Director / Director / Chief
Executive Officer
|
3.
|
Nationality
|
|
4.
|
Age (to be substantiated with
date of birth)
|
|
5.
|
Business Address
|
|
6.
|
Residential Address
|
|
7.
|
E-mail address / Telephone
number
|
|
8.
|
PAN Number under Income Tax
Act
|
|
9.
|
Director Identification Number
(DIN)
|
|
10.
|
Social security number /
Passport No.*
|
|
11.
|
Educational / professional
qualifications
|
|
12.
|
Professional Achievement
relevant to the job
|
|
13.
|
Line of business or vocation
|
|
14.
|
Any other information relevant
to the Company
|
|
15.
|
Name/s of other companies in
which the person has held the post of Chairman / Managing Director /
Director / Chief Executive Officer
|
|
16.
|
Name/s of the regulators (RBI,
SEBI, IRDA, PFRDA, NHB or any other foreign regulator) of the entities
mentioned in which the persons hold directorships
|
|
17.
|
Name/s of the NBFCs, if any,
with which the person is associated as Promoter, Managing Director,
Chairman or Director including a Residuary Non-Banking Financial Company,
which has been prohibited from accepting deposits / prosecuted by RBI ?
|
|
18.
|
Detail of prosecution, if any,
pending or commenced or resulting in conviction in the past against the
person and / or against any of the entities he is associated with for
violation of economic laws and regulations
|
|
19.
|
Cases, if any, where the
person or relatives of the person or the companies in which the person is
associated with, are in default or have been in default in the last 5
years in respect of credit facilities obtained from any entity or bank
|
|
20.
|
If the person is a member of a
professional association / body, details of disciplinary action, if any,
pending or commenced or resulting in conviction in the past against him /
her or whether he / she has been banned from entry of any professional
occupation at any time
|
|
21.
|
Whether the person attracts
any of the disqualification envisaged under Section 164 of the Companies
Act, 2013
|
|
22.
|
Has the person or any of the
companies, he / she is associated with, been subject to any investigation
at the instance of the Government Department or Agency
|
|
23.
|
Has the person at any time
been found guilty of violations of rules / regulations / legislative
requirements by Customs / Excise / Income Tax / Foreign Exchange / Other
Revenue Authorities, if so, give particulars
|
|
24.
|
Experience in the business of
NBFC (number of years)
|
|
25.
|
Equity shareholding in the
company
|
|
|
(i)
|
No. of shares
|
|
|
(ii)
|
No. of shares
|
|
|
(iii)
|
Percentage to total paid up
equity share capital of the company
|
|
26.
|
Name/s of the companies, firms
and proprietary concerns in which the person holds substantial interest
|
|
27.
|
Names of the principal bankers
to the concerns at 26 above
|
|
28.
|
Names of the overseas bankers
*
|
|
29.
|
Whether number of
directorships held by the person exceeds the limits prescribed under
Section 165 of the Companies Act, 2013
|
|
Signature :
|
Name :
|
Designation :
|
Company Seal :
|
Date :
|
Place :
|
* For foreign promoters /
directors / shareholders
|
Note : (i) Separate form
should be submitted in respect of each of the proposed promoters /
directors / shareholders
|
Annex
III – Part (ii)
Information
about Corporate Promoter
Sr.
No.
|
Particulars
Required
|
Response
|
1.
|
Name
|
|
2.
|
Business Address
|
|
3.
|
E-mail address / Telephone
number
|
|
4.
|
PAN Number under Income Tax
Act
|
|
5.
|
Name and contact details of
compliance officer
|
|
6.
|
Line of business
|
|
7.
|
The details of their major
shareholders (more than 10%) and line of activity, if corporates
|
|
8.
|
Names of the principal bankers
/ overseas bankers *
|
|
9.
|
Name/s of the regulators
(RBI,SEBI,IRDA,PFRDA,NHB or any other foreign regulator)
|
|
10.
|
Name/s of Company/ies in the
Group as defined in the Prudential Norms Directions
|
|
11.
|
Name/s of the company/ies in
the Group that are NBFCs
|
|
12.
|
Specify the names of companies
in the group which have been prohibited from accepting deposits /
prosecuted by RBI?
|
|
13.
|
Detail of prosecution, if any,
pending or commenced or resulting in conviction in the past against the
corporate for violation of economic laws and regulations
|
|
14.
|
Cases, if any, where the
corporate, is in default or have been in default in the last 5 years in
respect of credit facilities obtained from any entity or bank
|
|
15.
|
Whether the corporate has been
subject to any investigation at the instance of the Government Department
or Agency
|
|
16.
|
Has the Corporate at any time
been found guilty of violations of rules / regulations / legislative
requirements by Customs / Excise / Income Tax / Foreign Exchange / Other
Revenue Authorities, if so, give particulars
|
|
17.
|
Has the promoter corporate /
majority shareholder of the promoter corporate, if a corporate, ever
applied to RBI for CoR which has been rejected
|
|
Signature :
|
Name :
|
Designation :
|
Company Seal :
|
Date :
|
Place :
|
* For foreign corporate
|
Annex
IV
Guidelines
on Private Placement of NCDs (maturity more than 1 year) by CICs:
1 CICs shall put in place a
Board approved policy for resource planning which, inter-alia, shall cover
the planning horizon and the periodicity of private placement.
2 The issues shall be governed
by the following instructions:
i) The minimum subscription per
investor shall be ?20,000 (Rupees Twenty thousand);
ii) The issuance of private
placement of NCDs shall be in two separate categories, those with a maximum
subscription of less than ? 1 crore and those with a minimum subscription
of ? 1 crore and above per investor;
iii) There shall be a limit of
200 subscribers for every financial year, for issuance of NCDs with a
maximum subscription of less than ? 1 crore, and such subscription shall be
fully secured;
iv) There shall be no limit on
the number of subscribers in respect of issuances with a minimum
subscription of ? 1 crore and above; the option to create security in
favour of subscribers shall be with the issuers. Such unsecured debentures
shall not be treated as public deposits as defined in Core Investment
Companies (Reserve Bank) Directions, 2016.
v) A CIC shall not extend loans
against the security of its own debentures (issued either by way of private
placement or public issue).
3. Tax exempt bonds offered by
CICs are exempted from the applicability of the circular.
4. For NCDs of maturity upto one
year, guidelines on Issuance of Non-Convertible Debentures (Reserve Bank)
Directions, 2010, dated June 23, 2010, by Internal Debt Management
Department, RBI shall be applicable.
|