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NBFCs - Certain Issues and developments

NBFCs - Certain Issues and developments. JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,. Outline of law. Act Various Directions, Circulars, etc. Acceptance of deposits Prudential Norms Auditors Others Recent Reports/draft Guidelines State Laws

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NBFCs - Certain Issues and developments

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  1. NBFCs - Certain Issues and developments JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,

  2. Outline of law • Act • Various Directions, Circulars, etc. • Acceptance of deposits • Prudential Norms • Auditors • Others • Recent Reports/draft Guidelines • State Laws • Companies Act, 2012/SEBI Ordinance CA Jayant Thakur, 8th September 2013

  3. Position as on 31st March 2010 • Total NBFCs 12662 • Deposit taking NBFCs 311 • SI-ND taking NBFCs 295 • Other ND taking NBFCs – 12056 • Asset size of non-deposit accepting NBFCs grew from 250765 crores in 2006 to 566853 crores. CA Jayant Thakur, 8th September 2013

  4. Auditors role • General and comprehensive • Registration • Compliance of Prudential Norms and Deposits Directions • Continuity of business • Manner of reporting • Miscellaneous CA Jayant Thakur, 8th September 2013

  5. Important basic terms • Definition of NBFC • What constitutes NBFC • 50% criteria • Financial assets • Exempted companies • Net owned funds • Punishment for violation • Non-compoundable • Non-appealable CA Jayant Thakur, 8th September 2013

  6. Core Investment Companies (CICs) • Definition and concepts • Basic conditions • SI • ND • Assets composition • Public Funds • Group • Benefits • Obligations CA Jayant Thakur, 8th September 2013

  7. Mergers/takeovers of NBFCs • Deposit Accepting • Others • Proposed changes CA Jayant Thakur, 8th September 2013

  8. ThoratCommittee Report • Overview • Public funds concept • NBFCs < Rs. 50 crores assets • Principal business condition • NBFCs < Rs. 1000 crores assets • Principal business condition • Existing NBFCs? • De-registration • Re-registration/gestation period CA Jayant Thakur, 8th September 2013

  9. ThoratCommittee Report • Change of control/mergers • Reduction in deposit limits for AFCs • No new deposit accepting NBFCs • All deposit accepting NBFCs to get rated • Multiple NBFCs • Captive NBFCs CA Jayant Thakur, 8th September 2013

  10. ThoratCommittee Report • Corporate governance • More powers for RBI • Clause 49 • Mandatory disclosures CA Jayant Thakur, 8th September 2013

  11. Recent letters to “NBFCs” • Issues raised • Other NBFCs CA Jayant Thakur, 8th September 2013

  12. Debentures Private placement guidelines • NBFCs raised 3,18,800 crores in 2011-12 • ND-SI 2,95,000 crores • Recent controversies and abuses • Applies to private placements • NCDs • Time of completion - 6 months • Gaps between 2 placements • Names of subscribers CA Jayant Thakur, 8th September 2013

  13. Debentures Private placement guidelines • Maximum number of investors 49 • Minimum amounts/multiples • Only secured debentures/compulsorily convertible debentures • Applicability - “as may be specified” CA Jayant Thakur, 8th September 2013

  14. Companies Act, 2012 – some pointers • Frauds in deposit acceptance • Frauds generally • Class actions • Sahara/Saradha type of cases CA Jayant Thakur, 8th September 2013

  15. Securities Laws Ordinance 2013 • Arrangements/pooling with corpus of more than Rs. 100 crores • NBFCs? CA Jayant Thakur, 8th September 2013

  16. State Depositors’ Protection Laws • Which States? • Who are covered? • What is deposits? • When would there be violation? • What action can be taken? • Supreme Court – K. K. Baskaran, 4th April 2011 • Applicable to NBFCs? CA Jayant Thakur, 8th September 2013

  17. THANK YOU!

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