The Reserve Bank on Wednesday prohibited Non-Banking Finance Companies (NBFCs) from contributing to the capital of a partnership firm or become a partner of such entities.  The central bank also asked NBFCs, which have already contributed capital or are partner in such firms, to exit from such arrangements at the earliest.

“In view of the risks involved in NBFCs associating themselves with partnership firms, it has been decided to prohibit NBFCs from contributing capital to any partnership firm or to be partners in partnership firms,” RBI said.

In cases of existing partnerships, NBFCs may seek early retirement from such arrangements, it added.

There are about 300 NBFCs registered with RBI and some of them have large investments in, and have contributed capital to, partnership firms.

 

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