ISSUES IN FORMATION OF NBFC FILING OF RETURNSvasai-icai.org/Image/Alok Saxena Sir.pdf · NBFC DEFINITION • Section 45I of Reserve Bank of India (RBI) Act 1934 • Section45I(f)Non-Banking

ISSUES IN FORMATION OF NBFC

&

FILING OF RETURNSBY C.A. ALOK SAKSENA

NBFC DEFINITION

NBFC DEFINITION

• Section 45I of Reserve Bank of India (RBI) Act

1934

• Section 45I (f) Non- Banking Finance Company

(i) a financial institution which is a company;

(ii) a non-banking institution which is a company and

which has as its principal business the receiving of

deposits, under any scheme or arrangement or in any

other manner, or lending in any manner;

(iii) such other non-banking institution or class of

such institutions, as the Bank may, with the previous

approval of the Central Government and by

notification in the Official Gazette, specify;]

NBFC DEFINITION Contd…

• Section 45I (e) – Non Banking Institutions

‘‘non-banking institution’’ means a company, corporation

[or cooperative society].

• Section 45I (c)- Financial Institutions

‘‘financial institution’’ means any non-banking institution

which carries on as its business or part of its business any

of the following activities, namely:–

(i) the financing, whether by way of making loans or

advances or otherwise, of any activity other than its own:


(ii) the acquisition of shares, stock, bonds, debentures or

securities issued by a Government or local authority or

other marketable securities of a like nature:

(iii) letting or delivering of any goods to a hirer under a

hire-purchase agreement as defined in clause (c) of section

2 of the Hire-Purchase Act, 1972:

(iv) the carrying on of any class of insurance business;

(v) managing, conducting or supervising, as foreman, agent

or in any other capacity, of chits or kuries as defined in any

law which is for the time being in force in any State, or any

business, which is similar thereto;


(vi) collecting, for any purpose or under any scheme

or arrangement by whatever name called, monies in

lumpsum or otherwise, by way of subscriptions or by

sale of units, or other instruments or in any other

manner and awarding prizes or gifts, whether in cash

or kind, or disbursing monies in any other way, to

persons from whom monies are collected or to any

other person, [but does not include any

institution, which carries on as its principal

business,–

(a) agricultural operations; or

(aa) industrial activity; or]


(b) the purchase or sale of any goods (other than securities)

or the providing of any services; or

(c) the purchase, construction or sale of immovable

property, so however, that no portion of the income of the

institution is derived from the financing of purchases,

constructions or sales of immovable property by other

persons;]

[Explanation.– For the purposes of this clause,

‘‘industrial activity’’ means any activity specified in

sub-clauses (i) to (xviii) of clause (c) of section 2 of

the Industrial Development Bank of India Act, 1964;]


Simplified Version as applicable to Companies from Directions

“Non Banking Financial Company means only the non-banking institution

which is a loan company or an investment company or an asset finance

company or a mutual benefits finance company.”

• “Loan Company”

Loan Company means any company which is a financial institution carrying

on as its principal business the providing of finance whether by making loans

or advances or otherwise for any activity other than its own but does not

include an Asset Finance Company.

• “Investment Company”

Investment Company means any company which is a financial institution

carrying on as its principal business the acquisition of securities.


• “Asset Finance Company”

Asset Finance Company means any company which is a financial institution carrying on

as its principal business the financing of physical assets supporting productive/ economic

activity, such as automobiles, tractors, lathe machines, generator sets, earth moving and

material handling equipments moving on own power and general purpose industrial

machines.

• “Mutual Benefit Financial Company”

Mutual Benefit Financial Company means any company which is a financial institution

notified by the Central Government under section 620A of the Companies Act 1956 (1

of 1956).

CLASSIFICATION

CLASSIFICATION

• If any question arise as to whether a company is a financial

institution or not, such question shall be decided by the Reserve

Bank of India in consultation with the Central Government and

such decision shall be final and be binding on all the parties

concerned.

• If any question arises as to whether a company which is a

financial institution is a loan company or [an asset finance

company], such question shall be decided by the Reserve Bank

of India, having regard to the principal business of the

company and other relevant factors and such decision shall be

final and be binding on all the parties concerned.

CLASSIFICATION Contd…

• Leasing /hire purchase company treated as “Asset Finance

Company”.

Reclassification of NBFCs

In terms of Company Circular DNBS.PD. CC No. 85 / 03.02.089/2006-07 dated December 06, 2006 it was advised that NBFCsfinancing real / physical assets for productive / economic activitywill be classified as Asset Finance Company (AFC) as per thecriteria given under paragraph 4 of that circular. Consequent uponre-classification of NBFCs, in the proposed structure the followingcategories of NBFCs will emerge:

(i) Asset Finance Company

(ii) Investment Company

(iii) Loan Company

CLASSIFICATION Contd…

Accordingly, it was advised that the companies satisfying the

conditions specified may approach the Regional Office in the

jurisdiction of which their Registered Office is located, along with

the original Certificate of Registration (CoR) issued by the Bank to

recognize their classification as Asset Finance Companies. Their

request must be supported by their Statutory Auditors’ certificate

indicating the asset / income pattern of the company as on March

31, 2006.

As substantial time has elapsed, since the issue of the circular, it has

now been decided that erstwhile EL/HP NBFCs should, duly

supported by Statutory Auditors’ Certificate as on March 31, 2008,

immediately approach the Regional Office concerned for appropriate

classification latest by December 31, 2008 after which NBFCs which

have not opted for the classification would be deemed to be loan

companies.

SUB-CLASSIFICATION OF NBFC

SUB-CLASSIFICATION OF NBFC

• Deposit taking NBFC [NBFC – D]

• Non – deposit taking NBFC [NBFC- ND]

• Non – deposit taking NBFC [NBFC- ND-S1]

Systemically important

[these having assets size of

`. 100 crores or more]

• Core Investment Companies [CIC –ND-SI]

Non- deposit and Systemically

important

REGISTRATION OF NBFC

REGISTRATION OF NBFC

45-IA Requirement Of Registration And Net Owned Fund.

(1) Notwithstanding anything contained in this Chapter or in any

other law for the time being in force, no non-banking financial

company shall commence or carry on the business of a non-

banking financial institution without–

(a) obtaining a certificate of registration issued under this

Chapter; and

(b) having the net owned fund of twenty-five lakh rupees or

such other amount, not exceeding two hundred lakh rupees, as

the Bank may, by notification in the Official Gazette, specify.

(2) Every non-banking financial company shall make an

application for registration to the Bank in such form as the

Bank may specify.

REGISTRATION OF NBFC Contd…(3) The Bank may, for the purpose of considering the application for

registration, require to be satisfied by an inspection of the books of the non-banking financial company or otherwise that the following conditions arefulfilled:–

(a) that the non-banking financial company is or shall be in a position to pay itspresent or future depositors in full as and when their claims accrue;

(b) that the affairs of the non-banking financial company are not being or arenot likely to be conducted in a manner detrimental to the interest of itspresent or future depositors;

(c) that the general character of the management or the proposed managementof the non-banking financial company shall not be prejudicial to the publicinterest or the interest of its depositors;

(d) that the non-banking financial company has adequate capital structure andearning prospects;

(e) that the public interest shall be served by the grant of certificate ofregistration to the non-banking financial company to commence or to carryon the business in India;

REGISTRATION OF NBFC Contd...

(f) that the grant of certificate of registration shall not be prejudicial tothe operation and consolidation of the financial sector consistent withmonetary stability, economic growth and considering such otherrelevant factors which the Bank may, by notification in the OfficialGazette, specify; and

(g) any other condition, fulfillment of which in the opinion of the Bank,shall be necessary to ensure that the commencement of or carrying onof the business in India by a non-banking financial company shall notbe prejudicial to the public interest or in the interest of the depositors.

(4) The Bank may, after being satisfied that the conditions specified in sub-section (4) are fulfilled, grant a certificate of registration subject to such conditions which it may consider fit to impose.

REGISTRATION OF NBFC Contd...

• Net Owned Funds

(I)“Net owned fund” means–

(a) the aggregate of the paid-up equity capital and free reserves as

disclosed in the latest balance-sheet of the company after deducting

there from–

– (i) accumulated balance of loss;

– (ii) deferred revenue expenditure; and

– (iii) other intangible assets; and

(b) further reduced by the amounts representing–

(1) investments of such company in shares of–

-- (i) its subsidiaries;

– (ii) companies in the same group;

– (iii) all other non-banking financial companies; and

REGISTRATION OF NBFC Contd…(2) the book value of debentures, bonds, outstanding loans and advances (including

hire-purchase and lease finance) made to, and deposits with,–

(i) subsidiaries of such company; and

(ii) companies in the same group,

– to the extent such amount exceeds ten per cent of (a) above.

(II) “subsidiaries” and “companies in the same group” shall have the same

meanings assigned to them in the Companies Act, 1956.

• Paid up preference share capital which is compulsorily convertible into equity

share capital is to be treated as part of net owned funds.

• “Free Reserves”

Free Reserves means the aggregate of the balance in the share premium

account, capital and debenture redemption reserves and any other reserve

shown or published in the balance sheet of a company and created through an

allocation of profits not being a reserve created for repayment of any future

liability or for depreciation in assets debts or a reserve created by revaluation of

the assets of the company.

REGISTRATION OF NBFC Contd…

• Vide Notification No. DNBS 132/CGM (VSNM)-99 dated

20-04-1999, the Reserve Bank of India specifies the “net

owned fund’ to be two hundred lakhs of rupees, for a non-

banking financial company which commences the business

of a non-banking financial institution on or after 21st April

1999.

• This specification of higher “net owned funds” shall not be

applicable to such company whose application for

certificate of registration under section 45IA of the said

Act is submitted to the Reserve Bank of India on or before

20th April 1999.

ISSUES

ISSUESA. Limited Liability Partnership

Whether the status is that of a company and can they be registered as NBFC?

Pl. refer note 7 of form 1 under LLP Rules, 2009 that RBI in principle approval is required for

NBFC activities. Trading in shares/securities is also a NBFI activity as per RBI Act, 1934 and

for this NBFI activities only the company format of business is permitted as per RBI

Act,1934. In LLP you can do this business only when RBI/Govt. of India allows for the same.

As stated in your mail if registration of LLP is permitted ignoring LLP Rules read with Form-

1 requirement stated above, then problem is raised that who will regulate the activity of LLP.

If RBI is agreed to you that if LLP is registered then they will permit you registration and

regulate the LLP then we have no problem in registering LLP. The RBI maintains that

only company can do NBFI activity as per RBI Act,1934.

Thus It is not advisable to get registered unless RBI issues a general circular or ammend RBI

Act,1934 allowing LLP to do NBFI activity. However, Ministry is perusing the RBI for

allowing LLP for NBFI activity.

ISSUES Contd…B. Partnership or incorporated association of individuals/firms. Whether they

are regulated?

One may look at section 45S of the RBI Act 1934

(1) No person, being an individual or a firm or an unincorporated association of

individuals shall, accept any deposit–

(i) If his or its business wholly or partly includes any of the activities specified in

clause (c) of section 45-I; or

– (ii) if his or its principal business is that of receiving of deposits under any

scheme or arrangement or in any other manner, or lending in any manner;

– Provided that nothing contained in this sub-section shall apply to the receipt

of money by an individual by way of loan from any of his relatives or to the

receipt of money by a firm by way of loan from the relative or relatives of any

of the partners.

(2) Where any person referred to in sub-section (1) holds any deposit on the 1st day of

April, 1997 which is not in accordance with sub-section (1), such deposit shall be

repaid by that person immediately after such deposit becomes due for repayment

or within three years from the date of such commencement, whichever is earlier;

Provided that if the Bank is satisfied on an application made by any person to the

Bank that such person is unable to repay a part of the deposits for reasons beyond

ISSUES Contd…

his control or such repayment shall cause extreme hardship to him, it may, by an

order in writing, extend such period by a period not exceeding one year subject to

such conditions as may be specified in the order.

(3) On and from the 1st day of April, 1997, no person referred to in sub-section (1)

shall issue or cause to be issued any advertisement in any form for soliciting deposit.

Explanation.– For the purposes of this section, a person shall be deemed to be a

relative of another if, and only if,–

– (i) they are members of a Hindu undivided family; or

– (ii) they are husband and wife; or

– (iii) the one is related to the other in the manner indicated in the List of Relatives

below:–

• List of relatives–

• 1. Father, 2. Mother (including step-mother), 3. Son (including stepson), 4. Son’s

wife, 5. Daughter (including step-daughter), 6. Father’s father, 7. Father’s mother, 8.

Mother’s mother, 9. Mother’s father, 10. Son’s son, 11. Son’s son’s wife, 12. Son’s

daughter, 13. Son’s daughter’s husband, 14. Daughter’s husband, 15. Daughter’s

son, 16. Daughter’s son’s wife, 17. Daughter’s daughter, 18. Daughter’s daughter’s

husband, 19. Brother (including stepbrother), 20. Brother’s wife, 21. Sister

(including step-sister), 22. Sister’s husband.]

ISSUES Contd…C. “Securities / share trading company” whether they are regulated?

A pure share trading company which buys and sells shares/ securities and hold

securities/ stocks as “closing stock” and consider the income as Business Income.

Whether it would be an NBFC?

D. Core Investment Companies (CIC) and to what extent regulated? What is the effect

of the circular no. DNBS (PD) CC. No. 197/03.10.001/2010-11 dated 12th August

2010?

EXEMPTIONS

EXEMPTIONS Contd…1. Introduction

The Bank has issued notifications from time to time exempting some entities from the

requirements of Chapter III B of the RBI Act, 1934 or part thereof. While the Master

Circular has been prepared to enable the users to have the benefit of a consolidated

circular for the purpose of operations, they should refer to the instructions /

directions contained in the relevant notifications. The Master Circular is based on

notifications listed in the Annex.

2 (i) Exemption from provisions of Chapter III B of the RBI Act, 1934 – Housing

Finance Institutions.

The Bank has exempted a non-banking financial company which is a housing finance

institution as defined in Section 2(d) of the National Housing Bank Act, 1987 from

the provisions of Chapter III B of the RBI Act, 1934.

2(ii) Merchant Banking company :

A merchant banking company has been exempted from the provisions of Section 45-

IA [Requirement of registration and net owned fund], Section 45-IB [Maintenance of

liquid assets] and 45-IC [Creation of Reserve Fund] of the RBI Act, 1934 , 3 Non-

Banking Financial Companies Acceptance of Public Deposits (Reserve Bank)

Directions, 1998 and 4 Non-Banking Financial Companies Prudential Norms

(Reserve Bank) Directions, 1998 subject to compliance with the following conditions:

EXEMPTIONS Contd…

(a) It is registered with the Securities and Exchange Board of India as a Merchant Banker underSection 12 of the Securities and Exchange Board of India Act, 1992 and is carrying on thebusiness of merchant Banker in accordance with the Securities and Exchange Board ofIndia Merchant Banking (Rules) 1992 and Securities and Exchange Board of IndiaMerchant Banking (Regulations) 1992;

(b) acquires securities only as a part of its merchant banking business;

(c) does not carry on any other financial activity referred to in Section 45I(c) of the RBI Act,1934; and

(d) does not accept or hold public deposits as defined in paragraph 2(1)(xii) of the NotificationNo. DFC 118/DG(SPT)-98 dated January 31, 1998.

2 (iii) Micro Finance Companies

Sections 45-IA, 45-IB and 45-IC of the Reserve Bank of India Act, 1934 (2 of 1934) shallnot apply to any non-banking financial company which is

–(a) engaged in micro financing5 activities, providing credit not exceeding `. 50,000 for a

business enterprise and `.1,25,000 for meeting the cost of a dwelling unit to any poor

person for enabling him to raise his level of income and standard of living; and

–(b) licensed under Section 25 of the Companies Act, 1956; and

–(c) not accepting public deposits as defined in paragraph 2(1)(xii) of Notification No. 118/DG(SPT)-98 dated January 31, 1998.

EXEMPTIONS Contd…

• Mutual Benefit Companies

Sections 45-IA, 45-IB and 45-IC of the Reserve Bank of India Act, 1934 (2 of 1934)

shall not apply to any non-banking financial company which being a mutual benefit

company as defined in paragraph 2(1) (ixa) of the Non-Banking Financial Companies

Acceptance of Public Deposits (Reserve Bank) Directions, 1998 contained in

Notification No. DFC.118/DG(SPT)-98 dated January 31, 1998).

A “mutual benefit company” means a company not notified under section 620A of the Companies

Act, 1956 (1 of 1956) and carrying on the business of a non-banking financial institution, -

(a) on 9th January 1997; and

(b) having the aggregate of net owned funds and preferential share capital of not less than ten lakhs

of rupees; and

(c) has applied for issue of certificate of registration to the Bank on or before 9th July 1997; and

(d) is complying with the requirements contained in the relevant provisions of the Directions issued

under Section 637A of the Companies Act, 1956 to Nidhi Companies by the Central Government.

EXEMPTIONS Contd…2(iv) Government Companies

Sections 45-IB and 45-IC of the Reserve Bank of India Act, 1934 (2 of 1934), paragraphs 4 to 7of the Non-Banking Financial Companies Acceptance of Public Deposits ( Reserve Bank)Directions, 1998 and Non-Banking Financial Companies Prudential Norms (Reserve Bank)Directions, 1998 (since repealed by Prudential Norms Directions Notification No 192 datedFebruary 22, 2007), except paragraph 13 A of the said directions relating to submission ofinformation to Reserve Bank in regard to change of address, directors, auditors, etc. shall not applyto any non-banking financial company as defined in section 45-I(f) of the Reserve Bank of IndiaAct, 1934 (2 of 1934) being a Government company6 as defined in section 617 of the CompaniesAct, 1956. A Government Company is a company in which not less than 51% of the paid upcapital is held by the Central Government, or by any State Government or Governments or partlyby the Central Government and partly by one or more State Governments and includes a companywhich is subsidiary of a Government Company as thus defined.

2(v) Venture Capital Fund Companies

Section 45-IA and Section 45-IC of the Reserve Bank of India Act, 1934 (2 of 1934); NotificationNo. DFC.118/DG(SPT)-98 dated January 31, 1998; and Notification No. DFC.119 / DG(SPT)-98dated January 31, 1998 shall not apply to a non-banking financial company, which is a venturecapital fund company holding a certificate of registration obtained under Section 12 of theSecurities and Exchange Board of India Act, 1992 (15 of 1992) and not holding or acceptingpublic deposit as defined in paragraph 2(1)(xii) of the Notification No. DFC.118/DG(SPT)-98dated January 31, 1998.

EXEMPTIONS Contd…

2(vi) Insurance/Stock Exchange/Stock Broker/Sub-Broker

The provisions of Section 45-IA, 45-IB, 45-IC, 45MB and 45MC of the Reserve Bank

of India Act, 1934 (2 of 1934) and provisions of Non-Banking Financial Companies

Acceptance of Public Deposit (Reserve Bank) Directions contained in Notification

No. DFC.118 / DG(SPT)-98 dated January 31. 1998, “Non-Banking Financial

(Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank)

Directions, 2007” shall not apply to any non-banking financial company not holding or

accepting public deposit as defined in paragraph 2(1)(xii) of the Notification No.

DFC.118/DG(SPT)-98 dated January 31, 1998, and -

(a) doing the business of insurance8, holding a valid certificate of registration issued under

Section 3 of the Insurance Act, 1938 (IV of 1938);

(b) being a stock exchange, recognised under Section 4 of the Securities Contracts

(Regulation) Act, 1956 (42 of 1956) ; and

(c) doing the business of a stock-broker or sub-broker holding a valid certificate of

registration obtained under Section 12 of the Securities and Exchange Board of India

Act, 1992 (15 of 1992).

EXEMPTIONS Contd…

2(vii) Nidhi Companies

The provisions of Sections 45-IA, 45-IB and 45-IC of the Reserve Bank of India Act,

1934 (2 of 1934) shall not apply to any non-banking financial company

(a) Notified under Section 620A of the Companies Act, 1956 (1 of 1956), known as Nidhi

Companies; and 10[“The provisions contained in Non-Banking Financial Companies

Acceptance of Company; Public Deposits ( Reserve Bank) Directions, 1998 shall not

apply to a Mutual Benefit Financial Company or a Mutual Benefit company

– Provided that the application of Mutual Benefit Company is not rejected by

Government of India under the provisions of the Companies Act, 1956( Act 1 of

1956).” ]

Chit Companies

(b) doing the business of chits, as defined in clause (b) of Section 2 of the Chit Funds Act,

1982 (No. 40 of 1982).

EXEMPTIONS Contd…Securitization and Reconstruction Companies

(c) Securitization company or Reconstruction company registered with the Reserve Bank of India under Section 3 of

the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act,2002.

Mortgage Guarantee Companies

(d) Mortgage Guarantee Companies notified as non-banking financial company in terms of Section 45 I (f)(iii) of the

Reserve Bank of India Act, 1934 (2 of 1934) with the prior approval of the Central Government, and a company

registered with the Bank under the scheme for registration of Mortgage Guarantee Companies.

Core Investment Companies (CIC)

Core Investment Companies (CIC) with an asset size of less than `.100 crores are proposed to be exempted

(Notification is awaited).

CICs are defined as under:

A NBFC carrying on the business of acquisition of shares and securities which satisfied the following conditions:

(i) it holds not less than 90% of its Total Assets in the form of investment in equity shares, preference shares, debt

or loans in group companies;

(ii) its investments in the equity shares (including instruments compulsorily convertible into equity shares within a

period not exceeding 10 years from the date of issue) in group companies constitutes not less than 60% of its

Total Assets;

(iii) it does not trade in its investments in shares, debt or loans in group companies except through block sale for the

purpose of dilution or disinvestment;

(iv) it does not carry on any other financial activity referred to in Section 45I(c) and 45I(f) of the RBI act, 1934

except investment in bank deposits, money market instruments, government securities, loans to and

investments in debt issuances of group companies or guarantees issued on behalf of group companies.

PROCEDURE FOR REGISTRATION


SPECIMEN APPLICATION FORM FOR REGISTRATION WITH RBI

FORM OF APPLICATION FOR CERTIFICATE OF REGISTRATION TO

COMMENCE/CARRY ON THE BUSINESS OF A NON-BANKING

FINANCIAL INSTITUTION BY A COMPANY

Name and address of registered

office of the company

(in block letters)

By Registered Post A.D./Hand Delivery

To

The General/Dy. General Manager*,

Department of Non-Banking Supervision

Reserve Bank of India,

Regional Office,

...................................................................

(Place)


Contd...Dear Sir,Application for a Certificate of Registration to commence/carry *on the business of a non-banking financial institution

We make this application in terms of sub-section (2) of section 45-IA of the Reserve Bank of IndiaAct, 1934 for issue of a Certificate of Registration. The required documents/information as per theinstructions are furnished.We are desirous of commencing/carrying on* the business of a non-banking financial institution.Hence, we hereby request you to kindly issue the necessary Certificate of Registration under sub-section (1) of section 45-IA of the Reserve Bank of India Act, 1934 to enable our company tocommence/carry on* the business of a non-banking financial institution.

We declare that to the best of our knowledge and belief the information furnished in thestatements/annexes enclosed hereto is true/correct and complete.

Yours faithfully,Date:Place: Signature:

Name:Designation:

Company Seal:Encl. : ................Sheets*Strike out whichever is not applicable.


Contd...

1 MinimumNOF requirement `. 200 lacs

2 Application to be submitted in two separate sets tied up properly in two separate files

3 Annexure II to be submitted duly signed by the Director / authorised signatory and certified by thestatutory auditors.

4 Annexure III (director’s profile) to be separately filled up for each director. Care should be taken to givedetails of bankers in respect of firms/companies/entities in which directors have substantial interest.

5 In case the directors are associated or have substantial interest in other companies, indicate clearly theactivity of the companies (whether NBFC or not)

6 Board resolution specifically approving the submission of the application and its contents andauthorising signatory

7 Board resolution to the effect that the company has not accepted any public deposit, in the past (specifyperiod)/ does not hold any public deposit as on date and will not accept in same in future without theprior approval of Reserve Bank of India in writing

8 Board Resolution stating that the company is not carrying on any NBFC activity/ stopped NBFCactivity and will not carry on / commence the same before getting registration from RBI.

9 Auditor’s certificate certifying that the company is / does not accept/ is not holding public deposit.

10 Auditor’s certificate certifying that the company is not carrying on any NBFC activity

11 Net owned fund as on date

Requirements to be complied with and documents to be submitted to RBI by NBFCs for obtaining

Certificate Of Registration


Contd...

12 Certifying compliance with section 45C of Chapter IIIC of the RBI Act 1934 in which director/s of the company has substantial interest

13 Details of change in the Memorandum and Articles of Association duly certified

14 Last three years audited balance sheet along with director’s and auditor’s report

15 Details of clauses in the memorandum relating to financial business

16 Details of change in the management of company during last financial year till date if any and reasons thereof

17 Details of acquisitions, mergers of other companies if any together with supporting documents

18 Details of group companies/ associate concerns/ subsidiaries/ holding companies

19 Details of infusion of capital if any during last financial year together wit the copy of the return of allotment filed wit the Registrar of Companies

20 Details of bank balances/ bank accounts/complete postal address of the branch/ bank, loan/credit facilities etc. awaited.

21 Business plan for next three years indicating market segment to be covered without any element of public deposits


Contd...22 Cash flow statement, asset/ income pattern statement for next three years

23 Brief back ground note on the activities of the company during the last three years and the reasons for applying for NBFC registration

24 II (b) is the company engaged in any capital market activity? If so, whether there has been any non-compliance with SEBI regulations? (Statement to be certified by auditors)

25 Whether any prohibitory order was issued in the past to the company or any other NBFC/ RNBC with which the directors/ promote etc. were associated? If yes, details thereof.

26 Whether the company or any of its directors was / is involved in any criminal case, including under section 138(1) of the Negotiable Instruments Act? If yes, details thereof.

27 Whether the company was granted any permission by ECD to function as Full-fledged Money Changers?

28 Whether the company was/ is authorised by ECD to accept deposits from NRIs?

29 Whether “Fit and Proper” Norms for directors have been fulfilled?


Contd...INSTRUCTIONS

(Fill up the application form strictly in accordance with these instructions)

GENERAL

(1) Application should be made in the prescribed form only. Wherever space is insufficient,

information may be furnished in separate sheet/s.

(2) Application along with enclosures duly completed should be submitted in duplicate, beforeJuly 8, 1997 to the Department of Non-Banking Supervision, Reserve Bank of India,

Regional Office under whose jurisdiction the registered office of the company is situated.

(3) A photocopy of the application as submitted may be kept with the company for its record.

(4) Application should be signed by any of the following officials authorised by the Board ofDirectors, in this behalf (viz., Chairman, Managing Director, Chief Executive Officer,

Company Secretary, a whole-time Director or any other official).

(5) Application should bear common seal of the company.

(6) An acknowledgement for having submitted the application may be obtained from theRegional Office concerned.

(7) The particulars/information to be furnished in Annex II of the application should be based

on figures as disclosed in the latest annual audited balance-sheet. However, in the case of acompany incorporated after 9-1-1997, such particulars/information should be based on the

balance-sheet as on a date falling within thirty days preceding the date of application.


Contd...ANNEX I

(8) In case the company has changed its name earlier, a list of all the earlier names of the company anddate/s of change together with the names of Chief Executive Officer and Chairman at the time ofchange of name should be furnished.

(9) If the company was registered with Reserve Bank of India in terms of Circular DFC (COC) No.828/174-92/93, dated April 12, 1993, the letter in original advising registration should be enclosed.

(10) If the company has ever defaulted in timely repayment of deposit and payment of interest, a list ofall such pending cases and the action taken in respect of each case should be furnished. Thecompany should also submit a list containing the details of all the court cases pending against it,including those pending in consumer forum, pertaining to its deposits acceptance activities.

ANNEX II

(11) This statement is to be filled only by a non-banking financial company which was in existence as onJanuary 9, 1997 and carrying on business of a non-banking financial institution.

(12) For filling up Annexure II, please refer to the guidelines to non-banking financial companies onprudential norms for income recognition, accounting standards, asset classification, provisioning forbad and doubtful debts, capital adequacy, concentration of credit/investment, etc.

(13) The contents of Annexure II should be certified by a Chartered Accountant.

ANNEX III

(14) ‘Substantial interest’ means holding of beneficial interest by an individual or his/her spouse or minorchild, whether singly or taken together, in shares of a company/capital of a firm, the amount paid-up on which exceeds 10 per cent of the paid-up capital of the company or total capital subscribed byall the partners of a partnership firm.


Contd...ANNEX I

IDENTIFICATION PARTICULARS

COMPANY CODE

(to be filled by RBI)

.......................................

1.1 Name of the Company......................................................................................................

1.2 Whether the company had changed its name earlier?

[Please see item (8) of instructions] Yes/No

2. Date of incorporation

3. Date of commencement of business

4. State in which the company is registered..............................................................

5. Full Address of the Company

(i) Registered Office.......................................................................................................

Phone No. ................................................................Fax........................................... Email:

(ii) Corporate/Administrative* Office...................................................................

Phone No. .................................................................. Fax............................................


Contd…• No. of branches :

6. Status (a) Public (b) Private (c) Deemed public

(d) Government company (e) Other (to be specified)

7. Whether the company was transacting the

business of

Yes/No

Non-banking financial institution as on January 9, 1997 ?If yes—

(i) the date of commencement of such business:(ii) Classification as made by RBI..........................................................................

(EL/HP/LC/IC/Nidhi/RNBC/MNBC)(iii) Reference No. and date of RBI Classification advice.................................(iv) Whether the company was already registered with RBI? Yes/No

[Please see item (9) of instructions]If yes,—(a) Registration No. ............................................................................................(b) Reference No. and date of RBI advice..................................................


Contd...(v) Whether the company has been issued a Certificate in terms of Circular DFC (COC) No.

2/02/04/96-97, dated July 24, 1996 ? Yes/No

If yes,—

(a) Certificate No. .......................................

(b) Reference No. and date of RBI advice...................

(vi) Whether the company has ever defaulted in the repayment of principal and/or payment of interest on deposits? Yes/No

[Please see item (10) of instructions]

(vii)(a)Whether any of the group companies regulated by other regulators such as SEBI, IRDA, etc. Yes/No:

(b) If yes, give details of the company:

i) Name

ii) Address

iii) Nature of business

iv) Regulator

v) Approval/Certificate/ Registration No.

(c)Action if any initiated/ pending against the company by the regulator with details

(strictures, penalties, adjudications, investigations etc)


Contd...8. Name/s of Statutory Auditor/s with address/es ..........................................

..........................................

9.1 Name/s & Address/es of bankers ..........................................

..........................................

9.2 Whether the company has committed any default in repayment of any loan, advance or any other credit facility availed from any bank ? Yes/No

9.3 If yes, furnish full details, such as name of Bank/Branch, type of facility, period and quantum of default, etc.

10. Name and Designation of CEO/Authorised official ..........................................

...........................................................Signature :

Date :

Name :

Place :

Designation :

Company Seal :

PROCEDURE FOR REGISTRATION Contd...

Item Name Item Code Amount (`)

(i) Paid-up Equity Capital 111

(ii) Free reserves (Please see note below)

(a) General Reserves 112

(b) Share Premium 113

(c) Capital Reserves (representing surplus on sale of assets held in

separate account)114

(d) Debentures Redemption Reserve 115

(e) Capital Redemption Reserve 116

(f) Credit Balance in P & L Account 117

(g) Other free reserves (to be specified) 118

(iii) Total (111 to 118) 110

(iv) Accumulated balance of loss 121

(v) Deferred Revenue Expenditure 122

(vi) Other Intangible Assets 123

(vii) Total (121 to 123) 120

(viii) Owned funds (110 - 120) 130

ANNEX IISTATEMENT OF CAPITAL FUNDS AND RISK ASSETS AS ON*........

PART A

CAPITAL FUNDS - TIER-I (` in thousands)

PROCEDURE FOR REGISTRATION Contd...

Item Name Item Code Amount `

(ix) Investment in shares of: [please see Note (1) below] :

(a) Subsidiaries 141

(b) Companies in the same Group 142

(c) Other non-banking financial companies 143

(x) The book value of debentures bonds, outstanding loans and advances

(including hire-purchase and lease finance) made to and deposits with [please

see note (2) below] :

(a) Subsidiaries 144

(b) Companies in the same Group 145

(xi) Total (141 to 145) 140

(xii) Amount of item 140 in excess of 10 per cent of item 130 above 150

(xiii) Tier-I Capital: Net owned funds (130 - 150) 151

Note : ‘Free reserves’ shall include balance in share premium account, capital and debenture redemption reservesand any other reserves shown in the balance-sheet and created through an allocation out of profits but not being(a) a reserve created for repayment of any future liability or for depreciation on assets or for bad debts, or (b) areserve created by revaluation of assets of the company.


Contd...

Item Name Item Code Amount `.

(i) Preference Share Capital 161

(ii) Revaluation reserves (see para 5.2-2 of guidelines) 162

(iii) General provisions and loss reserves (see para 5.2-3 of

guidelines)

163

(iv) Hybrid debt capital instruments (see para 5.2-4 of guidelines) 164

Notes :

1. Investments in shares includes investment in fully convertible debentures and/or convertible portionof partially convertible debentures. Investments held either in investment account or stock-in-tradeshould be included under this item.

2. Debentures whether held in investment account or by way of stock-in-trade should be includedunder this item. Non-convertible debentures, non-convertible portion of partially convertibledebentures and optionally convertible debentures should also be included under this item.

PART BCAPITAL FUNDS - TIER-II


Contd...

Item Name Item Code Amount ̀

(i) Adjusted value of funded risk assets, i.e., on-balancesheet items (Totally with Part D)

181

(ii) Adjusted value of non-funded and off-balance sheetitems (Totally with Part E)

182

(iii) Total risk-weighted assets/exposures (181 + 182) 180

(iv) Percentage of capital funds to risk-weightedassets/exposures:(a) Tier-I capital (Percentage of Item 151 to Item 180) 191

(b) Tier-II capital (Percentage of Item 160 to Item 180) 192

(c) Total (Percentage of Item 170 to Item 180) 193

PART CRISK ASSETS AND OFF-BALANCE SHEET ITEMS


Contd...

Item Name Item code Book value Risk weight Adjusted value

I. Cash and bank balances including fixed deposits &

Certificates of Deposits210 0 0

II. Investments (see paras 2.6-1 to 2.6-7 of the guidelines)—

(a)Government and approved securities as defined under

section 45-IB of RBI Act, 1934221 0 0

(b)Shares/debentures/bonds/ units of mutual funds—

(i)Amounts deducted in Part ‘A’ [Item (ix)] 222 0 0

(ii)Amounts not deducted in Part A 223 100

III. Current Assets—

(a)Stock on hire (Please see Note 3 below):

(i)Amounts deducted in Part A [Item (x)] 231 0 0

(ii)Amounts not deducted in Part A 232 100

(b) Inter-corporate loans/deposits :

(i) Amounts deducted in Part ‘A’ [Item (x)] 233 0 0

(ii) Amounts not deducted in Part A 234 100

PART DWEIGHTED ASSETS, I.E., ON-BALANCE SHEET ITEMS


Contd...Item Name Item code Book value Risk weight Adjusted

value(c) Loans and advances fully secured by

company’s own deposits

235 0 0

(d) Loans to staff 236 0 0

(e) Other secured loans and advances

considered goods :

(i) Amounts deducted in Part A [Item (x)] 241 0 0


(f) Bills purchased/discounted:



(g) Others (to be specified) 245 100

IV. Fixed Assets: (net of depreciation)

(a) Assets leased out—



(b) Premises 253 100

(c) Furniture & Fixtures 254 100


Contd...Item Name Item code Book value Risk weight Adjusted value

V. Other assets:

(a) Income-tax deducted at

source (net of

provisions)

255 0 0

(b) Advance tax paid (net of

provision)

256 0 0

(c) Interest due on

Government Securities

257 0 0

(d) Others (to be specified) 258 100 0

Total weighted assets (Items

210 to 258)

200 —

Notes :

1.Netting may be done in respect of assets where provisions for depreciation or for bad

and doubtful debts have been made.

2.Unquoted shares are to be valued at cost or break-up value of the shares (as per last

audited balance-sheet of the company concerned), whichever is less.

3.Stock on hire should be shown net of finance charges; i.e., interest and other charges,

recoverable.

4.Assets which have been deducted from owned fund to arrive at net owned fund

pursuant to Paragraph 5.1 of the guidelines will have a weightage of ‘O’.


Contd…

Items Item code Book value

Conversion factor

Equivalent value

Risk weight

Adjusted value

1. Financial & Other

guarantees

310 100 100

2. Share/debenture

underwriting obligation

320 50 100

3. Partly paid

shares/debentures

330 100 100

4. Bills

discounted/rediscounted

340 100 100

5. Lease contracts entered into

but yet to be executed

350 100 100

6. Other contingent liabilities

(To be specified)

360 50 100

7. Total non-funded exposures

(Items 310 to 360)

300 - -

PART EWEIGHTED NON-FUNDED EXPOSURES/OFF-BALANCE SHEET

ITEMS

Note : Cash margin/deposits shall be deducted before applying the conversion factors.


Contd…

Item Name Item Code Amount `

(i) Standard assets 411

(ii) Sub-standard assets 412

(iii) Doubtful assets 413

(iv) Loss assets 414

PART FOTHER DATA

I. Aggregate of credit exposures categories into :

II. Aggregate provisioning in respect of I above as per the guidelines prescribed :

Item name Item code Provision required

Actual provision made

(i) Sub-standard assets (10 per cent of total outstanding) 421

(ii) Doubtful assets (100 per cent to the extent not covered by

realisable value of security + 20 to 50 per cent of the

secured portion for the period the asset has remained

doubtful)

422

(see 4 of the guidelines)

(iii) Loss assets (100 per cent of the out-standing balance) 423


Contd…Item name Item code Provision

requiredActual

provision made(i) Depreciation in fixed assets 431

(ii) Depreciation in investments 432

(iii) Loss/intangible assets 433

(iv) Taxation 434

(v)Gratuity/provident fund 435

(vi) Others (to be specified) 436

III. Other provisions in respect of :

PART GPARTICULARS REGARDING INVESTMENTS IN AND ADVANCES TO

COMPANIES/FIRMS IN THE SAME GROUP AND OTHER NBFCs


(i) Outstanding loans and advances to and deposits with subsidiaries and

companies in the same Group (Details enclosed in Appendix No.)

510

(ii) Investments in shares of subsidiaries, companies in the same Group and

non-banking financial companies (Details enclosed in Appendix No.)

520

(iii) Investments by way of shares, debentures, loans and advances, leasing,

hire-purchase finance, deposits, etc., in other companies, firms and

proprietary concerns where directors of the company hold substantial

interest (Details enclosed in Appendix No.)

530


Contd…


(i) Loans and advances, including off-balance sheet exposures, to any single party in

excess of 15 per cent of owned fund of the NBFC (Details enclosed in Appendix

No.)

610

(ii) Loans and advances, including off-balance sheet exposures, to a single group of

parties in excess of 25 per cent of owned fund of the NBFC (Details enclosed in

Appendix No.)

620

(iii) Investments in other companies in excess of 25 per cent of the owned fund of

the NBFC (Details enclosed in Appendix No.)

630

PART HPARTICULARS REGARDING CONCENTRATION OF ADVANCES (INCLUDING OFF-

BALANCE SHEET EXPOSURE AND INVESTMENTS) TO PARTIES OTHER THAN

THOSE IN PART G ABOVE

Certified that the data/information furnished in this statement are in accordance with the guidelines issued by the

Reserve Bank of India relating to income recognition, accounting standards, asset classification, provisioning for bad

and doubtful debts, capital adequacy and concentration of credit and investments. They have been complied from the

books of account and other records of the company and to the best of my knowledge and belief they are correct.

For and on behalf of

Date : Name of the Company

Name :

Place : Signature :

Company Seal : Designation :


Contd…

• AUDITOR’S REPORT

We have examined the books of account and other records maintainedby.....................Limited in respect of the capital funds, riskassets/exposures and risk asset ratio, etc., as on.............and report that tothe best of our knowledge and according to the information andexplanations given to us and as shown by the record examined by us, thefigures shown in Parts A, B, C, D, E, F, G and H of the statement arecorrect.

Place:

Date :

Chartered Accountants


Contd…

1. Name :

2. Designation : Chairman/Managing

Director/

Director/Chief

Executive Officer*

3. Nationality :

4. Age :

5. Business Address :

6. Residential Address :

7. Educational/professional qualifications :

8. Line of business or vocation :

9. Name/s of other companies in which the person has held the post of

Chairman/ Managing Director/Director/Chief Executive Officer

:

10. (i) Whether associated as Promoter, Managing Director, Chairman or Director

with any NBFC including a Residuary Non-Banking Financial Company which

has been prohibited from accepting deposits/prosecuted by RBI ?

Yes/No

(ii) If yes, the name/s of the company/ies

11 (i) Whether prosecuted/convicted for any economic offence either in the

individual capacity or as a partner/director of any firm/company ?

Yes/No

ANNEX IIIINFORMATION ABOUT THE PROMOTERS, CHAIRMAN, MANAGING DIRECTOR,

DIRECTORS AND THE CHIEF EXECUTIVE OFFICER OF THE COMPANY

(PLEASE SEE NOTE ON PAGE 2)


Contd…(ii) If yes, particulars thereof :

12. Experience in the business of NBFC (number of years) :

13. Equity shareholding in the company

No. of shares : ……………………………

Face value : `. ………………………..

Percentage to total equity share capital of the company :……………………………

14. Name/s of the companies, firms and proprietary concerns in which

the person holds substantial interest

:

(Please see item 14 of instructions)

15. Names of the principal bankers to the concerns at 14 above :

Signature :

Date : Name :

Place: Designation :

(Chief Executive Officer)

Company Seal :

Note : Separate form should be submitted in respect of each of such functionaries, by using

photocopy of this format.

DIRECTIONS AND THEIR

APPLICABILITY

DIRECTIONS AND THEIR

APPLICABILITYDirections Applicability Remarks

Non- Banking Financial Companies Acceptance Of

Public Deposits (Reserve Bank) Directions, 1998.

All NBFCs • Para 4 to 8 which constitutes provisions relating to

accepting deposits, rating , advertisement ,

investment in approved securities are applicable only

to deposit taking NBFC (NBFC-D).

• NBFC-ND are exempted subject to passing a

resolution every year to the effect that they have

neither accepted public deposit nor would accept

public deposit.

Non-Banking Financial (Deposit Accepting Or

Holding) Companies Prudential Norms (Reserve

Bank) Directions, 2007.

NBFC-D

Non-Banking Financial (Non-deposit Accepting Or

Holding) Companies Prudential Norms (Reserve

Bank) Directions, 2007.

NBFC- ND CIC-ND-SI are also proposed to be exempted

Non- Banking Financial Companies Auditor’s Report

(Reserve Bank) Directions, 2008.

All Auditors

of NBFC

Reserve Bank Of India (Non Banking Financial

Companies) Returns Specifications, 1997.

NBS -3 and 3A have been prescribed.

NBFC- D

The Non Banking Financial Companies (Deposit

Accepting) (Approval Of Acquisition Or Transfer Of

Control) Directions, 2009.

NBFC-D

RETURNS BY NBFC

RETURNS BY NBFC

RETURNS BY NBFC Contd…



ANNUAL SUBMISSIONS

ANNUAL SUBMISSIONS• All NBFCs are required to make two submissions to RBI irrespective whether they are

accepting deposits or not accepting deposits (NBFC-D or NBFC- ND).

1. Balance sheets and Profit and loss A/c

All NBFCs are required to finalize the annual accounts within three months from theyear end. i.e. if the year ending is 31st March, the accounts should be finalised by 30th

June as per circular dated 1st December 2010.

Issues: Whether finalised accounts refers to audited accounts is not clear as it wouldotherwise conflict with the Companies Act 1956.

2. Statutory Auditor’s certificate within one month of finalisation of the balance sheetand in any case is not later than 30th December of that year. Format is given below:

3. NBFC with FDI has to submit a half yearly (half year ending March and September)certificate to the effect that it has complied with the minimum capitalisation normsand that its activities are restricted to the activities prescribed under FEMA.

4. CIC-ND-SI are required to submit an annual certificate regarding compliance with theguidelines relating to CIC as per circular dated 12th August 2010.

ANNUAL SUBMISSIONS Contd…To,

The Assistant General Manager

Department of Non-Banking Supervision

Reserve Bank of India

1st Floor, Near Gandhi Bridge

Ahemadabad - 380 014

Dear Sir,

Re: “A” Limited

We, the Statutory Auditors of “A” Limited, Office No. ___________hereby certify that for the financial year ending as at March 31,

____, the Company is engaged in the business of Non-Banking Financial Institution requiring to hold a Certificate of Registration

under section 45-IA of the Reserve Bank of India Act, 1934.

The pattern of the assets and income of the company as at March 31, _____ and for the period ending March 31, ____ is

respectively as under:

i. Asset Pattern

S.No

.

Particular Amount (`.) Percentage of Total Assets

1 Investments

2 Loans & Advances*

3 Assets Finance

4 Total Financial Assets (1+2+3)

5 Total Asset

ANNUAL SUBMISSIONS Contd…ii. Income Pattern

Thanking you,

Yours faithfully,

For “ Auditor”

S.

No.

Particular Amount (`.) Percentage of Total

Income

1 Income from Investments*

2 Income from Loans &

Advances

3 Income from Assets Finance

4 Income from Financial

Assets (1+2+3)

5 Total Income

TAKEOVER OF NBFC

TAKEOVER OF NBFCPrior Public Notice about change in control / management

Need for public notice before (a) closure of the branch/office by any NBFC

(b) sale/transfer of ownership by an NBFC

(a) NBFC should give at least three months public notice prior to the date of closure of any of its

branches/ offices in, at least, one leading national news paper and a leading local (covering the placeof branch / office) vernacular language newspaper indicating therein the purpose and arrangements

being made to service the depositors etc.

(b) (i) A public notice of 30 days shall be given before effecting the sale of, or transfer of theownership by sale of shares, or transfer of control, whether with or without sale of shares. Such

public notice shall be given by the NBFC and also by the transferor, or the transferee or jointly bythe parties concerned.

For this purpose, the term 'control' shall have the same meaning as defined in

Regulation 2(1) (c) of the Securities and Exchange Board of India (Substantial

Acquisition of Shares and Takeovers) Regulations, 1997.

ii. The public notice should indicate the intention to sell or transfer ownership / control, the

particulars of transferee and the reasons for such sale or transfer of ownership / control. The noticeshould be published in one leading national and another in leading local (covering the place of

registered office) vernacular language newspaper.

TAKEOVER OF NBFC Contd…Change in management and mergers/amalgamation

It has been observed that the change in management also takes place by way of

amalgamation / merger of an NBFC with another NBFC or a non-financial company and as such, thesemergers / amalgamations would tantamount to the change in the management, as aforesaid.

It would be obligatory on the part of such an NBFC seeking change in management or merger oramalgamation with any other company to give an option to every depositor to decide whether to continuethe deposits with the company under the new management or the transferee company or not. The companywould also be obliged to make the payment to the depositors who seek the repayment of their deposits. TheBank would view the non-compliance of the above instructions very seriously and penal action would beinitiated against the defaulter company on the merits of each case.

The following changes are effected in the above instructions in January 2006:

(i) Merger and amalgamation in terms of the High Court Order.

(a) Where merger and amalgamation takes place in terms of the High Court order in pursuance of Sections391 and 394 of the Companies Act 1956, the company shall inform the Bank about merger or amalgamationalong with Court’s order approving the same within a period of one month from the date of the order. Asthe public notice is given by the companies under the Companies Act 1956 and Rules made thereunder, nofurther public notice is required to be given by the companies in terms of the Bank’s Circular as mentionedabove.

(b) However there will be no change in other instructions contained in paragraph 5(iii) (b) of the CompanyCircular DNBS (PD) .CC No.12/02.01/99-2000 dated January 13, 2000.

(ii) Other cases

Where merger and amalgamation or change in the management of the company takes place upon sale /transfer otherwise than as stated in sub-paragraph (i) above, the NBFCs (including RNBCs)(deposit takingand non-deposit taking companies ) should give prior public notice of 30 days.

TAKEOVER OF NBFC Contd…Prior approval of RBI in cases of acquisition or transfer of control of deposit taking

NBFCs

Any takeover or acquisition of control of a deposit taking NBFC, whether by acquisition of sharesor otherwise, or any merger/amalgamation of a deposit taking NBFC with another entity, or anymerger/amalgamation of an entity with a deposit taking NBFC, shall require prior written approvalof Reserve Bank of India [The NBFC (Deposit Accepting) (Approval of acquisition or

transfer of control) Directions, 2009].

Given below are the formats of public notices:

I. Acquiring a Non-deposit accepting listed company

1. “A” Ltd. or Target Company, a company incorporated under the Companies Act 1956 having itsregistered office at ______, is registered with the Reserve Bank of India as a Non-BankingFinancial Company (NBFC) vide Certificate Of Registration bearing no. ____ dated _____. “A”Ltd had not raised or accepted any public deposits.

2. The present promoters of “A” are _____ collectively referred to as ‘Promoter Group’ and

collectively holding ____ equity shares of `___ each, representing ____ % of paid up capital of“A”.

3. “B” Pvt. Ltd. or Acquirer a company incorporated under the Companies Act 1956 having itsregistered office at ______ has entered into a Share Purchase Agreement (SPA) on _____ withthe Promoter Group to acquire ______ fully paid up equity shares of Rs. ___ each, representing____ % of total paid up equity/ voting share capital, and management control of the TargetCompany.

TAKEOVER OF NBFC Contd…4. Pursuant to the aforesaid acquisition, the Acquirer has made an open offer vide Public

Announcement dated ______, to the shareholders of the Target Company in accordance withSecurities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers)Regulations 1997, and subsequent amendments thereto (Regulations) to acquire upto ____ fully

paid up equity of `____ each representing )___ % of the paid up equity and voting share capital,at a price of `___ per share (Offer Price) payable in cash. By virtue of above, management, andcontrol of the company will be transferred and vested to the Acquirer after completion of theOpen Offer formalities in accordance with the Regulations.

5. The main object of “B” Pvt. Ltd. Company is execution of all types Real Estate andinfrastructure projects. “B” is presently engaged in financial services and investment activities.

6. “A” is engaged in finance and related activities. Due to their pre occupation with their othercommitments, The Promoter Group has decided to sell their shares and management control to“B”.

The Notice is published in compliance with the requirements of circular DNBS(PD)CC.No.11/02.01/99-2000 dated November 15, 1999 read with paragraph A(5)(iii) (a) of the circularDNBS (PD)Cc.No.12/02.01/99-2000 dated January 13,2000 and paragraph 2 (ii) of circularDNBS(PD) CC. No.63/02.02/2005-06 dated January 24, 2006 and circular DNBS (PD) CC. No.82/03.02.02/2006-07 dated October 27,2006.

TAKEOVER OF NBFC Contd…II. Acquiring a Non-deposit accepting Private Limited Company

“X” Limited, a company registered under the Companies Act, 1956 having its registered office at _______ isregistered with the Reserve Bank of India as a Non-Banking Finance Company (NBFC) vide Certificate ofRegistration bearing No______dated _____. “X” has not raised any public deposits.

The present Promoters of “X” are ____________ (collectively referred to as the “Promoter Group”) and

collectively hold _______ equity shares of `. _____ each, representing 100% of the paid up capital of “X”.

Mr. ______ of “Y” Pvt. Ltd, Mr. _______of “Z” Pvt. Ltd. and Mr. ______, “L” Pvt. Ltd. (collectively referredto as the “Acquirers”.) intend to commence non-banking finance / microfinance operations and haveaccordingly reached an understanding with the promoter group to acquire their entire current shareholding in“X” along with the management and control thereof.“X” is engaged in finance and related activities. Due to their preoccupation with other commitments, thePromoter group has decided to sell their shareholding along with the management and control of SPFL to theAcquirers.The notice is published in compliance with the provisions of Circular DNBS (PD) CC.No. 11/02.01/99-2000 dated November 15, 1999 read with paragraph A(5)(iii)(a) f the Circular DNBS (PD)CCNo. 12/02.01/99-2000 dated January 13, 2000 and paragraph 2 of Circular DNBS (PD) CC No. 63/02.02/2005-06 dated January24, 2006 and Circular DNBS (PD) CC No. 82/03.02.02/2006-07 dated October 27, 2006.

For “X” and For AcquirersSd/ Sd/-Authorised Signatory Authorised SignatoriesPlace:Date:

FDI IN NBFC

FDI IN NBFC100% FDI is allowed under automatic role in the following businesses

S.

No.

Business Conditions

i

ii

iii

iv

v

vi

vii

viii

ix

Merchant

Banking

Underwriting

Portfolio Management

Services

Investment Advisory

Services

Financial Consultancy

Stock Broking

Asset

Management

Venture Capital

Custodial Services

a. Minimum capitalization norms for fund based NBFCs - US$ 0.5 million

to be brought upfront for FDI up to 51%; US$ 5 million to be brought

upfront for FDI above 51% and up to 75%; and US$ 50 million out of

which US$ 7.5 million to be brought upfront and the balance in 24

months, for FDI beyond 75% and up to 100%.

b. Minimum capitalization norms for non-fund based NBFC activities-

US$ 0.5 million, subject to the condition that such company would not be

aloowed to set up any subsidiary for any other activity nor it can

participate

in the equity of NBFC holding / operating company. Nonfund based

activities would include Investment Advisory services , Financial

consultancy, Forex Broking , Money changing Business and Credit Rating

Agencies.

c. Foreign investors can set up 100% operating subsidiaries without the

condition to disinvest a minimum of 25% of its equity to Indian entities

subject to bringing in US$ 50 million without any restriction on number of

operating subsidiaries without bringing additional capital.

FDI IN NBFC Contd…

S. No. Business Conditions

x

xi

xii

xiii

xiv

xv

xvi

xvii

xviii

Factoring

Credit Rating Agencies

Leasing & Finance

Housing Finance

Forex Broking

*Credit card

Business

Money changing

Business

Micro credit

Rural credit

d. Joint venture operating NBFCs that have 75% or less than 75% foreign

investment will also be allowed to set up subsidiaries for undertaking other

NBFC activities subject to the subsidiaries also complying with the

applicable minimum capital inflow.

e. Compliance with the guidelines of the RBI.

* Credit card business includes issuance, sales , marketing and design of various payment products such as credit cards , debit cards, stored value cards, smart card, value added cards, etc.

• CORPORATE GOVERNANCE

• FAIR PRACTICE CODE

• KYC NORMS FOR NBFC

• FRAUDS IN NBFC

THANK YOU

ISSUES IN FORMATION OF NBFC FILING OF RETURNSvasai-icai.org/Image/Alok Saxena Sir.pdf · NBFC DEFINITION • Section 45I of Reserve Bank of India (RBI) Act 1934 • Section45I(f)Non-Banking

Documents