Para 2(C)(iii) of the guidelines provide that only non-financial services companies/entities and non-operative financial holding company in the Group and individuals belonging to Promoter Group will be allowed to hold shares in the NOFHC. Accordingly, a non-operative financial holding company though regulated by RBI will remain outside NOFHC. NBFC (Investment Companies) which hold/deal in equity shares of Promoter Group Companies cannot be under the NOFHC because, in terms of para 2 (I) (IV) (a) of the Guidelines, the financial entities held by NOFHC shall not have any credit and investment (including investments in the equity/debt capital instruments) exposure to the Promoters/Promoter Group entities or individuals associated with the Promoter Group or the NOFHC. Therefore, NBFC (Investment Companies), which would include CICs and other non-operative holding companies, would remain outside NOFHC. However, if there are investments in voting equity shares of regulated financial sector entities in which the Group has significant influence or control, such entities will have to be brought under the NOFHC. ‘Investment Company’ as defined under para 2(I)(vi) of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Direction, 1998, means any company which is a financial institution carrying on, as its principal business, the acquisition of securities.

Ans. The notional credit so received can be used on resolution of complaint and establishing the liability of the customer by the non-bank PPI issuer. However, in any circumstances, this period cannot exceed 90 days from the date of receipt of the complaint.

It is not necessary that a NOFHC should be held only by non-financial services companies/ entities. It can be held by a CIC or a non-operating holding company. The regulated financial business / entities of the holding company, if any, cannot remain with the holding company. It has to come under the NOFHC. [para 2 (C) (iii) & (vii) of the guidelines]

Ans. The burden of proving the customer liability in case of unauthorised electronic payment transactions lies on the non-bank PPI issuer.

It is not necessary that a NOFHC should be held only by non-financial services companies/ entities. It can be held by a CIC or a non-operating holding company. The regulated financial business / entities of the holding company, if any, cannot remain with the holding company. It has to come under the NOFHC. [para 2 (C) (iii) & (vii) of the guidelines]

A. a (i) There would be no relaxation for the pattern of shareholding in the NOFHC with regard to the provisions at the para 2 (C) (iii) of the guidelines

(ii) For the purpose of these guidelines, NBFC (Investment Companies) (which would include CIC and a non-operative holding company) would be held outside the purview of the NOFHC. [para 2 (C) (iii) of the guidelines]. The regulated financial business/entities of the holding company, if any, cannot remain with the holding company. It has to come under the NOFHC. [para 2 (C) (iii) & (vii) of the guidelines]

(iii) In the case of other NBFCs in which public holds more than 51 percent of voting equity shares, wishes to set up a bank or convert itself into a bank, it must transfer all its regulated financial services business to a separate company/companies and transfer the shareholding in such companies to the NOFHC. After it has transferred the regulated financial services business, it can set up a NOFHC, provided it meets the requirements of para 2 (C) (ii) and (iii) of the guidelines.

(b) As stated above, before the listed NBFC holds shares in the NOFHC, it must transfer all regulated financial services business to a new company and shares in that new company must be held by the NOFHC. Conversion of the listed NBFC into a listed non operating holding company would enable meeting the requirement of para 2(C) (iii) of the guidelines provided the listed non operating holding company meets the requirement of para 2(C)(ii)(b) of the guidelines i.e. the public hold not less than 51 percent voting equity shares in the company.

A. Yes. An existing non-operating listed holding company, with more than 51 percent public shareholding, will be eligible to promote a Non-Operative Financial Holding Company (NOFHC). [para 2 (C) (ii) (b) and 2 (C) (iii) of the guidelines]

A. A non operating holding company being a promoter of NOFHC and holding investments in unregulated financial sector entities and non financial sector entities will be required to be registered as a CIC with RBI if it meets the criteria laid down in para 2 and 3 (h) of Notification No DNBS.PD. 219/CGM(US)-2011 dated January 05, 2011 regarding Regulatory Framework for Core Investment Companies.

A. NOFHC, being a non-operative financial holding company, cannot hold physical assets belonging to the Group and charge for them on an arm’s length basis. A holding company of the Promoter Group, which holds the NOFHC can undertake related businesses such as technology services or banking correspondent services or distribution services on its own, or through a subsidiary. If the non-operative holding company is a CIC or NBFC, the relevant regulations will be applicable.

A. No. An existing non-operating listed holding company, with more than 51 per cent public shareholding cannot operate as the NOFHC as the NOFHC has to be wholly-owned by the Promoter / Promoter Group. The above cited example does not meet this criteria as the non-operating listed holding company has equity shareholding from non-promoters/promoter group entities. However, this existing non-operative listed holding company in which public shareholding exceeds 51 per cent can promote a NOFHC.

A non operating holding company being a promoter of NOFHC will be required to be registered as a CIC with RBI if it meets the stipulated criteria.

If the non operating holding company does not meet the criteria for being defined as a Core Investment Company but is an NBFC (Investment Company) it will be required to be registered with RBI as NBFC(Investment Company).

A. For the purpose of these guidelines, the investment company (SPV/CIC) that holds shares only in non-financial companies of the Promoter Group would not be considered as a financial services company and would be held outside the purview of the NOFHC. [para 2 (C) (iii) of the guidelines]

A. A non-operative financial holding company is a company which has no operational activities and holds the non-financial sector companies of the Promoter Group and which has no subsidiaries, joint venture or associate or other controlled entities in the financial sector except investments in the NOFHC. Such company can hold voting equity shares in the NOFHC in accordance with Paragraph 2 (C) (ii) and (iii) of the guidelines. The said holding company can hold upto 100 per cent of the voting equity of the NOFHC, if it has public shareholding of not less than 51 per cent. [para 2 (C)(ii)(b) of the guidelines].

A. NOFHC cannot provide any advisory services to any entity both within the Group and outside the Group. The NOFHC can make investment in bank deposits, money market instruments, government securities and actively traded bonds and debentures besides lending to or investing in entities that are held under it. [para 2(H)(i)(c) of the guidelines]

A. (a) It is not necessary that there has to be an individual promoter. The company wherein 100% of voting equity shares are held by the public can set up the NOFHC and hold to the extent of 100% of the voting equity shares of the NOFHC if such a company is a non-financial services company or a non-operating financial holding company in the group. Further, the company itself will be deemed to be the Promoter and all the provisions of the guidelines applicable to the Promoter and the Promoter Group will apply to it.

(b) The listed company cannot be the NOFHC. It will need to form a NOFHC which is wholly owned by it. The number of independent Directors on the Board of the NOFHC should be in compliance with the provisions of paragraph 2 (G) (iv) of the guidelines.

A. For the purpose of these guidelines, a non-operative holding company that holds shares only in non-financial companies of the Promoter Group would not be considered as a financial services company and would be held outside the purview of the NOFHC.

A. Promoter Group entities, which hold investments in group companies or investments in the normal course of business, are not required to come under the NOFHC. They can hold shares in the NOFHC, provided the conditions stipulated in para 2(C) (ii) & (iii) of the guidelines are met.

A. No. A financial services company of the Promoter Group cannot participate in the voting equity shares of the NOFHC.

If the Promoters/Promoter Group which has a financial services company, listed or otherwise, wishes to set up a bank, the said financial services company must transfer all its regulated financial services business to a separate company/companies and transfer the shareholding in such companies to the NOFHC. After it has transferred the regulated financial services business, it will cease to be a financial services company, and it can set up a NOFHC provided, the public shareholding in it is not less than 51 per cent. [ Paragraph 2(C)(ii) and (iii) of the guidelines]

A non operating holding company that holds investments in unregulated financial sector entities and non financial sector entities will be eligible to hold voting equity shares in the NOFHC. It will be required to be registered as a CIC or NBFC with RBI if it meets the stipulated criteria.

A non operating holding company that holds investments in unregulated financial sector entities and non financial sector entities will be eligible to hold voting equity shares in the NOFHC. It will be required to be registered as a CIC or NBFC with RBI if it meets the stipulated criteria.

A. Activities such as credit cards, primary dealer, leasing, hire purchase, factoring etc., can be conducted by a bank departmentally or through a separate entity or entities outside the bank. If such an activity is to be carried through a separate entity, then it should be carried on by a subsidiary, joint venture or associate of the NOFHC, and not of the bank, unless it is legally required or specifically permitted by RBI. [para 2 (C) (iv) of the guidelines].

A. As per the extant instructions, prior permission of RBI is necessary for the banks to invest in the equity of subsidiaries and financial services entities. Accordingly, banks would require RBI’s approval for setting up subsidiaries / joint ventures / associates for conducting activities permitted to banks under Section 6 of the BR Act, 1949. The general principle in this regard is that para-banking activities, such as credit cards, primary dealer, leasing, hire purchase, factoring etc., can be conducted either inside the bank departmentally or outside the bank through subsidiary/ joint venture /associate. Activities such as insurance, stock broking, asset management, asset reconstruction, venture capital funding and infrastructure financing through Infrastructure Development Fund (IDF) sponsored by the bank can be undertaken only outside the bank. Lending activities must be conducted from inside the bank. However, other regulated financial servicesentities (excluding entities engaged in credit rating and commodity broking) in which the Promoter/Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) have to be held under the NOFHC and not under the bank unless it is legally required or specifically permitted by RBI. [para 2 (C) (iv) of the guidelines].

A. In the normal course, a bank held under the NOFHC will not be permitted to have subsidiaries. A subsidiary of the bank can be set up only where it is legally required or specifically permitted by RBI [para 2(C) (vi) of the guidelines]. FDI investments in the subsidiary of the bank or in the financial services entities held under the NOFHC would be as per the DIPP guidelines of Government of India/Notifications issued under FEMA.

A. Setting-up would mean incorporating a new entity or acquiring shares in an existing entity in which the Promoter Group will have ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) and which carries on regulated financial services business whereby such entities would be required to be a subsidiary, joint venture or associate of the NOFHC. [para 2 (C) (vi) of the guidelines]

A. Normally the bank will not be permitted to set up a subsidiary / joint venture under it. However, a bank may be permitted to set-up a subsidiary / joint venture under it, where it is legally required or specifically permitted by RBI (For example, a banking subsidiary for carrying on the business of banking exclusively outside India). [para 2 (C) (vi) of the guidelines]

A. Promoters/Promoter Groups will not be permitted to set up any new financial services entity within three years from the date of commencement of business of the NOFHC, even if such intention is mentioned in the applications. [para 2 (C) (vi) of the guidelines]

A. Yes. The financial services entities of the Promoter Group which are not regulated by RBI or any other financial sector regulator cannot be brought under the NOFHC structure. [para 2 (C) (iii) of the guidelines]

A. Yes, subject to regulations relating to rights issues. The shareholding of the NOFHC will be a minimum of 40 per cent of the paid up voting equity capital of the bank which shall be locked in for a period of five years from the date of commencement of the business of the bank. The shareholding in excess of 40 per cent of the total paid up voting equity capital should be brought down to 40 per cent within three years from the date of commencement of business of the bank. [para 2 (D) (ii) and (iii) of the guidelines]

A. There could be common directors in the NOFHC and the bank. [para 2(G)(i) of the guidelines]. A director of the NOFHC cannot be considered as independent director of the bank. The common directorship between the NOFHC and other regulated financial services entities would be as per the regulations of the sectoral regulators concerned. [para 2 G (iv) of the guidelines]

A. No. The bank cannot be incorporated without obtaining ‘in-principle approval’ from the Reserve Bank. The bank will be incorporated as a public limited company.

A. No. The bank cannot be incorporated without obtaining ‘in-principle approval’ from the Reserve Bank. In case in-principle approval is given by the Reserve Bank, the bank should be set up within a period of 18 months from the date of in-principle approval. The same may be mentioned in the Form III.

A. This model is not possible for the following reasons:

(i) The NOFHC should be wholly owned by the Promoters/Promoter Group [para 2(A) of the guidelines].

(ii) If as a result of the share swap, any part of the shareholding of the NOFHC is held by the public, which holds shares in the listed NBFC, then the NOFHC cannot be wholly owned by the Promoters/Promoter Group.

A. The requirement is that the NOFHC has to be wholly owned by the Promoters/Promoter Group. Further, at least 51 percent of the voting equity shares of the NOFHC have to be held by companies in the Promoter Group in which public hold not less than 51 percent of the voting equity of those companies. A company in which public holds 51 per cent need not necessarily be listed.[para 2 (C) (i) & (ii) of the guidelines]

A. Yes. A listed CIC in the Promoter Group can have a 100 percent shareholding in the NOFHC, provided the public hold not less than 51 percent of the voting equity shares in the CIC. [para 2 (C) (ii)(b) and 2 C (iii) of the guidelines]

A. A promoter group company where the public holding is greater than 51 per cent can have a 100 percent shareholding in the NOFHC. [para 2 (C) (ii) (a) and (b) of the guidelines]

A. The guidelines require that:

1. all regulated financial services entities of the Promoters/Promoter Group in which the Promoters/Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) should be carried on only through entities held by the NOFHC.

2. no entity in which the NOFHC has a shareholding can hold shares in the NOFHC.

Therefore, there cannot be a company involved in the financial sector which is on top of the NOFHC and is a 100 percent promoter of the NOFHC.

Lending activities must be conducted from inside the bank. Therefore, the housing finance activity of the HFC should be transferred to the bank under the NOFHC. The financial sector regulated entity which holds the HFC substantially will have to come under the NOFHC.[para 2(C)(iii) of the guidelines]

Lending activities must be conducted from inside the bank. Therefore, the housing finance activity of the HFC should be transferred to the bank under the NOFHC. The financial sector regulated entity which holds the HFC substantially will have to come under the NOFHC.[para 2(C)(iii) of the guidelines]

A. No. Such an entity cannot promote a NOFHC because lending activities must be conducted from inside the bank. Therefore, the retail mortgage lending activity of the entity should be transferred to the bank under the NOFHC. Further, all regulated financial services entities of the Group in which the Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) have to be held by a NOFHC. [para 2 (C)(iii) and (vii) of the guidelines]

A. Entities, in which the Government / Public Sector Undertaking / Government Companies’ shareholding is less than 50 percent, would be treated as private sector entities, provided there are no explicit or implicit agreements or arrangements through which Government can exercise control. [para 2 (A) (i) of the guidelines]

Whether a public financial institution is part of the Promoter Group will depend upon whether it is in effective control of the NOFHC to the exclusion of any other person.

Whether a public financial institution is part of the Promoter Group will depend upon whether it is in effective control of the NOFHC to the exclusion of any other person.

The general principle in this regard is that para-banking activities, such as credit cards, primary dealer, leasing, hire purchase, factoring etc., can be conducted either inside the bank departmentally or outside the bank through subsidiary/ joint venture /associate. Activities such as insurance, stock broking, asset reconstruction, venture capital funding and infrastructure financing through Infrastructure Development Fund (IDF) sponsored by the bank can be undertaken only outside the bank. Lending activities must be conducted from inside the bank. However, other regulated financial services entities (excluding entities engaged in credit rating and commodity broking) in which the Promoters/Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) have to be held under the NOFHC and not under the bank unless it is legally required or specifically permitted by RBI. [para 2 (C) (iv) of the guidelines]

The general principle in this regard is that para-banking activities, such as credit cards, primary dealer, leasing, hire purchase, factoring etc., can be conducted either inside the bank departmentally or outside the bank through subsidiary/ joint venture /associate. Activities such as insurance, stock broking, asset reconstruction, venture capital funding and infrastructure financing through Infrastructure Development Fund (IDF) sponsored by the bank can be undertaken only outside the bank. Lending activities must be conducted from inside the bank. However, other regulated financial services entities (excluding entities engaged in credit rating and commodity broking) in which the Promoters/Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) have to be held under the NOFHC and not under the bank unless it is legally required or specifically permitted by RBI. [para 2 (C) (iv) of the guidelines]

The general principle in this regard is that para-banking activities, such as credit cards, primary dealer, leasing, hire purchase, factoring etc., can be conducted either inside the bank departmentally or outside the bank through subsidiary/ joint venture /associate. Activities such as insurance, stock broking, asset reconstruction, venture capital funding and infrastructure financing through Infrastructure Development Fund (IDF) sponsored by the bank can be undertaken only outside the bank. Lending activities must be conducted from inside the bank. However, other regulated financial services entities (excluding entities engaged in credit rating and commodity broking) in which the Promoters/Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) have to be held under the NOFHC and not under the bank unless it is legally required or specifically permitted by RBI. [para 2 (C) (iv) of the guidelines]

The general principle in this regard is that para-banking activities, such as credit cards, primary dealer, leasing, hire purchase, factoring etc., can be conducted either inside the bank departmentally or outside the bank through subsidiary/ joint venture /associate. Activities such as insurance, stock broking, asset reconstruction, venture capital funding and infrastructure financing through Infrastructure Development Fund (IDF) sponsored by the bank can be undertaken only outside the bank. Lending activities must be conducted from inside the bank. However, other regulated financial services entities (excluding entities engaged in credit rating and commodity broking) in which the Promoters/Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) have to be held under the NOFHC and not under the bank unless it is legally required or specifically permitted by RBI. [para 2 (C) (iv) of the guidelines]

The general principle in this regard is that para-banking activities, such as credit cards, primary dealer, leasing, hire purchase, factoring etc., can be conducted either inside the bank departmentally or outside the bank through subsidiary/ joint venture /associate. Activities such as insurance, stock broking, asset reconstruction, venture capital funding and infrastructure financing through Infrastructure Development Fund (IDF) sponsored by the bank can be undertaken only outside the bank. Lending activities must be conducted from inside the bank. However, other regulated financial services entities (excluding entities engaged in credit rating and commodity broking) in which the Promoters/Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) have to be held under the NOFHC and not under the bank unless it is legally required or specifically permitted by RBI. [para 2 (C) (iv) of the guidelines]

The general principle in this regard is that para-banking activities, such as credit cards, primary dealer, leasing, hire purchase, factoring etc., can be conducted either inside the bank departmentally or outside the bank through subsidiary/ joint venture /associate. Activities such as insurance, stock broking, asset reconstruction, venture capital funding and infrastructure financing through Infrastructure Development Fund (IDF) sponsored by the bank can be undertaken only outside the bank. Lending activities must be conducted from inside the bank. However, other regulated financial services entities (excluding entities engaged in credit rating and commodity broking) in which the Promoters/Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) have to be held under the NOFHC and not under the bank unless it is legally required or specifically permitted by RBI. [para 2 (C) (iv) of the guidelines]

The general principle in this regard is that para-banking activities, such as credit cards, primary dealer, leasing, hire purchase, factoring etc., can be conducted either inside the bank departmentally or outside the bank through subsidiary/ joint venture /associate. Activities such as insurance, stock broking, asset reconstruction, venture capital funding and infrastructure financing through Infrastructure Development Fund (IDF) sponsored by the bank can be undertaken only outside the bank. Lending activities must be conducted from inside the bank. However, other regulated financial services entities (excluding entities engaged in credit rating and commodity broking) in which the Promoters/Promoter Group has ‘significant influence’ or ‘control’ (as defined in Accounting Standard 23) have to be held under the NOFHC and not under the bank unless it is legally required or specifically permitted by RBI. [para 2 (C) (iv) of the guidelines]

A. (i) No. The NOFHC has to be wholly owned by a single Promoter/Promoter Group (as per the definition given in Annex I to the guidelines) and the pattern of shareholding would be as per the provisions laid down at par 2(C)(ii) & (iii) of the guidelines. Two or more separate groups cannot combine together to set up a NOFHC.

(ii) & (iii) A strategic shareholder not being a part of the Promoter Group, can be a shareholder in a company belonging to the Promoter Group (as per definition in Annex I to the guidelines), which holds shares in the NOFHC. If the strategic partner is in control of the company and is not a resident, then the company cannot hold shares in the NOFHC, as NOFHC has to be owned and controlled by residents. The strategic partner cannot be considered as part of the public shareholding, if he, by virtue of his shareholding or otherwise, exercises significant influence and control over the company.