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Everything about Core Investment Companies (NBFC CIC)

Mani Dahiya Mani Dahiya | Fintech Compliance Professional | Updated

The Core Investment Companies (NBFC CIC) are the ones that have their assets primarily as investments in shares for holding stake in group companies but not for trading purpose, and do not carry on any other financial activity. These kind of companies have a minimum ninety percent of their assets in the group concerns either in the form of equity, preference shares or convertibles bonds or loans. Further the module of equity holdings should not be less than sixty percent of their assets.


RBI has acknowledged that such CICs rightly rationalize a different treatment in the regulatory recommendation pertinent to Non-Banking Financial Companies that are non deposit taking and systemically significant.  It is now determined by RBI that only those CICs having an asset size of Rs.100 crore and above would be treated as systemically significant core investment companies. Systemically significant core Investment Company means a Core Investment Company satisfying both the conditions:

 

  • Having total assets of not less than Rs hundred crores, either individually or in cumulative along with other Core Investment Companies in the Group; 
  • Raises or holds public funds; 

 

The rules covering systemically significant CICs are as below:

  • They would necessitate registration with the Reserve Bank and would be given discharge from safeguarding of net owned fund and revelation norms subject to certain circumstances.
  • Capital necessities:  Every CIC  shall make sure that at all times it maintains a minimum Capital Ratio whereby its accustomed Net Worth shall not be less than 30% of its cumulative risk subjective assets on balance sheet and risk accustomed value of off-balance sheet items as an the date of the last audited balance sheet as at the end of the financial year.
  • Leverage Ratio:  Every CIC  shall make sure that its external liabilities at all times shall not surpass 2.5 times its Adjusted Net Worth as on the date of the last audited balance sheet as at the conclusion of the financial year. 

 

Exemptions of Core Investment Companies (NBFC CIC)   

A CIC  which cling to the necessities regarding capital rations and leverage ratio as particularly above, may to the level necessary, be excluded from conformity with:- 

  • Safeguarding of statutory minimum Net Owned Fund (NoF) and
  • Requirements of "Non-Banking Financial (Non-Deposit Accepting or holding) Companies Prudential Norms (Reserve Bank) Directions, 2007" including requirements of capital sufficiency and revelation norms. 

 

Definitions of Core Investment Companies (NBFC CIC)

 
1. Adjusted Net Worth

Adjusted net worth means the cumulative, as appearing in the last audited balance sheet as at the end of the financial year, of Owned Funds as described in Non Banking Financial (Non Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 and forty-five percent of the amount reputed to credit of Revaluation Reserve arising from revaluation of investments in given investments, if any, 

 

  • Increased by:

Fifty percent of the unrealized appreciation in the book value of quoted investments as at the date of the last audited balance sheet as at the end of the financial year (such appreciation being calculated, as the surplus of the cumulative market value of such investments over the book value of such investments); and 
the amplify if any, in the equity share capital since the date of the last audited balance sheet. 

 

  • Decreased by:

The amount of lessening in the cumulative book value of given investments (such decrease being deliberated as the surplus of the book value of such investments over the cumulative market value of such investments ) and the cutback, if any, in the equity share capital since the date of the last audited balance sheet.  

 

(2)   Market Value of Quoted Investments means:

The average of the highs and lows of the given prices of the investments, on a documented stock exchange where the investment is most keenly  traded, during the period of 26 weeks instantly preceding the end of the financial year at which date the last audited balance sheet is available.

 

(3) Outside Liabilities means:

Total liabilities as appearing on the liabilities side of the balance sheet not including 'paid-up capital' and 'reserves and surplus' but involving all forms of debt and obligations having the distinctiveness of debt whether created by issue of amalgamated instruments or otherwise and value of guarantees issued whether showing on the balance sheet or not.

 

(4) Total Assets means:

Total assets as showing on the assets side of the balance sheet but not including :-

  • Cash and bank balances;
  • Outlay in money market instruments;
  • Processed payments of taxes; and
  • Overdue tax asset.

 

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