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RBI Announces Regulatory Framework for Core Investment Companies (CICs) (Full Guidelines)
August 12, 2010:
Reserve 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.
In order to rationalize the policy approach for CICs, Reserve Bank of India has announced Regulatory Framework for Core Investment Companies (CICs).
Regulatory Framework for Core Investment Companies
i) It is proposed to exempt Core Investment Companies (CIC) with an asset size of less than Rs.100 crores from the requirements of registration with RBI. For this purpose all CICs belonging to a Group will be aggregated.
ii) CICs with an asset size of Rs 100 crores or more will be considered as Systemically Important Core Investment Companies (CICs-ND-SI) and would be required to obtain Certificate of Registration (COR) from RBI under Section 45-IA of the Reserve Bank of India Act, 1934 even if they have been advised in the past that registration was not required.
iii) Capital Requirements: Every CIC-ND-SI shall ensure that at all times it maintains a minimum Capital Ratio whereby its Adjusted Net Worth shall not be less than 30% of its aggregate risk weighted assets on balance sheet and risk adjusted value of off-balance sheet items as an the date of the last audited balance sheet as at the end of the financial year.
iv) Leverage Ratio: Every CIC-ND-SI shall ensure that its outside liabilities at all times shall not exceed 2.5 times its Adjusted Net Worth as on the date of the last audited balance sheet as at the end of the financial year.
v) Exemptions: A CIC-ND-SI which adheres to the requirements regarding capital requirements and leverage ratio as specified at (iii) and (iv) above, may to the extent necessary, be exempted from compliance with:-
i) maintenance of statutory minimum Net Owned Fund (NoF) and
ii) requirements of "Non-Banking Financial (Non-Deposit Accepting or holding) Companies Prudential Norms (Reserve Bank) Directions, 2007" including requirements of capital adequacy and exposure norms.
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