pri Systemically Important Core Investment Companies (CIC-ND-SI) Systemically Important Core Investment Companies (CIC-ND-SI)

CIC-ND-SI is a Non-Banking Financial Company:

(i) with Rs 100 crore and above asset size;  

(ii) dealing with the acquisition of shares and securities;

(iii) that holds not less than 90% of its net assets in the form of investment in preference shares, bondsloans, equity shares, debentures, debt in group companies;

(iv) whose investments in the equity shares (inclusive of instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue)in group companies comprises of not less than 60% of its net assets same as mentioned in clause (iii) above;

(v) that 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;

(vi) it does not continue any other financial activity referred to in Section 45I(c) and 45I(f) of the RBI act, 1934 except investment in money market instruments, government securities, bank deposits, borrowings to and contributions in debt issuances of group companies or guarantees issued on behalf of group companies. (or guarantees issued on behalf of group companies.

(vii) it accepts public funds (RBI)

What is the procedure of a company to get registered as a CIC-ND-SI?

The application form for CICs-ND-SI is available on the Bank’s website that can be easily downloaded and filled in and submitted to the Regional Office of the DNBS in whose authority, the Company is registered along with all necessary supporting documents mentioned in the application form.

A CIC-ND-SI must have 90% investment within the group, and in terms of current exposure norms, NBFCs-ND-SI are permitted for only 40% of both lending and investment within any group. Thus, no NBFC as it stands, would be able to become a CIC without violating the NOF, CRAR or Concentration Norms, since its entire business is in a subsidiary. Anyhow, an NBFC may voluntarily seek to become a CIC-ND-SI since it brings clarity to the holding structure in their organization. How can this issue be resolved? Can an NBFCs-ND-SI be provided exemption from Capital adequacy/exposure norms during the transition period, just as unregistered CICs-ND-SI are given 6 months time.

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

The Reserve Bank of India (RBI) is an Apex Bank of the Country and entrusted with the authority of administering and supervising the Non-Banking Financial Companies. The regulatory and supervisory objective is to:

a.   ensure healthy growth of the financial companies;

b.   Make sure that these organisations function as a part of the financial system within the policy framework, in such a manner that their presence and operation do not lead to systemic aberrations; and that

c.  the quality of surveillance and supervision exercised by the Bank over the NBFCs is sustained by keeping pace with the developments that take place in this sector of the financial system.

—Shweta Gupta, Founder and CEO, MUDS

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July 2021