2019 – Posted in: Daily News – Tags: NBFCs

RESERVE BANK OF INDIA TO REVIEW CORE INVESTMENT COMPANIES

For: Mains

Topics covered: Core investment companies, its Significances

News Flash

Reserve Bank of India has now set up a working group to review the regulatory framework for core investment companies.

Significance

This Concept was originated in order to safeguard NBFCs which are formed for group investments from stringent RBI procedures.

The Terms of Reference of the Working Group are

The terms of reference of the working group include an examination of the current regulatory framework for Core Investment Companies.
The examination of the framework for CICs in terms of adequacy, efficacy, and effectiveness of every component and suggest changes therein.
The working group has also been tasked with recommending appropriate measures to enhance RBI’s off-sight surveillance.
The group also has to suggest on-site supervision over Core Investment Companies.
It is also aligned with a task to assess the appropriateness of and suggest changes to the current approach of the Reserve Bank of India towards registration of CICs.
To suggest measures to strengthen corporate governance and disclosure requirements for CICs.
The working group will be headed by Non-Executive Chairman, Central Bank of India, and former Secretary, Ministry of Corporate Affairs, Mr.Tapan Ray.
The Working Group shall submit its report by October 31, 2019.

Background

In August 2010, the Reserve Bank had introduced a separate framework for the regulation of systemically important Core Investment Companies (CICs) recognizing the difference in the business model of a holding company relative to other non-banking financial companies.

Core Investment Companies

CIC is a non-banking financial company. It carries on the business of acquisition of shares and securities and which satisfies the following conditions:

(i) It holds not less than 90% of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies.

(ii) Its investments in the equity shares in group companies and units of Infrastructure Investment Trust only as sponsors constitute not less than 60% of its net assets.

(iii) It 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.

Source: Livemint

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