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Core Investment Companies

B. Registration and related matters:

11. A single group is having under its fold four to five prospective Core Investment Companies with an aggregate asset size of more than ₹ 100 crore. In such a situation, which company among the group companies is required to seek registration as CIC with the Bank.

Ans: All companies in the group that are CICs would be regarded as CICs (provided they have accessed public fund) under the extant regulations of Reserve Bank and would be required to obtain a Certificate of Registration from the Bank.

12. A single group is having under its fold various prospective Core Investment Companies with an aggregate asset size of more than ₹ 100 crore. One of the entities has raised / holds public funds (one of the prerequisites for qualifying as a CIC). In such a situation, whether every CIC within the group or only the parent CIC or the specific entity that has raised/ holds public funds would be regarded as CIC, and thus would be required to seek registration as CIC with the Bank.
For Example: HCo is the parent group CIC holding 100 per cent equity capital of A, B and C, all of which are also CICs . In case C has accessed public funds, whether HCo as well as A, B and C must seek registration as CIC or will just C need registration?

Ans: In such a case only C will be registered, provided C is not funding any of the other CICs either directly or indirectly. HCo as well as A and B would not require registration as they neither access public funds directly nor access public funds indirectly through C.

13. A CIC should have 90% investment within the group, and in terms of current exposure norms, NBFCs in Middle Layer and Upper layer are permitted to have exposures (both credit/ investments) only to the extent of 40% of Tier -I capital and 25% of available eligible capital, respectively, within any group. Therefore, no NBFC (ML/ UL) as it stands, would be able to become a CIC without breaching the NOF, CRAR or Concentration Norms, since its entire business is in a subsidiary. However, an NBFC may voluntarily seek to become a CIC since it brings clarity to the holding structure in their organization. How would this issue be resolved? Could NBFCs be provided exemption from Capital adequacy/exposure norms during the transition period, just as unregistered CICs are given 6 months’ time.

Ans: The NBFC would have to apply to RBI with full details of the plan and exemptions could be considered on a selective basis on the merits of the case.

14. A company has investments in Group companies but does not meet the criteria of principal business as defined in terms of asset-income criteria for NBFCs. Can the company still be registered as a CIC, or does it need to first register as an NBFC?

Ans: CICs need not meet the principal business criteria for NBFCs.

15. If a company is a CIC but does not exactly meet the criteria specified, does the company need to register as an NBFC?

Ans: A holding company not meeting the criteria for a CIC laid down in para 2 of Master Direction DoR(NBFC).PD.003/03.10.119/2016-17 dated August 25, 2016 would require to register as an NBFC. However, if such company wishes to register as CIC/ be exempted as CIC, it will have to apply to RBI with an action plan achievable within the specific period to reorganize its business as CIC. If it is not able to do so, it would need to comply with NBFC requirements and prudential norms.

16. Whether a Holding Company which is not able to comply with the CIC criteria (all four conditions), would still need to comply with NBFC requirements and prudential norms even in the event that it is not satisfying the asset-income criteria. (For example: the holding company owns 60 per cent equity in another group company and is not meeting other three conditions. Therefore, it does not qualify as a CIC. Further, the income from financial assets is also less than 50 per cent of total income. Whether such a company would require compliance with NBFC norms).

Ans: No, since the Company is not fulfilling the Principal Business Criteria (asset-income pattern) of an NBFC i.e. more than 50 % of its total assets should be financial assets and the income derived from these assets should be more than 50% of the gross income, it is not required to register as an NBFC under Section 45 IA of the RBI Act, 1934. However, it should register itself as an NBFC as soon as it fulfils the criteria of an NBFC and comply with the NBFC norms.

17. A group would like to set up a CIC in the group to rationalize the set up. However, no company can commence the business of NBFI without COR from RBI. Therefore, the proposed company would have to apply for COR before transferring shares from different companies to the CIC. But at that time the company would not be eligible in terms of the requirements, as it would not have 90% of net assets as investment in group companies. What should the company do?

Ans: The company would have to apply for COR to RBI, giving a satisfactory time-bound business plan within which, it would achieve CIC status.

18. Whether CICs that are exempt from registration either because they have an asset size of less than Rs 100 crore or are not accessing public funds are required to register as NBFCs?

Ans: CICs that (a) have an asset size of less than ₹100 crore irrespective of whether they are accessing public funds or not and (b) have an asset size of ₹ 100 crore and above and are not accessing public funds have been exempt from registration with the Bank under Section 45IA of the RBI Act, 1934 in terms of Master Direction DoR(NBFC).PD.003/03.10.119/2016-17 dated August 25, 2016. Thus, they are not required to register with the Bank at all. As this is an exemption given under Section 45NC of the RBI Act, 1934, they are not required to approach the Bank at all.

19. Would a similar benefit apply to NBFCs i.e. would NBFCs with an asset size of less than ₹ 100 crore and not accessing public funds be exempted from registration with the Bank?

Ans: No, this exemption is specifically given to CICs only. NBFCs other than CICs are not covered by this or any other aspect of the CIC Directions and would have to register with the Bank and comply with all applicable Directions of the Bank as issued from time to time.

20. Whether NBFCs already registered with the Bank as NBFC-Base layer whose asset size is below ₹ 100 crore, but fulfilling the CIC criteria, can seek voluntary deregistration (as such companies are not otherwise required to get registered with the Bank under the extant norms)? If so, which source should be relied upon viz certificate from Statutory auditor or audited balance sheet for one year or more?

Ans: Yes, CICs presently registered with the Bank but fulfilling the criteria for ‘Unregistered CICs’ as defined under para 6 of the Master Direction DoR(NBFC).PD.003/03.10.119/2016-17 date August 25, 2016 can seek voluntary deregistration. Both audited balance sheet and auditor’s certificate are required to be submitted for the purpose.