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PPT on NBFCs & CIC in India

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Very useful guide for compliances for NBFC & CIC in india

Very useful guide for compliances for NBFC & CIC in india

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  • Very good ppt on NBFC. Congrats Mr.Bhatt.
    What changes can come in the light of New companies bill -2012 in NBFC functioning....?
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    PPT on NBFCs  & CIC in India PPT on NBFCs & CIC in India Presentation Transcript

    • By Prakash Bhatt B. Com, CS & LLB Delve Consultancy Services R-109, Sector-21, Noida Email: pbhatt.acs@gmail.com Mob. 9873877684 1
    •  Definition  Registration  Classification  Exempted from registration requirement  Compliances requirements  Returns to be submitted  Auditors responsibility  Problem areas 2
    •  Reserve Bank of India is regulator of the Non-Banking Financial Companies under the provisions of Chapter III B of the Reserve Bank of India Act, 1934.  With the amendment of the Reserve Bank of India Act, 1934 in January 1997, in terms of Section 45 IA of the Act, all Non-Banking Financial Companies have to be mandatorily registered with the Reserve Bank of India. 3
    • DEFINITIONDEFINITION Clause (3) of section 45-IA RBI Act 1934: A Non Banking Financial Company (NBFC) is a Company registered under the Companies Act, 1956 and which is engaged in the business of : Loans & advances Acquisition of shares and securities Leasing Hire purchase Insurance Chit fund Nidhi Companies (Mutual Benefit Companies) List of registered NBFC is available at the website of RBI & MCA 4
    • DEFINITION OF PRINCIPAL BUSINESSDEFINITION OF PRINCIPAL BUSINESS RBI Press Release Dt. April 8, 1999  If 50% or more of a company’s total assets (netted off by intangible assets) are financial assets and  If 50% or more of a company’s gross income is from financial assets then the Principal Business of the Company is of a NBFC 5
    • With effect from December 6, 2006 the above NBFCs registered with RBI have been reclassified as: (i) Asset Finance Company (AFC) (ii) Investment Company (IC) (iii) Loan Company (LC) (iv) Core Investment Company (CIC) (v) Residuary Non Banking Finance Company, a class of NBFC not being Investment, Asset Financing, Loan Company (R-NBFC). (vi) Nhidis Company (Mutual Benefit Finance Co) (vii) Chit Fund (Misc NBFC) 6
    •  Insurance Companies registered under Insurance Act, 1938;  Nidhi Companies notified under Section 620A of the Companies Act, 1956;  Chit fund companies regulated by State Govt.  Stock Broking Companies / Merchant Banking Companies registered with Securities & Exchange Board of India Act;  Housing Finance Companies being regulated by the National Housing Bank (NHB) 7
    • CIC’s are exempted from registration with RBI subject to the compliance with the following criteria as on date of last audited balance sheet: It holds not less than 90% of its net assets in the form of investment in Group Companies (subsidiaries, Associates and JVs). It holds investment in equity shares in group companies not less than 60% of its net assets. It is not trading in those shares (except for block sale) It does not carry any other NBFI activities except investment in Bank Deposits, Govt. Securities, Bonds, debentures or loans in group companies. Its total assets are less than 100 Crores. 8
    • PRE-REQUSITE FOR CARREYING ON NBFC ACTIVITIES  Require registration with RBI under section 45 IA of RBI Act, 1934 to commence / carry on business of NBFC.  Minimum NOF Rs 200 Lacs( earlier Rs. 25 Lacs) 9
    • NOF: PAID UP SHARE CAPITAL + FREE RESERVE (created through an allocation of profits) DEDUCT: a) Accumulated balance of losses b) Deferred revenue expenditure c) Other intangible assets DEDUCT : If the following are in excess of 10% of the above a). Investment in shares in shares of b). subsidiaries, cos., in the same group and other NBFCs c). Book value of debentures, bonds, loans & advances to subsidiaries and cos. in the same group Deposits with subsidiaries and cos. in the same group 10
    • For the purpose on monitoring / compliances NBFC are further classified:  Deposit taking NBFC (NBFC-D) - Category –A  Non-Deposit taking NBFC (NBFC-ND)- Category- B  CIC-ND-SI – Category –C Separate guidelines / regulation has been formulated by RBI for each above class 11
    • I. NBFC Acceptance Of Public Deposit Directions, 1998. II.NBF (Deposit Accepting or Holding) Companies Prudential Norms Directions, 2007. III.NBFC Advertisement Rules,1977. IV.Circulars issued form time to time. 12
    •  Regulated deposits and exempt deposits  Quantum of deposit  Credit rating  Advertisement/ Statement in lieu of Advertisement  Period of deposit  Rate of interest  Rate of brokerage  Repayment of deposit  Regularization of excess deposit  Premature payment of deposits 13
    •  Loan against deposit  Default in payment of deposit or interest thereon  Interest on overdue deposits  Deposit Register & Deposit Receipts  Percentage of Liquid assets  Nature of liquid assets  Mode of liquid assets  Safe custody of approved securities  Floating charge on liquid assets in favour of depositors  KYC Norms 14
    • I. NBFC (Non-Deposit Accepting or Holding ) Companies Prudential Norms Directions, 2007. II. Additional requirements for NBFCs-ND-SI (having total assets of Rs.100 Crores and above as shown in the last audited Balance Sheet). III. Circulars issued form time to time. 15
    •  Accounting policies  Accounting standards  Income recognition  Accounting of Investment  Policy on investment and disclosure  Assets Classification  Provisioning norms  Capital adequacy requirement (Tier i &Tier ii)  Disclosure in balance sheet 16
    •  Policy for demand / call loans  Accounting year  Concentration of Loans / investment with reference to single borrower / group. 15% (single borrower) / 25% (group) (lend + invest 25 % single/ 40% group)  NBFC Schedule is to be appended to Balance sheet.  Constitution of Audit committee.  Submission of auditors certificate  Intimation of change of directors, address, principal officer, auditors etc. 17
    • 18
    •  Special Report to the Board of Directors of the co. in terms of Para 2 of NBFC Auditors Report ( RB) Directions, 2008.  Exceptional Report to the RBI in specific circumstances in terms of Para 5 of NBFC Auditors Report( RB) Directions, 2008.  Schedule to the Balance sheet in terms of Prudential Norms Directions,2007.  Periodical Certified Returns to RBI. 19
    •  All NBFC are prohibited from granting loans against their own shares.  NBFC Not to be partner in partnership firm. 20
    •  OFF-SITE SURVEILLANCE Returns Auditors’ Reports Market intelligence  ON-SITE SURVEILLANCE Inspections Special audits 21
    • A large number of NBFCs are working without registration: Companies working without registration and Companies rejected by RBI still operating. Penalties:  Imprisonment of 1 to 5 Years and  Fine of Rs. 1 Lakh to 5 Lakhs. 22
    • Thank You 23
    • Delve Consultancy Services provides consultancy for Non- Banking Finance Companies (NBFC) / Core Investment Companies (CICs) registration, compliances, returns to be submitted & inspections etc. Contact: Mob: 9873877684 Email: pbhatt.acs@gmail.com 24