NBFC Salient Features. By : CA Anil Mathur at Jaipur Branch on Saturday, 22 nd June, 2013. I. Prominent features & Basic characteristics. What is NBFC:- A company registered under Companies Act, 1956 ; and
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By : CA Anil Mathur
Saturday, 22nd June, 2013
What is NBFC:-
1. Asset Finance Company (AFC)
2. Investment Company (IC)
3. Loan Company (LC)
4. Infrastructure Finance Company (IFC)
5. Systemically Important Core Investment Company
(CIC- ND- SI)
6. Infrastructure Debt Fund - NBFC( IDF-NBFC)
7. NBFC- Micro Finance Institutions ( NBFC MFI)
8. NBFC – Factors
I. NBFC’s accepting public deposits should furnish following returns :-
Public deposits defined in para 2(1)(xii) of NBFC Acceptance of Public Deposits (Reserve bank) Directions 1998, as exclusive definition
Ceiling on acceptance of public deposits An NBFC maintaining required NOF/ Capital to Risk Assets Ratio (CRAR) and complying with the prudential norms can accept deposit as follows ;-
NBFC with NOF 200 lacs
NBFC with NOF less than 200 lacs
Rate of interest/ brokerage
Not to exceed 2% of deposit collected w.e.f. 31.01.1998 and reimbursement of expenses upto 0.5% of such deposit subject to production of bills.
A shareholder is permit to renew deposit before
maturity for availing higher interest rate provided :-
- Merchant Banking
- Financial Consultancy
- Stock Broking
- Asset Management
- Venture Capital
- Credit Rating Agency
- Housing Finance
- Credit card business
- Leasing & Finance
- Money changing
Conditions to be complied for FDI in terms of minimum capitalization norms
Foreign Capitalupfront amount
upto 51% 0.5 Mn US$
51 to 75% 5.00 Mn. US$
More than 75% 50 Mn US$
(of which 7.5 Mn. Upfront & balance in 24 months)
Exposure to single NBFC lending against collateral of gold jewellery (50% or more loan) should not exceed 7.5 % of banks capital fund
Auditor’s report shall include a statement on the following matters
A) IN CASE OF ALL NON-BANKING FINANCIAL COMPANIES
I. Whether the company is engaged in the business of NBFI and whether it has obtained a CoR from RBI
II. In the case of a company holding CoR issued by the RBI, whether that company is entitled to continue to hold such CoR in terms of its asset / income pattern as on March 31,…
III. For classification of NBFCs as asset Finance Company (AFC) whether the NBFC has been correctly classified as AFC
iv. For NBFC-MFI whether the NBFC has been correctly classified as NBFC –MFI as defined in the said directions with reference to the business carried on by it during the applicable F. Y.
(B) IN CASE OF A NBFC ACCEPTING/ HOLDING PUBLIC DEPOSITS
Apart from (A) above , following matters to be further stated :-
(i) whether the public deposits accepted by the company together with other borrowings viz..,
(a) from public by issue of unsecured non- convertible debentures/bonds
(b) from its share holders by a public limited company
(c) any other type of deposit which has not been excluded from the definition of “public deposit”
are within the limits admissible to the company
(ii) Whether excess deposits are regularised in the prescribed manner
(iii) Whether the NBFC is accepting Public Deposits without minimum investment grade credit rating from an approved credit rating agency.
(v) Whether compliance of Notification No. DNBS.199/CGM(PK)-2008 dated June 17, 2008- for NBFC having less than Rs. 200 lakh NOF who were required to freeze their public deposits at the existing level and required to bring down these deposits to the level of revised ceiling has been made .
(vi) Whether the company has defaulted in paying to its depositors the interest / principal amount of the deposits after they are due.
(vii) whether the company has complied with the specified prudential norms on income recognition, accounting standards, asset classification, provisioning for bad and doubtful debts and concentration of credit/investment norms as per Prudential Norms Directions (as applicable to Deposit accepting/holding NBFCs).
(viii) Whether the capital adequacy ratio as disclosed in the return submitted to the Bank has been correctly determined and whether such ratio is in compliance with minimum Capital to Risk Asset Ratio prescribed for Deposit accepting / holding NBFCs
(ix) whether the company has complied with prescribed liquidity requirement and kept the approved securities with a designated bank ( now the securities are to be held in dematerialized form.
(x) Whether the company has furnished to RBI within the stipulated period the return on deposits in NBS-1 statement ( ref. Public Deposit Directions)
(xi) Whether the company has furnished to RBI within the stipulated period the half-yearly return on prudential norms( Prudential Norms Directions)
(xii) Whether the company has complied with the directions in respect of opening and closing of branches.
(C) IN CASE OF A NBFC NOT ACCEPTING PUBLICDEPOSITS
In addition to aspects in (A)
(i) whether the Board of Directors has passed a resolution for the non-acceptance of any public deposits.
(ii) whether the company has accepted any public deposits during the relevant period/ year
(iii) whether the company has complied with the applicable prudential norms
(D)in case of a NBFC which is not required to hold CoR subject to certain conditions, the auditor shall include a statement as to whether the company has obtained a specific advice from the RBI that it is not required to hold CoR from the Bank and whether the company is complying with the conditions stipulated as advised by the Bank.
(I) It shall be the obligation of the auditor to make a report to RBI of unfavourable or qualified statements and/ or non-compliance to the concerned Regional office of DNBS in respect of statement in regard to any of the items referred to in paragraph 3 above or if the company has not complied with the provisions of Deposit Directions and Prudential Norms Directions to the extent applicable and provisions of Chapter III B of the RBI Act, 1934.
(II) Exception Report should include only the contraventions of the provisions of RBI Act, 1934 and Directions, Guidelines, instructions referred to in sub-paragraph (I) and such report shall not contain any statement with respect to compliance of any of those provisions.