As you are aware, in order to have all current instructions on the subject at one place, the Reserve Bank of India issues updated Circulars/notifications. The instructions contained in the Notification No.DNBC.39/DG(H)-77 dated 20th June 1977 updated as on June 30, 2012 is enclosed. The updated notification has also been placed on the RBI web-site (http://www.rbi.org.in).
Quoted investments for each category shall be valued at cost or market value whichever is lower. For this purpose, the investments in each category shall be considered scrip-wise and the cost and market value aggregated for all investments in each category. If the aggregate market value for the category is less than the aggregate cost for that category, the net depreciation shall be provided for or charged to the profit and loss account. If the aggregate market value for the category exceeds the aggregate cost for the category, the net appreciation shall be ignored. Depreciation in one category of investments shall not be set off against appreciation in another category.
The Reserve Bank of India may, if it considers it necessary for avoiding any hardship or for any other just and sufficient reason, grant extension of time to comply with or exempt any mortgage guarantee company or class of mortgage guarantee companies, from all or any of the provisions of these instructions either generally or for any specified period, subject to such conditions as the Reserve Bank of India may impose.
NBFCs were advised to follow certain customer identification procedure for opening of accounts and monitoring transactions of a suspicious nature for the purpose of reporting it to appropriate authority. These ‘Know Your Customer’ guidelines have been revisited in the context of the Recommendations made by the Financial Action Task Force (FATF) on Anti Money Laundering (AML) standards and on Combating Financing of Terrorism (CFT). Detailed guidelines based on the Recommendations of the Financial Action Task Force and the paper issued on Customer Due Diligence (CDD) for NBFCs by the Basel Committee on Banking Supervision, with indicative suggestions wherever considered necessary, have been issued. NBFCs have been advised to ensure that a proper policy framework on ‘Know Your Customer’ and Anti-Money Laundering measures with the approval of the Board is formulated and put in place.
Registration with the Reserve Bank of India – 3. A mortgage guarantee company shall commence the business of providing mortgage guarantee after – (a) obtaining a certificate of registration from the Reserve Bank of India; and (b) having a net owned fund of one hundred crore rupees or such other higher amount, as the Reserve Bank of India may, by notification, specify.
Direct investments by residents in Joint Venture (JV) and Wholly Owned Subsidiary (WOS) abroad are being allowed, in terms of clause (a) of sub-section (3) of section 6 of the Foreign Exchange Management Act, 1999, (42 of 1999) read with Notification No. FEMA 120/RB-2004, dated July 7, 2004, (GSR 757(E), dated November 19, 2004), viz., Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004, as amended from time to time.
These Directions shall be known as the Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007. (2) These Directions shall come into force with immediate effect.
The Bank had announced in the Annual Policy 2010-2011 that companies which have their assets predominantly as investments in shares for holding stake in group companies but not for trading, and also do not carry on any other financial activity, i.e., Core Investment Companies, (CICs), justifiably deserve a differential treatment in the regulatory prescription applicable to Non-Banking Financial Companies which are non deposit taking and systemically important to this extent. Draft guidelines had been placed on the RBI website on April 21, 2010. The feedback received from the market participants have been considered and the following regulatory framework for Core Investment Companies was framed.
NBFCs are required to submit various returns to RBI w.r.t their deposit acceptance, prudential norms compliance, ALM etc. Detailed instructions regarding submission of returns by NBFCs have been issued through various company circulars. A list of such returns to be submitted by NBFCs-D, NBFCs-ND-SI and others is as under:
Foreign investment in India is governed by sub-section (3) of Section 6 of the Foreign Exchange Management Act, 1999 read with Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time. The regulatory framework and instructions issued by the Reserve Bank have been compiled in this Master Circular. The list of underlying circulars/notifications is furnished in Appendix. In addition to the above, this Master Circular also covers the area of Investment in capital of partnership firms or proprietary concern’ which is regulated in terms of Section 2(h) of Section 47 of Foreign Exchange Management Act, 1999, read with Notification No. FEMA 24/2000-RB dated May 3, 2000.
