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RBI Announces Regulatory Framework for Core Investment Companies (CICs) (Full Guidelines)
Definitions
For the purposes of these guidelines:-
1) Adjusted Net Worth means:-
i) the aggregate as appearing in the last audited balance sheet as at the end of the financial year of :-
(A) Owned Funds as defined in Non Banking Financial ( Non Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007; and
(B) 45% of the amount standing to the credit of the Revaluation Reserve arising from revaluation of investments in quoted investments, if any,
ii) as increased by :-
(A) 50% 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 calculate, as the excess of the aggregate market value of such investments over the book value of such investments); and
(B) the increase if any, in the equity share capital since the date of the last audited balance sheet.
iii) as reduced by :-
(A) the amount of diminution in the aggregate book value of quoted investments (such diminution being calculated as the excess of the book value of such investments over the aggregate market value of such investments ) and
(B) the reduction, if any, in the equity share capital since the date of the last audited balance sheet.
(2) Core Investment Company means:
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.
(3) Market Value of Quoted Investments means:
the average of the highs and lows of the quoted prices of the investments, on a recognized stock exchange where the investment is most actively traded, during the period of 26 weeks immediately preceding the end of the financial year at which date the last audited balance sheet is available.
(4) Outside Liabilities means:
total liabilities as appearing on the liabilities side of the balance sheet excluding 'paid up capital' and 'reserves and surplus' but including all forms of debt and obligations having the characteristics of debt whether created by issue of hybrid instruments or otherwise and value of guarantees issued whether appearing on the balance sheet or not.
(5) Total Assets means:
total assets as appearing on the assets side of the balance sheet but excluding :-
(i) cash and bank balances;
ii) investment in money market instruments;
iii) advance payments of taxes; and
iv) deferred tax asset.
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