Ans: Yes, company which is a CIC and has achieved the balance sheet size of ₹ 100 crore as per its last audited annual financial statement is required to apply to the Bank for registration as a CIC, subject to its meeting the other conditions for being identified as a CIC.

Ans: Yes, as they are regulated by RBI, they would require prior approval from Department of  Regulation (DoR) for making investments in the financial sector. However, a registered CIC making investments in the non-financial sector need not obtain prior approval from the Department of Regulation (DoR), RBI. The registered CICs will only need to report such investments to the Department within 30 days of such investment.

Ans: The Directions on CICs have not restricted them from making overseas investment. Such investment will be governed by the provisions of Chapter IX of Master Direction DoR(NBFC).PD.003/03.10.119/2016-17 dated August 25, 2016. Similarly, presently CICs can raise funds through ECB. The same would be governed by the instructions contained in the ECB Policy issued by Foreign Exchange Department of the Reserve Bank. Lending to NBFCs/ CICs by banks will be governed by the provisions as applicable to banks and specifically contained in the instructions on ‘bank finance to NBFCs’ issued by Department of Banking Regulation of the Reserve Bank.

Ans: Anything that has to be repaid to any other legal entity/ person will be an outside liability.

Ans: The period of 10 years was specified as a prudential measure not necessarily in alignment with a provision of the Companies Act. Moreover, the issue here is not public deposits but Outside Liabilities.

Ans: The term used in the CIC Master Direction is block sale and not block deal which has been defined by SEBI. In the context of the Master Direction, a block sale would be a long term or strategic sale made for purposes of disinvestment or investment and not for short term trading. Unlike a block deal, there is no minimum number/value defined for the purpose.

Ans: Adjusted net worth (ANW) is a concept akin to capital requirement wherein the ANW should not be less than 30% of the risk weighted assets (RWA). In cases where asset size is aggregated, all the CICs within the group will be registered as CIC and ANW will be applicable individually.

Ans: The total assets of all NBFCs (Including Standalone Primary Dealer (SPD), Infrastructure Debt Fund-Non-Banking Financial Company (IDF-NBFC) and NBFCs which will always remain in Base Layer, viz., NBFC-Peer to Peer Lending Platform (NBFC-P2P), NBFC-Account Aggregator (NBFC-AA), Non-Operative Financial Holding Company (NOFHC) and NBFC without public funds and customer interface) in a Group, including all the registered Core Investment Companies (CICs) and unregistered CICs with asset size less than ₹100 crore which have raised public funds, shall be consolidated to determine the threshold for classification of other group NBFCs (NBFC- Investment and Credit Company (NBFC-ICC), NBFC- Micro Finance Institution (NBFC-MFI), NBFC- Factor and NBFC- Mortgage Guarantee Company (NBFC-MGC)) into middle layer. However, the consolidation of asset of unregistered CICs for the above purpose would not change the status of unregistered CICs.

Ans: Yes. As per the present directions for CICs, they are permitted to make investments in money market instruments, including money market mutual funds. Since Liquid Funds are also mutual funds with the underlying being money market instruments; CICs are permitted to invest their surplus funds in Liquid Fund Schemes also.

Yes, activities such as trading or rendering services to the group companies are not restricted for CICs, provided such activities are carried out purely in the nature of a non-financial activity, and they do not lead the CIC to carry on any other financial activity not permitted under the extant instructions within the group or on behalf of the group entities. Such activities should not ultimately render creation of any financial asset which the CICs are not permitted to hold within/outside the group. Further, CICs cannot enter into commodity derivative contracts or hold any non-financial assets other than real estate or other fixed assets which are required for effective functioning of the CIC outside the group within the limit of 10% of net assets.

The number of layers of CICs within a Group (including the parent CIC) shall be restricted to two, irrespective of the extent of direct or indirect holding/ control exercised by a CIC in the other CIC. For instance, if a group consists of a parent CIC namely HCo which is holding 100 per cent equity capital in three other CICs namely A, B and C, the layers in the group shall  be as follows.

1. HCo shall be considered as first layer of CIC
2. A,B and C shall be considered as second layer of CICs.
3. Any cross holdings, directly or indirectly through other entities in the group, by CICs in the second layer in any other CIC in the group shall be considered as creation of third layer of CIC/s in the group structure which is a violation of the extant instructions. However, investment by second layer CICs in non-CIC group companies is not a violation to the extant CIC regulations. Further, no restriction is placed on number of CICs in a horizontal layer.