Proposed Regulatory Framework for Systemically Important Non Deposit Accepting Core Investment Compa, FEMA

[ASHISH TIWARI]

My query is in relation to the recent draft guidilines issued by RBI i.e.:Proposed Regulatory Framework for Systemically Important Non Deposit Accepting Core Investment Companies (CIC-ND-SI). One of the Group Co.(unlisted) is holding 55% of Equity of Other Group Companies(unlisted)and not regulary trading those shares.At the same time the said holding Company as and when require infuse the funds in the various Group Companies by way of Share Capital/Unsecured Loans. Whether such holding Company would fall with in the definition of Core Investment Companies. Please guide me where I can find the definition of Core Investment Companies.

Posts / Replies

[Surender Gupta]

(2)  Core Investment Company means:

A NBFC carrying on the business of acquisition of shares and securities which satisfied the following conditions:-

(i)    it holds not less than 90% of its Total Assets in the form of investment in equity shares, preference shares, 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 constitutes not less than 60% of its Total Assets;

iii)   it does not trade in its investments in shares, 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 RBI act, 1934 except investment in bank deposits, money market instruments, government securities, loans to and investments in debt issuances of group companies or guarantees issued on behalf of group companies.

[Surender Gupta]

Core Investment Company(CIC) means

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 constitutes not less than 60% of its net assets

Net assets, for the purpose of this provisio, would mean 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.

(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 45 I (c) and 45 I (f) of the Reserve Bank of India Act, 1934 except:

a) investment in

1. bank deposits,
2. money market instruments, including money market mutual funds,
3. government securities, and
4. bonds or debentures issued by group companies;

b) granting of loans to group companies; and
c) issuing guarantees on behalf of group companies.