RBI

Master Circular – “Non-Systemically Important NBFC (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015”

 • 0 Comments

RBI/2014–15/630 DNBR (PD) CC No.038/03.01.001/2014–15

June 03, 2015

Mas­ter Cir­cu­lar – “Non-Sys­tem­i­cal­ly Impor­tant Non-Bank­ing Finan­cial (Non-Deposit Accept­ing or Hold­ing) Com­pa­nies Pru­den­tial Norms (Reserve Bank) Direc­tions, 2015”.

As you are aware, in order to have all cur­rent instruc­tions on the sub­ject at one place, the Reserve Bank of India issues updat­ed cir­cu­lars / noti­fi­ca­tions. The instruc­tions con­tained in the Noti­fi­ca­tion No.DNBR.008/CGM (CDS)-2015 dat­ed March 27, 2015 updat­ed till the date as indi­cat­ed above are repro­duced below. The updat­ed noti­fi­ca­tion has also been placed on the RBI web-site (http://rbi.org.in/).

Yours faith­ful­ly,

(C.D.Srinivasan)
Chief Gen­er­al Manager

Table of Contents

Para No Par­tic­u­lars
1 Short title, com­mence­ment and applic­a­bil­i­ty of the Directions
2 Def­i­n­i­tions
3 Income recog­ni­tion
4 Income from investments
5 Account­ing standards
6 Account­ing of investments
7 Need for pol­i­cy on demand/call loans
8 Asset clas­si­fi­ca­tion
9 Pro­vi­sion­ing requirements
10 Pro­vi­sion for stan­dard assets
11 Dis­clo­sure in the bal­ance sheet
12 Account­ing year
13 Sched­ule to the bal­ance sheet
14 Trans­ac­tions in gov­ern­ment securities
15 Sub­mis­sion of a cer­tifi­cate from statu­to­ry audi­tor to the bank
16 Require­ment as to cap­i­tal adequacy
17 Lever­age ratio
18 Loans against non-bank­ing finan­cial company’s own shares prohibited
19 Loans against secu­ri­ty of sin­gle prod­uct — gold jewellery
20 Ver­i­fi­ca­tion of the own­er­ship of gold
21 Stan­dard­iza­tion of val­ue of gold accept­ed as col­lat­er­al in arriv­ing at LTV Ratio
22 Safe­ty and secu­ri­ty mea­sures to be fol­lowed by Non-Bank­ing Finan­cial Com­pa­nies lend­ing against col­lat­er­al of gold jewellery
23 Loans against secu­ri­ty of shares
24 Con­cen­tra­tion of credit/investment
25 Open­ing Branch­es exceed­ing one thou­sand in number
26 Infor­ma­tion with respect to change of address, direc­tors, audi­tors, etc. to be submitted
27 NBFCs not to be part­ners in part­ner­ship firms
28 Norms for restruc­tur­ing of advances
29 Flex­i­ble Struc­tur­ing of Long Term Project Loans to Infra­struc­ture and Core Industries
30 Sub­mis­sion of ‘Branch Info’ Return
31 Exemp­tions
32 Inter­pre­ta­tions
33 Repeal and Saving
Appen­dix

RESERVE BANK OF INDIA
DEPARTMENT OF NON-BANKING REGULATION
CENTRAL OFFICE, CENTRE I, WORLD TRADE CENTRE
CUFFE PARADE, COLABA, MUMBAI 400 005

NOTIFICATION No.DNBR.008/ CGM (CDS) — 2015 dat­ed March 27, 2015

The Reserve Bank of India, hav­ing con­sid­ered it nec­es­sary in the pub­lic inter­est, and being sat­is­fied that, for the pur­pose of enabling the Bank to reg­u­late the cred­it sys­tem to the advan­tage of the coun­try, it is nec­es­sary to issue the Direc­tions relat­ing to the pru­den­tial norms as set out below, in exer­cise of the pow­ers con­ferred by Sec­tion 45JA of the Reserve Bank of India Act, 1934 (2 of 1934) and of all the pow­ers enabling it in this behalf, and in super­s­es­sion of the Noti­fi­ca­tion No. DNBS. 193/ DG (VL)-2007 dat­ed Feb­ru­ary 22, 2007 gives the Direc­tions here­inafter specified.

Short title, com­mence­ment and applic­a­bil­i­ty of the Directions:

1. (1) These Direc­tions shall be known as the “Non-Sys­tem­i­cal­ly Impor­tant Non-Bank­ing Finan­cial (Non-Deposit Accept­ing or Hold­ing) Com­pa­nies Pru­den­tial Norms (Reserve Bank) Direc­tions, 2015″.

(2) These Direc­tions shall come into force with imme­di­ate effect.

(3) (i) The pro­vi­sions of these Direc­tions, save as pro­vid­ed for in claus­es (ii), (iii), (iv), (v), (vi) and (vii) here­inafter, shall apply to:

every non-bank­ing finan­cial com­pa­ny not accepting/ hold­ing pub­lic deposits which is non-sys­tem­i­cal­ly impor­tant as defined in para 2 (xxvi­ii) of these directions.

“Pro­vid­ed that para 16 of these direc­tions shall be applic­a­ble only to NBFC-MFIs as defined in the Non-Bank­ing Finan­cial Com­pa­ny- Micro Finance Insti­tu­tions (Reserve Bank) Direc­tions 2011 and Infra­struc­ture Finance Com­pa­nies as defined at clause 2(xi) of these Directions”.

(ii) These direc­tions except para 15 shall not apply to a non-deposit tak­ing non-bank­ing finan­cial com­pa­ny hav­ing asset size of less than Rs. 500 crore Pro­vid­edthat, it does not accept/ hold any pub­lic funds.

(iii) These Direc­tions, except the pro­vi­sions of para­graph 26 shall not apply to non-bank­ing finan­cial com­pa­ny being a Gov­ern­ment com­pa­ny as defined under clause (45) of Sec­tion 2 of the Com­pa­nies Act, 2013 (18 of 2013) and not accept­ing / hold­ing pub­lic deposit.*

(iv) These Direc­tions shall not apply to a non-bank­ing finan­cial com­pa­ny being a Core Invest­ment Com­pa­ny referred to in the Core Invest­ment Com­pa­nies (Reserve Bank) Direc­tions, 2011 (here­inafter referred to as CIC Direc­tions), which is not a sys­tem­i­cal­ly impor­tant Core Invest­ment Com­pa­ny as defined in clause (h) of sub-para­graph (1) of para­graph 3 of the CIC Directions.

(vi) The pro­vi­sions of para­graphs 15, 16 and 17 of these Direc­tions shall not apply to a Sys­tem­i­cal­ly Impor­tant Core Invest­ment Com­pa­ny (between asset size Rs. 100 crore and Rs. 500 crore) as defined in clause (h) of sub-para­graph (1) of para­graph 3 of the CIC Direc­tions, 2011,.

(vii) The pro­vi­sions of para­graph 8, 9 and 17 of these Direc­tions shall not apply to an NBFC-MFI as defined in the Non-Bank­ing Finan­cial Com­pa­ny- Micro Finance Insti­tu­tions (Reserve Bank) Direc­tions, 2011.

Def­i­n­i­tions

2. (1) For the pur­pose of these Direc­tions, unless the con­text oth­er­wise requires :

(i) “break up val­ue” means the equi­ty cap­i­tal and reserves as reduced by intan­gi­ble assets and reval­u­a­tion reserves, divid­ed by the num­ber of equi­ty shares of the investee company;

(ii) “car­ry­ing cost” means book val­ue of the assets and inter­est accrued there­on but not received;

(iii) “com­pa­nies in the group” means an arrange­ment involv­ing two or more enti­ties relat­ed to each oth­er through any of the fol­low­ing rela­tion­ships: Sub­sidiary – par­ent (defined in terms of AS 21), Joint ven­ture (defined in terms of AS 27), Asso­ciate (defined in terms of AS 23), Pro­mot­er-pro­mo­tee (as pro­vid­ed in the SEBI (Acqui­si­tion of Shares and Takeover) Reg­u­la­tions, 1997) for list­ed com­pa­nies, a relat­ed par­ty (defined in terms of AS 18), Com­mon brand name, and invest­ment in equi­ty shares of 20% and above.”

(iv) “con­duct of busi­ness reg­u­la­tions” means the direc­tions issued by the Bank from time to time on Fair Prac­tices Code and Know Your Cus­tomer guidelines.

(v) “cur­rent invest­ment” means an invest­ment which is by its nature read­i­ly real­is­able and is intend­ed to be held for not more than one year from the date on which such invest­ment is made;

(vi) “cus­tomer inter­face” means inter­ac­tion between the NBFC and its cus­tomers while car­ry­ing on its NBFI business.

(vii) “doubt­ful asset” means:

  1. a term loan, or
  2. a lease asset, or
  3. a hire pur­chase asset, or
  4. any oth­er asset,

which remains a sub-stan­dard asset for a peri­od exceed­ing 18 months;

(viii) “earn­ing val­ue” means the val­ue of an equi­ty share com­put­ed by tak­ing the aver­age of prof­its after tax as reduced by the pref­er­ence div­i­dend and adjust­ed for extra-ordi­nary and non-recur­ring items, for the imme­di­ate­ly pre­ced­ing three years and fur­ther divid­ed by the num­ber of equi­ty shares of the investee com­pa­ny and cap­i­talised at the fol­low­ing rate:

  1. in case of pre­dom­i­nant­ly man­u­fac­tur­ing com­pa­ny, eight per cent;
  2. in case of pre­dom­i­nant­ly trad­ing com­pa­ny, ten per cent; and
  3. in case of any oth­er com­pa­ny, includ­ing non-bank­ing finan­cial com­pa­ny, twelve per cent;

Note: If, an investee com­pa­ny is a loss mak­ing com­pa­ny, the earn­ing val­ue will be tak­en at zero;

(ix) “fair val­ue” means the mean of the earn­ing val­ue and the break up value;

(x) “hybrid debt” means cap­i­tal instru­ment which pos­sess­es cer­tain char­ac­ter­is­tics of equi­ty as well as of debt;

(xi) “Infra­struc­ture Finance Com­pa­ny” means a non-deposit tak­ing NBFC that ful­fills the cri­te­ria men­tioned below:

  1. a min­i­mum of 75 per cent of its total assets should be deployed in “infra­struc­ture loans”;
  2. Net owned funds of Rs. 300 crore or above;
  3. min­i­mum cred­it rat­ing ‘A’ or equiv­a­lent of CRISIL, FITCH, CARE, ICRA or equiv­a­lent rat­ing by any oth­er accred­it­ing rat­ing agencies;
  4. CRAR of 15 per­cent (with a min­i­mum Tier I cap­i­tal of 10 percent)

A cred­it facil­i­ty extend­ed by lenders (i.e. NBFCs) to a bor­row­er for expo­sure in the fol­low­ing infra­struc­ture sub-sec­tors will qual­i­fy as “Infra­struc­ture lending”.

Sr.
No.		 Cat­e­go­ry Infra­struc­ture sub-sectors
1. Trans­port i Roads and bridges
ii Ports1
iii Inland Water­ways
iv Air­port
v Rail­way Track, tun­nels, viaducts, bridges2
vi Urban Pub­lic Trans­port (except rolling stock in case of urban road transport)
2. Ener­gy i Elec­tric­i­ty Generation
ii Elec­tric­i­ty Transmission
iii Elec­tric­i­ty Distribution
iv Oil pipelines
v Oil / Gas / Liq­ue­fied Nat­ur­al Gas (LNG) stor­age facil­i­ty3
vi Gas pipelines4
3. Water & Sanitation i Sol­id Waste Management
ii Water sup­ply pipelines
iii Water treat­ment plants
iv Sewage col­lec­tion, treat­ment and dis­pos­al system
v Irri­ga­tion (dams, chan­nels, embank­ments etc)
vi Storm Water Drainage System
vii Slur­ry Pipelines
4. Com­mu­ni­ca­tion i Telecom­mu­ni­ca­tion (Fixed net­work)5
ii Telecom­mu­ni­ca­tion towers
iii Telecom­mu­ni­ca­tion & Tele­com Services
5. Social and Com­mer­cial Infrastructure i Edu­ca­tion Insti­tu­tions (cap­i­tal stock)
ii Hos­pi­tals (cap­i­tal stock)6
iii Three-star or high­er cat­e­go­ry clas­si­fied hotels locat­ed out­side cities with pop­u­la­tion of more than 1 million
iv Com­mon infra­struc­ture for indus­tri­al parks, SEZ, tourism facil­i­ties and agri­cul­ture markets
v Fer­til­iz­er (Cap­i­tal investment)
vi Post har­vest stor­age infra­struc­ture for agri­cul­ture and hor­ti­cul­tur­al pro­duce includ­ing cold storage
vii Ter­mi­nal markets
viii Soil-test­ing laboratories
ix Cold Chain7
x. Hotels with project cost8 of more than Rs.200 crores each in any place in India and of any star rating.
xi. Con­ven­tion Cen­tres with project cost8 of more than Rs.300 crores each
Notes
1 Includes Cap­i­tal Dredging
2 Includes sup­port­ing ter­mi­nal infra­struc­ture such as loading/ unload­ing ter­mi­nals, sta­tions and buildings
3 Includes strate­gic stor­age of crude oil
4 Includes city gas dis­tri­b­u­tion network
5 Includes optic fibre/ cable net­works which pro­vide broadband/ internet
6 Includes Med­ical Col­leges, Para Med­ical Train­ing Insti­tutes and Diag­nos­tics Centres
7 Includes cold room facil­i­ty for farm lev­el pre-cool­ing, for preser­va­tion or stor­age of agri­cul­ture and allied pro­duce, marine prod­ucts and meat.
8.
Applic­a­ble with prospec­tive effect from the date of this cir­cu­lar and avail­able for eli­gi­ble projects for a peri­od of three years; Eli­gi­ble costs exclude cost of land and lease charges but include inter­est dur­ing construction.

(xii) “Lever­age Ratio” means the total Out­side Liabilities/ Owned Funds.

(xiii) “NBFC-MFI” means a non-deposit tak­ing NBFC (oth­er than a com­pa­ny licensed under Sec­tion 25 of the Indi­an Com­pa­nies Act, 1956) that ful­fils the fol­low­ing conditions:

(2) Min­i­mum Net Owned Funds of Rs.5 crore. (For NBFC-MFIs reg­is­tered in the North East­ern Region of the coun­try, the min­i­mum NOF require­ment shall stand at Rs. 2 crore).

(3) Not less than 85% of its net assets are in the nature of “qual­i­fy­ing assets.”

For the pur­pose of ii. above, “Net assets” are defined as total assets oth­er than cash and bank bal­ances and mon­ey mar­ket instruments;

1“Qual­i­fy­ing assets” shall mean a loan which sat­is­fies the fol­low­ing criteria:-

i. loan dis­bursed by an NBFC-MFI to a bor­row­er with a rur­al house­hold annu­al income not exceed­ing Rs. 1,00,000 or urban and semi-urban house­hold income not exceed­ing Rs. 1,60,000;

ii. loan amount does not exceed Rs. 60,000 in the first cycle and Rs. 1,00,000 in sub­se­quent cycles;

iii. total indebt­ed­ness of the bor­row­er does not exceed Rs.1,00,000;

Pro­vid­ed that loan, if any availed towards meet­ing edu­ca­tion and med­ical expens­es shall be exclud­ed while arriv­ing at the total indebt­ed­ness of a borrower.

iv. tenure of the loan not to be less than 24 months for loan amount in excess of Rs.15,000 with pre­pay­ment with­out penalty;

v. loan to be extend­ed with­out collateral;

vi. aggre­gate amount of loans, giv­en for income gen­er­a­tion, is not less than 50 per cent of the total loans giv­en by the MFIs;

vii. loan is repayable on week­ly, fort­night­ly or month­ly instal­ments at the choice of the borrower.

(xiv) “Non-Bank­ing Finan­cial Com­pa­ny — Fac­tor’ means a non-bank­ing finan­cial com­pa­ny as defined in clause (f) of sec­tion 45‑I of the RBI Act, 1934 hav­ing finan­cial assets in the fac­tor­ing busi­ness at least to the extent of 50 per­cent of its total assets and its income derived from fac­tor­ing busi­ness is not less than 50 per­cent of its gross income and has been grant­ed a cer­tifi­cate of reg­is­tra­tion under sub-sec­tion (1) of Sec­tion 3 of the Fac­tor­ing Reg­u­la­tion Act, 2011.

(xv) “Non-Oper­a­tive Finan­cial Hold­ing Com­pa­ny” (NOFHC) means a non-deposit tak­ing NBFC referred to in the2 “Guide­lines for Licens­ing of New Banks in the Pri­vate Sec­tor” issued by the Reserve Bank, which holds the shares of a bank­ing com­pa­ny and the shares of all oth­er finan­cial ser­vices com­pa­nies in its group, whether reg­u­lat­ed by Reserve Bank or by any oth­er finan­cial reg­u­la­tor, to the extent per­mis­si­ble under the applic­a­ble reg­u­la­to­ry prescriptions.

(xvi) “loss asset” means:

  1. an asset which has been iden­ti­fied as loss asset by the non-bank­ing finan­cial com­pa­ny or its inter­nal or exter­nal audi­tor or by the Reserve Bank of India dur­ing the inspec­tion of the non-bank­ing finan­cial com­pa­ny, to the extent it is not writ­ten off by the non-bank­ing finan­cial com­pa­ny; and
  2. an asset which is adverse­ly affect­ed by a poten­tial threat of non-recov­er­abil­i­ty due to either ero­sion in the val­ue of secu­ri­ty or non-avail­abil­i­ty of secu­ri­ty or due to any fraud­u­lent act or omis­sion on the part of the borrower;

(xvii) “long term invest­ment” means an invest­ment oth­er than a cur­rent investment;

(xvi­ii) “net asset val­ue” means the lat­est declared net asset val­ue by the mutu­al fund con­cerned in respect of that par­tic­u­lar scheme;

(xix) “net book val­ue” means:

  1. in the case of hire pur­chase asset, the aggre­gate of over­due and future instal­ments receiv­able as reduced by the bal­ance of unma­tured finance charges and fur­ther reduced by the pro­vi­sions made as per para­graph 9(2)(i) of these Directions;
  2. in the case of leased asset, aggre­gate of cap­i­tal por­tion of over­due lease rentals account­ed as receiv­able and depre­ci­at­ed book val­ue of the lease asset as adjust­ed by the bal­ance of lease adjust­ment account.

(xx) “non-per­form­ing asset” (referred to in these Direc­tions as “NPA”) means:

  1. an asset, in respect of which, inter­est has remained over­due for a peri­od of six months or more;
  2. a term loan inclu­sive of unpaid inter­est, when the instal­ment is over­due for a peri­od of six months or more or on which inter­est amount remained over­due for a peri­od of six months or more;
  3. a demand or call loan, which remained over­due for a peri­od of six months or more from the date of demand or call or on which inter­est amount remained over­due for a peri­od of six months or more;
  4. a bill which remains over­due for a peri­od of six months or more;
  5. the inter­est in respect of a debt or the income on receiv­ables under the head ‘oth­er cur­rent assets’ in the nature of short term loans/ advances, which facil­i­ty remained over­due for a peri­od of six months or more;
  6. any dues on account of sale of assets or ser­vices ren­dered or reim­burse­ment of expens­es incurred, which remained over­due for a peri­od of six months or more;
  7. the lease rental and hire pur­chase instal­ment, which has become over­due for a peri­od of twelve months or more;
  8. in respect of loans, advances and oth­er cred­it facil­i­ties (includ­ing bills pur­chased and dis­count­ed), the bal­ance out­stand­ing under the cred­it facil­i­ties (includ­ing accrued inter­est) made avail­able to the same borrower/ ben­e­fi­cia­ry when any of the above cred­it facil­i­ties becomes non-per­form­ing asset:

Pro­vid­ed that in the case of lease and hire pur­chase trans­ac­tions, a non-bank­ing finan­cial com­pa­ny may clas­si­fy each such account on the basis of its record of recovery;

(xxi) “owned fund” means paid up equi­ty cap­i­tal, pref­er­ence shares which are com­pul­so­ri­ly con­vert­ible into equi­ty, free reserves, bal­ance in share pre­mi­um account and cap­i­tal reserves rep­re­sent­ing sur­plus aris­ing out of sale pro­ceeds of asset, exclud­ing reserves cre­at­ed by reval­u­a­tion of asset, as reduced by accu­mu­lat­ed loss bal­ance, book val­ue of intan­gi­ble assets and deferred rev­enue expen­di­ture, if any;

(xxii) “out­side lia­bil­i­ties” means total lia­bil­i­ties as appear­ing on the lia­bil­i­ties side of the bal­ance sheet exclud­ing ‘paid up cap­i­tal’ and ‘reserves and sur­plus’, instru­ments com­pul­so­ri­ly con­vert­ible into equi­ty shares with­in a peri­od not exceed­ing 5 years from the date of issue 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.

(xxi­ii) “pub­lic funds” means “funds raised direct­ly or indi­rect­ly through pub­lic deposits, com­mer­cial papers, deben­tures, inter-cor­po­rate deposits and bank finance but excludes funds raised by issue of instru­ments com­pul­so­ri­ly con­vert­ible into equi­ty shares with­in a peri­od not exceed­ing 5 years from the date of issue”.

(xxiv) “stan­dard asset” means the asset in respect of which, no default in repay­ment of prin­ci­pal or pay­ment of inter­est is per­ceived and which does not dis­close any prob­lem nor car­ry more than nor­mal risk attached to the business;

(xxv) “sub-stan­dard asset” means:

  1. an asset which has been clas­si­fied as non-per­form­ing asset for a peri­od not exceed­ing 18 months;
  2. an asset where the terms of the agree­ment regard­ing inter­est and/ or prin­ci­pal have been rene­go­ti­at­ed or resched­uled or restruc­tured after com­mence­ment of oper­a­tions, until the expiry of one year of sat­is­fac­to­ry per­for­mance under the rene­go­ti­at­ed or resched­uled or restruc­tured terms:

Pro­vid­ed that the clas­si­fi­ca­tion of infra­struc­ture loan as a sub-stan­dard asset shall be in accor­dance with the pro­vi­sions of para­graph 27 of these Directions;

(xxvi) “sub­or­di­nat­ed debt” means an instru­ment, which is ful­ly paid up, is unse­cured and is sub­or­di­nat­ed to the claims of oth­er cred­i­tors and is free from restric­tive claus­es and is not redeemable at the instance of the hold­er or with­out the con­sent of the super­vi­so­ry author­i­ty of the non-bank­ing finan­cial com­pa­ny. The book val­ue of such instru­ment shall be sub­ject­ed to dis­count­ing as pro­vid­ed hereunder:

Remain­ing Matu­ri­ty of the instruments Rate of discount
(a) Upto one year 100 per cent
(b) More than one year but upto two years 80 per cent
© More than two years but upto three years 60 per cent
(d) More than three years but upto four years 40 per cent
(e) More than four years but upto five years 20 per cent

to the extent such dis­count­ed val­ue does not exceed fifty per cent of Tier I capital;

(xxvii) “sub­stan­tial inter­est” means hold­ing of a ben­e­fi­cial inter­est by an indi­vid­ual or his spouse or minor child, whether singly or tak­en togeth­er in the shares of a com­pa­ny, the amount paid up on which exceeds ten per cent of the paid up cap­i­tal of the com­pa­ny; or the cap­i­tal sub­scribed by all the part­ners of a part­ner­ship firm;

(xxvi­ii) “Sys­tem­i­cal­ly impor­tant non-deposit tak­ing non-bank­ing finan­cial com­pa­ny”, means a non-bank­ing finan­cial com­pa­ny not accepting/ hold­ing pub­lic deposits and hav­ing total assets of Rs. 500 crore and above as shown in the last audit­ed bal­ance sheet;

(xxix) “Tier I Cap­i­tal” means owned fund as reduced by invest­ment in shares of oth­er non-bank­ing finan­cial com­pa­nies and in shares, deben­tures, bonds, out­stand­ing loans and advances includ­ing hire pur­chase and lease finance made to and deposits with sub­sidiaries and com­pa­nies in the same group exceed­ing, in aggre­gate, ten per cent of the owned fund; and per­pet­u­al debt instru­ments issued by a non-deposit tak­ing non-bank­ing finan­cial com­pa­ny with assets between Rs. 100 crore and Rs. 500 crore as per the last audit­ed bal­ance sheet in each year to the extent it does not exceed 15% of the aggre­gate Tier I Cap­i­tal of such com­pa­ny as on March 31 of the pre­vi­ous account­ing year;

(xxx) “Tier II cap­i­tal” includes the following:

  1. pref­er­ence shares oth­er than those which are com­pul­so­ri­ly con­vert­ible into equity;
  2. reval­u­a­tion reserves at dis­count­ed rate of fifty five per cent;
  3. Gen­er­al Pro­vi­sions (includ­ing that for Stan­dard Assets) and loss reserves to the extent these are not attrib­ut­able to actu­al diminu­tion in val­ue or iden­ti­fi­able poten­tial loss in any spe­cif­ic asset and are avail­able to meet unex­pect­ed loss­es, to the extent of one and one fourth per­cent of risk weight­ed assets;
  4. hybrid debt cap­i­tal instruments;
  5. sub­or­di­nat­ed debt; and
  6. per­pet­u­al debt instru­ments issued by a non-deposit tak­ing non-bank­ing finan­cial com­pa­ny with assets between Rs. 100 crore and Rs. 500 crore as per the last audit­ed bal­ance sheet which is in excess of what qual­i­fies for Tier I Capital,

to the extent the aggre­gate does not exceed Tier I capital.

(2) Oth­er words or expres­sions used and not defined in these direc­tions but defined in the Reserve Bank of India Act, 1934 (2 of 1934) or the Non-Bank­ing Finan­cial Com­pa­nies Accep­tance of Pub­lic Deposits (Reserve Bank) Direc­tions, 1998 shall have the mean­ings respec­tive­ly assigned to them under that Act or Direc­tions. Any words or expres­sions used and not defined in these direc­tions or the RBI Act or any of the Direc­tions issued by the RBI, shall have the mean­ings respec­tive­ly assigned to them under the Com­pa­nies Act, 2013 (18 of 2013).

Income recog­ni­tion

3. (1) The income recog­ni­tion shall be based on recog­nised account­ing principles.

(2) Income includ­ing interest/ discount/ hire charges/ lease rentals or any oth­er charges on NPA shall be recog­nised only when it is actu­al­ly realised. Any such income recog­nised before the asset became non-per­form­ing and remain­ing unre­alised shall be reversed.

Income from investments

4. (1) Income from div­i­dend on shares of cor­po­rate bod­ies and units of mutu­al funds shall be tak­en into account on cash basis:

Pro­vid­ed that the income from div­i­dend on shares of cor­po­rate bod­ies may be tak­en into account on accru­al basis when such div­i­dend has been declared by the cor­po­rate body in its annu­al gen­er­al meet­ing and the non-bank­ing finan­cial company’s right to receive pay­ment is established.

(2) Income from bonds and deben­tures of cor­po­rate bod­ies and from Gov­ern­ment securities/ bonds may be tak­en into account on accru­al basis:

Pro­vid­ed that the inter­est rate on these instru­ments is pre-deter­mined and inter­est is ser­viced reg­u­lar­ly and is not in arrears.

(3) Income on secu­ri­ties of cor­po­rate bod­ies or pub­lic sec­tor under­tak­ings, the pay­ment of inter­est and repay­ment of prin­ci­pal of which have been guar­an­teed by Cen­tral Gov­ern­ment or a State Gov­ern­ment may be tak­en into account on accru­al basis.

Account­ing standards

5. Account­ing Stan­dards and Guid­ance Notes issued by the Insti­tute of Char­tered Accoun­tants of India (referred to in these Direc­tions as “ICAI”) shall be fol­lowed in so far as they are not incon­sis­tent with any of these Directions.

Account­ing of investments

6. (1) (a) The Board of Direc­tors of every non-bank­ing finan­cial com­pa­ny shall frame invest­ment pol­i­cy for the com­pa­ny and imple­ment the same;

(b) The cri­te­ria to clas­si­fy the invest­ments into cur­rent and long term invest­ments shall be spelt out by the Board of the com­pa­ny in the invest­ment policy;

© Invest­ments in secu­ri­ties shall be clas­si­fied into cur­rent and long term, at the time of mak­ing each investment;

(d) In case of inter-class transfer:

  1. there shall be no such trans­fer on ad-hoc basis;
  2. trans­fer, if war­rant­ed, shall be effect­ed only at the begin­ning of each half year, on April 1 or Octo­ber 1, with the approval of the Board;
  3. the invest­ments shall be trans­ferred scrip-wise, from cur­rent to long-term or vice-ver­sa, at book val­ue or mar­ket val­ue, whichev­er is lower;
  4. the depre­ci­a­tion, if any, in each scrip shall be ful­ly pro­vid­ed for and appre­ci­a­tion, if any, shall be ignored;
  5. the depre­ci­a­tion in one scrip shall not be set off against appre­ci­a­tion in anoth­er scrip, at the time of such inter-class trans­fer, even in respect of the scrips of the same category.

(2) (a) Quot­ed cur­rent invest­ments shall, for the pur­pos­es of val­u­a­tion, be grouped into the fol­low­ing cat­e­gories, viz.

  1. equi­ty shares,
  2. pref­er­ence shares,
  3. deben­tures and bonds,
  4. Gov­ern­ment secu­ri­ties includ­ing trea­sury bills,
  5. units of mutu­al fund, and
  6. oth­ers.

(b) Quot­ed cur­rent invest­ments for each cat­e­go­ry shall be val­ued at cost or mar­ket val­ue whichev­er is low­er. For this pur­pose, the invest­ments in each cat­e­go­ry shall be con­sid­ered scrip-wise and the cost and mar­ket val­ue aggre­gat­ed for all invest­ments in each cat­e­go­ry. If the aggre­gate mar­ket val­ue for the cat­e­go­ry is less than the aggre­gate cost for that cat­e­go­ry, the net depre­ci­a­tion shall be pro­vid­ed for or charged to the prof­it and loss account. If the ag­gregate mar­ket val­ue for the cat­e­go­ry exceeds the aggre­gate cost for the cat­e­go­ry, the net appre­ci­a­tion shall be ignored. Depre­ci­a­tion in one cat­e­go­ry of invest­ments shall not be set off against appre­ci­a­tion in anoth­er category.

(3) Unquot­ed equi­ty shares in the nature of cur­rent invest­ments shall be val­ued at cost or breakup val­ue, whichev­er is low­er. How­ev­er, non-bank­ing finan­cial com­pa­nies may sub­sti­tute fair val­ue for the breakup val­ue of the shares, if con­sid­ered nec­es­sary. Where the bal­ance sheet of the investee com­pa­ny is not avail­able for two years, such shares shall be val­ued at one Rupee only.

(4) Unquot­ed pref­er­ence shares in the nature of cur­rent invest­ments shall be val­ued at cost or face val­ue, whichev­er is lower.

(5) Invest­ments in unquot­ed Gov­ern­ment secu­ri­ties or Gov­ern­ment guar­an­teed bonds shall be val­ued at car­ry­ing cost.

(6) Unquot­ed invest­ments in the units of mutu­al funds in the nature of cur­rent invest­ments shall be val­ued at the net asset val­ue declared by the mutu­al fund in respect of each par­tic­u­lar scheme.

(7) Com­mer­cial papers shall be val­ued at car­ry­ing cost.

(8) A long term invest­ment shall be val­ued in accor­dance with the Account­ing Stan­dard issued by ICAI.

Expla­na­tion- Unquot­ed deben­tures shall be treat­ed as term loans or oth­er type of cred­it facil­i­ties depend­ing upon the tenure of such deben­tures for the pur­pose of income recog­ni­tion and asset classification.

Need for pol­i­cy on demand/call loans

7. (1) The Board of Direc­tors of every non-bank­ing finan­cial com­pa­ny granting/ intend­ing to grant demand/ call loans shall frame a pol­i­cy for the com­pa­ny and imple­ment the same.

(2) Such pol­i­cy shall, inter alia, stip­u­late the following,-

  1. A cut off date with­in which the repay­ment of demand or call loan shall be demand­ed or called up;
  2. The sanc­tion­ing author­i­ty shall, record spe­cif­ic rea­sons in writ­ing at the time of sanc­tion­ing demand or call loan, if the cut off date for demand­ing or call­ing up such loan is stip­u­lat­ed beyond a peri­od of one year from the date of sanction;
  3. The rate of inter­est which shall be payable on such loans;
  4. Inter­est on such loans, as stip­u­lat­ed shall be payable either at month­ly or quar­ter­ly rests;
  5. The sanc­tion­ing author­i­ty shall, record spe­cif­ic rea­sons in writ­ing at the time of sanc­tion­ing demand or call loan, if no inter­est is stip­u­lat­ed or a mora­to­ri­um is grant­ed for any period;
  6. A cut off date, for review of per­for­mance of the loan, not exceed­ing six months com­menc­ing from the date of sanction;
  7. Such demand or call loans shall not be renewed unless the peri­od­i­cal review has shown sat­is­fac­to­ry com­pli­ance with the terms of sanction.

Asset clas­si­fi­ca­tion

8. (1) Every non-bank­ing finan­cial com­pa­ny shall, after tak­ing into account the degree of well defined cred­it weak­ness­es and extent of depen­dence on col­lat­er­al secu­ri­ty for real­i­sa­tion, clas­si­fy its lease/hire pur­chase assets, loans and advances and any oth­er forms of cred­it into the fol­low­ing class­es, namely:

  1. Stan­dard assets;
  2. Sub-stan­dard assets;
  3. Doubt­ful assets; and
  4. Loss assets.

(2) The class of assets referred to above shall not be upgrad­ed mere­ly as a result of resched­ul­ing, unless it sat­is­fies the con­di­tions required for the upgradation.

Pro­vi­sion­ing requirements

9. Every non-bank­ing finan­cial com­pa­ny shall, after tak­ing into account the time lag between an account becom­ing non-per­form­ing, its recog­ni­tion as such, the real­i­sa­tion of the secu­ri­ty and the ero­sion over time in the val­ue of secu­ri­ty charged, make pro­vi­sion against sub-stan­dard assets, doubt­ful assets and loss assets as pro­vid­ed hereunder:-

Loans, advances and oth­er cred­it facil­i­ties includ­ing bills pur­chased and discounted-

(1) The pro­vi­sion­ing require­ment in respect of loans, advances and oth­er cred­it facil­i­ties includ­ing bills pur­chased and dis­count­ed shall be as under:

(i) Loss Assets The entire asset shall be writ­ten off. If the assets are per­mit­ted to remain in the books for any rea­son, 100% of the out­stand­ing should be pro­vid­ed for;
(ii) Doubt­ful Assets (a) 100% pro­vi­sion to the extent to which the advance is not cov­ered by the real­is­able val­ue of the secu­ri­ty to which the non-bank­ing finan­cial com­pa­ny has a valid recourse shall be made. The real­is­able val­ue is to be esti­mat­ed on a real­is­tic basis;
(b) In addi­tion to item (a) above, depend­ing upon the peri­od for which the asset has remained doubt­ful, pro­vi­sion to the extent of 20% to 50% of the secured por­tion (i.e. Esti­mat­ed real­is­able val­ue of the out­stand­ing) shall be made on the fol­low­ing basis:-
Peri­od for which the asset has been considered
as doubtful		 Per cent of provision
Up to one year 20
One to three years 30
More than three years 50
(iii) Sub-stan­dard assets A gen­er­al pro­vi­sion of 10 per cent of total out­stand­ing shall be made.

(2) Lease and hire pur­chase assets ‑The pro­vi­sion­ing require­ments in respect of hire pur­chase and leased assets shall be as under:

(i) Hire pur­chase assets — In respect of hire pur­chase assets, the total dues (over­due and future instal­ments tak­en togeth­er) as reduced by

  1. the finance charges not cred­it­ed to the prof­it and loss account and car­ried for­ward as unma­tured finance charges; and
  2. the depre­ci­at­ed val­ue of the under­ly­ing asset, shall be pro­vid­ed for.

Expla­na­tion: For the pur­pose of this paragraph,

  1. the depreciat­ed val­ue of the asset shall be notion­al­ly com­put­ed as the orig­i­nal cost of the asset to be reduced by deprecia­tion at the rate of twen­ty per cent per annum on a straight line method; and
  2. in the case of sec­ond hand asset, the orig­i­nal cost shall be the actu­al cost incurred for acqui­si­tion of such sec­ond hand asset.

Addi­tion­al pro­vi­sion for hire pur­chase and leased assets

(ii) In respect of hire pur­chase and leased assets, addi­tion­al pro­vi­sion shall be made as under:

(a) Where hire charges or lease rentals are over­due upto 12 months Nil
(b) Where hire charges or lease rentals are over­due for more than 12 months but upto 24 months 10 per cent of the net book value
© Where hire charges or lease rentals are over­due for more than 24 months but upto 36 months 40 per cent of the net book value
(d) where hire charges or lease rentals are over­due for more than 36 months but upto 48 months 70 per cent of the net book value
(e) where hire charges or lease rentals are over­due for more than 48 months 100 per cent of the net book value

(iii) On expiry of a peri­od of 12 months after the due date of the last instal­ment of hire purchase/ leased asset, the entire net book val­ue shall be ful­ly pro­vid­ed for.

Notes:

  1. The amount of cau­tion money/ mar­gin mon­ey or secu­ri­ty deposits kept by the bor­row­er with the non-bank­ing finan­cial com­pa­ny in pur­suance of the hire pur­chase agree­ment may be deduct­ed against the pro­vi­sions stip­u­lat­ed under clause (i) above, if not already tak­en into account while arriv­ing at the equat­ed month­ly instal­ments under the agree­ment. The val­ue of any oth­er secu­ri­ty avail­able in pur­suance to the hire pur­chase agree­ment may be deduct­ed only against the pro­vi­sions stip­u­lat­ed under clause (ii) above.
  2. The amount of secu­ri­ty deposits kept by the bor­row­er with the non-bank­ing finan­cial com­pa­ny in pur­suance to the lease agree­ment togeth­er with the val­ue of any oth­er secu­ri­ty avail­able in pur­suance to the lease agree­ment may be deduct­ed only against the pro­vi­sions stip­u­lat­ed under clause (ii) above.
  3. It is clar­i­fied that income recog­ni­tion on and pro­vi­sion­ing against NPAs are two dif­fer­ent aspects of pru­den­tial norms and pro­vi­sions as per the norms are required to be made on NPAs on total out­stand­ing bal­ances includ­ing the depre­ci­at­ed book val­ue of the leased asset under ref­er­ence after adjust­ing the bal­ance, if any, in the lease adjust­ment account. The fact that income on an NPA has not been recog­nised can­not be tak­en as rea­son for not mak­ing provision.
  4. An asset which has been rene­go­ti­at­ed or resched­uled as referred to in para­graph (2) (1) (xxv) (b) of these Direc­tions shall be a sub-stan­dard asset or con­tin­ue to remain in the same cat­e­go­ry in which it was pri­or to its rene­go­ti­a­tion or resched­ule­ment as a doubt­ful asset or a loss asset as the case may be. Nec­es­sary pro­vi­sion is required to be made as applic­a­ble to such asset till it is upgraded.
  5. The bal­ance sheet to be pre­pared by the NBFC may be in accor­dance with the pro­vi­sions con­tained in sub-para­graph (2) of para­graph 11.
  6. All finan­cial leas­es writ­ten on or after April 1, 2001 attract the pro­vi­sion­ing require­ments as applic­a­ble to hire pur­chase assets.
  7. In case of NBFC-MFIs, if the advance cov­ered by Cred­it Risk Guar­an­tee Fund Trust for Low Income Hous­ing (CRGFTLIH) guar­an­tee becomes non-per­form­ing, no pro­vi­sion need be made towards the guar­an­teed por­tion. The amount out­stand­ing in excess of the guar­an­teed por­tion should be pro­vid­ed for as per the extant guide­lines on pro­vi­sion­ing for non-per­form­ing advances.

Pro­vi­sion for stan­dard assets

10. Every Non-Bank­ing Finan­cial Com­pa­ny shall make pro­vi­sion for stan­dard assets at 0.25 per­cent of the out­stand­ing, which shall not be reck­oned for arriv­ing at net NPAs. The pro­vi­sion towards stan­dard assets need not be net­ted from gross advances but shall be shown sep­a­rate­ly as ‘Con­tin­gent Pro­vi­sions against Stan­dard Assets’ in the bal­ance sheet.

Dis­clo­sure in the bal­ance sheet

11. (1) Every non-bank­ing finan­cial com­pa­ny shall sep­a­rate­ly dis­close in its bal­ance sheet the pro­vi­sions made as per para­graph 9 above with­out net­ting them from the income or against the val­ue of assets.

(2) The pro­vi­sions shall be dis­tinct­ly indi­cat­ed under sep­a­rate heads of account as under:-

  1. pro­vi­sions for bad and doubt­ful debts; and
  2. pro­vi­sions for depre­ci­a­tion in investments.

(3) Such pro­vi­sions shall not be appro­pri­at­ed from the gen­er­al pro­vi­sions and loss reserves held, if any, by the non-bank­ing finan­cial company.

(4) Such pro­vi­sions for each year shall be deb­it­ed to the prof­it and loss account. The excess of pro­vi­sions, if any, held under the heads gen­er­al pro­vi­sions and loss reserves may be writ­ten back with­out mak­ing adjust­ment against them.

Account­ing year

12. Every non-bank­ing finan­cial com­pa­ny shall pre­pare its bal­ance sheet and prof­it and loss account as on March 31 every year. When­ev­er a non-bank­ing finan­cial com­pa­ny intends to extend the date of its bal­ance sheet as per pro­vi­sions of the Com­pa­nies Act, it should take pri­or approval of the Reserve Bank of India before approach­ing the Reg­is­trar of Com­pa­nies for this purpose.

Fur­ther, even in cas­es where the Bank and the Reg­is­trar of Com­pa­nies grant exten­sion of time, the non-bank­ing finan­cial com­pa­ny shall fur­nish to the Bank a pro­for­ma bal­ance sheet (unau­dit­ed ) as on March 31 of the year and the statu­to­ry returns due on the said date. Every non-bank­ing finan­cial com­pa­ny shall finalise its bal­ance sheet with­in a peri­od of 3 months from the date to which it pertains.

Sched­ule to the bal­ance sheet

13. Every non-bank­ing finan­cial com­pa­ny shall append to its bal­ance sheet pre­scribed under the Com­pa­nies Act, 2013, the par­tic­u­lars in the sched­ule as set out in Annex I.

Trans­ac­tions in gov­ern­ment securities

14. (1) Every non-bank­ing finan­cial com­pa­ny shall under­take trans­ac­tions in Gov­ern­ment secu­ri­ties through its CSGL account or its demat account.

(2) The non-bank­ing finan­cial com­pa­ny shall not under­take any trans­ac­tion in gov­ern­ment secu­ri­ty in phys­i­cal form through any broker.

Sub­mis­sion of a cer­tifi­cate from Statu­to­ry Audi­tor to the Bank

15. (1) Every non-bank­ing finan­cial com­pa­ny shall sub­mit a Cer­tifi­cate from its Statu­to­ry Audi­tor that it is engaged in the 3[busi­ness] of non-bank­ing finan­cial insti­tu­tion requir­ing it to hold a Cer­tifi­cate of Reg­is­tra­tion under Sec­tion 45-IA of the RBI Act and is eli­gi­ble to hold it. A cer­tifi­cate from the Statu­to­ry Audi­tor in this regard with ref­er­ence to the posi­tion of the com­pa­ny as at end of the finan­cial year end­ed March 31 may be sub­mit­ted to the Region­al Office of the Depart­ment of Non-Bank­ing Super­vi­sion under whose juris­dic­tion the non-bank­ing finan­cial com­pa­ny is reg­is­tered, with­in one month from the date of final­iza­tion of the bal­ance sheet and in any case not lat­er than Decem­ber 30th of that year. Such cer­tifi­cate shall also indi­cate the asset/ income pat­tern of the non-bank­ing finan­cial com­pa­ny for mak­ing it eli­gi­ble for clas­si­fi­ca­tion as Asset Finance Com­pa­ny, Invest­ment Com­pa­ny or Loan Company.

(2) For an NBFC-MFI, such Cer­tifi­cate should also indi­cate that the com­pa­ny ful­fills all con­di­tions stip­u­lat­ed to be clas­si­fied as an NBFC-MFI in the noti­fi­ca­tion DNBS.PD.No.234/CGM (US)-2011 dat­ed Decem­ber 02, 2011.

(3) For an NBFC-Fac­tor, such Cer­tifi­cate shall indi­cate the require­ment of hold­ing the cer­tifi­cate under Sec­tion 3 of the Fac­tor­ing Act. The cer­tifi­cate shall also indi­cate the per­cent­age of fac­tor­ing assets and income, that it ful­fills all con­di­tions stip­u­lat­ed under the Act to be clas­si­fied as an NBFC-Fac­tor and com­pli­ance to min­i­mum cap­i­tal­iza­tion norms, if FDI has been received.

Require­ment as to cap­i­tal adequacy

16. (1) Every NBFC-MFI and Infra­struc­ture Finance Com­pa­ny (IFC) shall main­tain, a min­i­mum cap­i­tal ratio con­sist­ing of Tier I and Tier II cap­i­tal which shall not be less than fif­teen per cent of its aggre­gate risk weight­ed assets on bal­ance sheet and of risk adjust­ed val­ue of off-bal­ance sheet items;

(2) The total of Tier II cap­i­tal of an NBFC-MFI, at any point of time, shall not exceed one hun­dred per cent of Tier I capital.

(3) The Tier I cap­i­tal of an IFC, at any point of time, shall not be less than 10%.

Expla­na­tions:

On bal­ance sheet assets–

(1) In these Direc­tions, degrees of cred­it risk expressed as per­cent­age weigh­tages have been assigned to bal­ance sheet assets. Hence, the val­ue of each asset/ item requires to be mul­ti­plied by the rel­e­vant risk weights to arrive at risk adjust­ed val­ue of assets. The aggre­gate shall be tak­en into account for reck­on­ing the min­i­mum cap­i­tal ratio. The risk weight­ed asset shall be cal­cu­lat­ed as the weight­ed aggre­gate of fund­ed items as detailed hereunder:

Weight­ed risk assets – weight Per­cent­age
On-Bal­ance Sheet items
(i) Cash and bank bal­ances includ­ing fixed deposits and cer­tifi­cates of deposits with banks 0
(ii) Invest­ments
(a) Approved secu­ri­ties [Except at © below] 0
(b) Bonds of pub­lic sec­tor banks 20
© Fixed deposits/ cer­tifi­cates of deposits/bonds of pub­lic finan­cial institutions 100
(d) Shares of all com­pa­nies and debentures/ bonds Com­mer­cial papers of all com­pa­nies and units of all mutu­al funds 100
4(e) All assets cov­er­ing PPP and post com­mer­cial oper­a­tions date (COD) infra­struc­ture projects in
exis­tence over a year of com­mer­cial operation		 50
(iii) Cur­rent assets
(a) Stock on hire (net book value) 100
(b) Inter cor­po­rate loans/ deposits 100
© Loans and advances ful­ly secured against deposits held by the com­pa­ny itself 0
(d) Loans to staff 0
(e) Oth­er secured loans and advances con­sid­ered good 100
(f) Bills purchased/ discounted 100
(g) Oth­ers (To be specified) 100
(iv) Fixed Assets(net of depreciation)
(a) Assets leased out (net book value) 100
(b) Premis­es 100
© Fur­ni­ture & Fixtures 100
(v) Oth­er assets
(a) Income tax deduct­ed at source (net of provision) 0
(b) Advance tax paid (net of provision) 0
© Inter­est due on Gov­ern­ment securities 0
(d) Oth­ers (to be specified) 100

Notes:

(1) Net­ting may be done only in respect of assets where pro­vi­sions for depre­ci­a­tion or for bad and doubt­ful debts have been made.

(2) Assets which have been deduct­ed from owned fund to arrive at net owned fund shall have a weigh­tage of ‘zero’.

(3) While cal­cu­lat­ing the aggre­gate of fund­ed expo­sure of a bor­row­er for the pur­pose of assign­ment of risk weight, such non-bank­ing finan­cial com­pa­nies may net off the amount of cash margin/ cau­tion money/ secu­ri­ty deposits (against which right to set-off is avail­able) held as col­lat­er­al against the advances out of the total out­stand­ing expo­sure of the borrower.

(4) For loans guar­an­teed by Cred­it Risk Guar­an­tee Fund Trust for Low Income Hous­ing (CRGFTLIH) NBFC-MFIs may assign zero risk weight for the guar­an­teed por­tion. The bal­ance out­stand­ing in excess of the guar­an­teed por­tion would attract a risk-weight as per extant guidelines.

(5) Norms for Infra­struc­ture loans

(a) Risk weight for invest­ment in AAA rat­ed secu­ri­tized paper

The invest­ment in “AAA” rat­ed secu­ri­tized paper per­tain­ing to the infra­struc­ture facil­i­ty shall attract risk weight of 50 per cent for cap­i­tal ade­qua­cy pur­pos­es sub­ject to the ful­fil­ment of the fol­low­ing conditions:

(i) The infra­struc­ture facil­i­ty gen­er­ates income/ cash flows, which ensures servicing/ repay­ment of the secu­ri­tized paper.

(ii) The rat­ing by one of the approved cred­it rat­ing agen­cies is cur­rent and valid.

Expla­na­tion: The rat­ing relied upon shall be deemed to be cur­rent and valid, if the rat­ing is not more than one month old on the date of open­ing of the issue, and the rat­ing ratio­nale from the rat­ing agency is not more than one year old on the date of open­ing of the issue, and the rat­ing let­ter and the rat­ing ratio­nale form part of the offer document.

(iii) In the case of sec­ondary mar­ket acqui­si­tion, the ‘AAA’ rat­ing of the issue is in force and con­firmed from the month­ly bul­letin pub­lished by the respec­tive rat­ing agency.

(iv) The secu­ri­tized paper is a per­form­ing asset.

(b) For Infra­struc­ture Finance Com­pa­nies, the risk weight for assets cov­er­ing PPP and post com­mer­cial oper­a­tions date (COD) projects which have com­plet­ed at least one year of sat­is­fac­to­ry com­mer­cial oper­a­tions shall be at 50 percent.

Off-bal­ance sheet items

(i) Gen­er­al

NBFCs will cal­cu­late the total risk weight­ed off-bal­ance sheet cred­it expo­sure as the sum of the risk-weight­ed amount of the mar­ket relat­ed and non-mar­ket relat­ed off-bal­ance sheet items. The risk-weight­ed amount of an off-bal­ance sheet item that gives rise to cred­it expo­sure will be cal­cu­lat­ed by means of a two-step process:

(a) the notion­al amount of the trans­ac­tion is con­vert­ed into a cred­it equiv­a­lent amount, by mul­ti­ply­ing the amount by the spec­i­fied cred­it con­ver­sion fac­tor or by apply­ing the cur­rent expo­sure method; and

(b) the result­ing cred­it equiv­a­lent amount is mul­ti­plied by the risk weight applic­a­ble viz. zero per­cent for expo­sure to Cen­tral Government/ State Gov­ern­ments, 20 per­cent for expo­sure to banks and 100 per­cent for others.

B. Non-mar­ket-relat­ed off- bal­ance sheet items

i. The cred­it equiv­a­lent amount in rela­tion to a non-mar­ket relat­ed off-bal­ance sheet item will be deter­mined by mul­ti­ply­ing the con­tract­ed amount of that par­tic­u­lar trans­ac­tion by the rel­e­vant cred­it con­ver­sion fac­tor (CCF).

Sr. No. Instru­ments Cred­it Con­ver­sion Factor
i. Finan­cial & oth­er guarantees 100
ii. Share/debenture under­writ­ing obligations 50
iii. Part­ly-paid shares/debentures 100
iv. Bills discounted/rediscounted 100
v. Lease con­tracts entered into but yet to be executed 100
vi. Sale and repur­chase agree­ment and asset sales­with recourse, where the cred­it risk remains with the NBFC. 100
vii. For­ward asset pur­chas­es, for­ward deposits and part­ly paid shares and secu­ri­ties, which rep­re­sent com­mit­ments with cer­tain draw down. 100
viii. Lend­ing of NBFC secu­ri­ties or post­ing of secu­ri­ties as col­lat­er­al by NBFC, includ­ing instances where these arise out of repo style transactions 100
ix. Oth­er com­mit­ments (e.g., for­mal stand­by facil­i­ties and cred­it lines) with an orig­i­nal matu­ri­ty of
up to one year 20
over one year 50
x. [Sim­i­lar com­mit­ments that are uncon­di­tion­al­ly can­cellable at any time by the NBFC with­out pri­or notice or that effec­tive­ly pro­vide for auto­mat­ic can­cel­la­tion due to dete­ri­o­ra­tion in a borrower’s cred­it worthiness. 0
xi. Take-out Finance in the books of tak­ing-over institution
(i) Uncon­di­tion­al take-out finance 100
(ii) Con­di­tion­al take-out finance 50
Note: As the counter-par­ty expo­sure will deter­mine the risk weight, it will be 100 per­cent in respect of all bor­row­ers or zero per­cent if cov­ered by Gov­ern­ment guarantee.
xii. Com­mit­ment to pro­vide liq­uid­i­ty facil­i­ty for secu­ri­ti­za­tion of stan­dard asset transactions 100
xiii. Sec­ond loss cred­it enhance­ment for secu­ri­ti­za­tion of stan­dard asset trans­ac­tions pro­vid­ed by third party 100
xiv. Oth­er con­tin­gent lia­bil­i­ties (To be specified) 50

Note:

i. Cash margins/deposits shall be deduct­ed before apply­ing the con­ver­sion factor

ii. Where the non-mar­ket relat­ed off-bal­ance sheet item is an undrawn or par­tial­ly undrawn fund-based facil­i­ty, the amount of undrawn com­mit­ment to be includ­ed in cal­cu­lat­ing the off-bal­ance sheet non-mar­ket relat­ed cred­it expo­sures is the max­i­mum unused por­tion of the com­mit­ment that could be drawn dur­ing the remain­ing peri­od to matu­ri­ty. Any drawn por­tion of a com­mit­ment forms a part of NBFC’s on-bal­ance sheet cred­it exposure.

For exam­ple:

A term loan of Rs. 700 cr is sanc­tioned for a large project which can be drawn down in stages over a three year peri­od. The terms of sanc­tion allow draw down in three stages – Rs. 150 cr in Stage I, Rs. 200 cr in Stage II and Rs. 350 cr in Stage III, where the bor­row­er needs the NBFC’s explic­it approval for draw down under Stages II and III after com­ple­tion of cer­tain for­mal­i­ties. If the bor­row­er has drawn already Rs. 50 cr under Stage I, then the undrawn por­tion would be com­put­ed with ref­er­ence to Stage I alone i.e., it will be Rs.100 cr. If Stage I is sched­uled to be com­plet­ed with­in one year, the CCF will be 20 per­cent and if it is more than one year then the applic­a­ble CCF will be 50 per cent.

C. Mar­ket Relat­ed Off-Bal­ance Sheet Items

i. NBFCs should take into account all mar­ket relat­ed off-bal­ance sheet items (OTC deriv­a­tives and Secu­ri­ties Financ­ing Trans­ac­tions such as repo / reverse repo/ CBLO etc.) while cal­cu­lat­ing the risk weight­ed off-bal­ance sheet cred­it exposures.

ii. The cred­it risk on mar­ket relat­ed off-bal­ance sheet items is the cost to an NBFC of replac­ing the cash flow spec­i­fied by the con­tract in the event of coun­ter­par­ty default. This would depend, among oth­er things, upon the matu­ri­ty of the con­tract and on the volatil­i­ty of rates under­ly­ing the type of instrument.

iii. Mar­ket relat­ed off-bal­ance sheet items would include:

(a) inter­est rate con­tracts — includ­ing sin­gle cur­ren­cy inter­est rate swaps, basis swaps, for­ward rate agree­ments, and inter­est rate futures;

(b) for­eign exchange con­tracts, includ­ing con­tracts involv­ing gold, — includes cross cur­ren­cy swaps (includ­ing cross cur­ren­cy inter­est rate swaps), for­ward for­eign exchange con­tracts, cur­ren­cy futures, cur­ren­cy options;

© Cred­it Default Swaps; and

(d) any oth­er mar­ket relat­ed con­tracts specif­i­cal­ly allowed by the Reserve Bank which give rise to cred­it risk.

iv. Exemp­tion from cap­i­tal require­ments is per­mit­ted for -

(a) for­eign exchange (except gold) con­tracts which have an orig­i­nal matu­ri­ty of 14 cal­en­dar days or less; and

(b) instru­ments trad­ed on futures and options exchanges which are sub­ject to dai­ly mark-to-mar­ket and mar­gin payments.

v. The expo­sures to Cen­tral Counter Par­ties (CCPs), on account of deriv­a­tives trad­ing and secu­ri­ties financ­ing trans­ac­tions (e.g. Col­lat­er­al­ized Bor­row­ing and Lend­ing Oblig­a­tions — CBLOs, Repos) out­stand­ing against them will be assigned zero expo­sure val­ue for coun­ter­par­ty cred­it risk, as it is pre­sumed that the CCPs’ expo­sures to their coun­ter­par­ties are ful­ly col­lat­er­al­ized on a dai­ly basis, there­by pro­vid­ing pro­tec­tion for the CCP’s cred­it risk exposures.

vi. A CCF of 100 per cent will be applied to the cor­po­rate secu­ri­ties post­ed as col­lat­er­als with CCPs and the resul­tant off-bal­ance sheet expo­sure will be assigned risk weights appro­pri­ate to the nature of the CCPs. In the case of Clear­ing Cor­po­ra­tion of India Lim­it­ed (CCIL), the risk weight will be 20 per cent and for oth­er CCPs, risk weight will be 50 percent.

vii. The total cred­it expo­sure to a counter par­ty in respect of deriv­a­tive trans­ac­tions should be cal­cu­lat­ed accord­ing to the cur­rent expo­sure method as explained below:

D. Cur­rent Expo­sure Method

The cred­it equiv­a­lent amount0 of a mar­ket relat­ed off-bal­ance sheet trans­ac­tion cal­cu­lat­ed using the cur­rent expo­sure method is the sum of a) cur­rent cred­it expo­sure and b) poten­tial future cred­it expo­sure of the contract.

(a) Cur­rent cred­it expo­sure is defined as the sum of the gross pos­i­tive mark-to-mar­ket val­ue of all con­tracts with respect to a sin­gle coun­ter­par­ty (pos­i­tive and neg­a­tive marked-to-mar­ket val­ues of var­i­ous con­tracts with the same coun­ter­par­ty should not be net­ted). The Cur­rent Expo­sure Method requires peri­od­i­cal cal­cu­la­tion of the cur­rent cred­it expo­sure by mark­ing these con­tracts to market.

(b) Poten­tial future cred­it expo­sure is deter­mined by mul­ti­ply­ing the notion­al prin­ci­pal amount of each of these con­tracts, irre­spec­tive of whether the con­tract has a zero, pos­i­tive or neg­a­tive mark-to-mar­ket val­ue by the rel­e­vant add-on fac­tor indi­cat­ed below accord­ing to the nature and resid­ual matu­ri­ty of the instrument.

Cred­it Con­ver­sion Fac­tors for inter­est rate relat­ed, exchange rate relat­ed and gold relat­ed derivatives
Cred­it Con­ver­sion Factors (%)
Inter­est Rate Contracts Exchange Rate Con­tracts & Gold
One year or less 0.50 2.00
Over one year to five years 1.00 10.00
Over five years 3.00 15.00

i. For con­tracts with mul­ti­ple exchanges of prin­ci­pal, the add-on fac­tors are to be mul­ti­plied by the num­ber of remain­ing pay­ments in the contract.

ii. For con­tracts that are struc­tured to set­tle out­stand­ing expo­sure fol­low­ing spec­i­fied pay­ment dates and where the terms are reset such that the mar­ket val­ue of the con­tract is zero on these spec­i­fied dates, the resid­ual matu­ri­ty would be set equal to the time until the next reset date. How­ev­er, in the case of inter­est rate con­tracts which have resid­ual matu­ri­ties of more than one year and meet the above cri­te­ria, the CCF or add-on fac­tor is sub­ject to a floor of 1.0 per cent.

iii. No poten­tial future cred­it expo­sure would be cal­cu­lat­ed for sin­gle cur­ren­cy float­ing / float­ing inter­est rate swaps; the cred­it expo­sure on these con­tracts would be eval­u­at­ed sole­ly on the basis of their mark-to-mar­ket value.

iv. Poten­tial future expo­sures should be based on ‘effec­tive’ rather than ‘appar­ent notion­al amounts’. In the event that the ‘stat­ed notion­al amount’ is lever­aged or enhanced by the struc­ture of the trans­ac­tion, the ‘effec­tive notion­al amount’ must be used for deter­min­ing poten­tial future expo­sure. For exam­ple, a stat­ed notion­al amount of USD 1 mil­lion with pay­ments based on an inter­nal rate of two times the lend­ing rate of the NBFC would have an effec­tive notion­al amount of USD 2 million.

E. Cred­it con­ver­sion fac­tors for Cred­it Default Swaps(CDS):

NBFCs are only per­mit­ted to buy cred­it pro­tec­tion to hedge their cred­it risk on cor­po­rate bonds they hold. The bonds may be held in cur­rent cat­e­go­ry or per­ma­nent cat­e­go­ry. The cap­i­tal charge for these expo­sures will be as under:

(i) For cor­po­rate bonds held in cur­rent cat­e­go­ry and hedged by CDS where there is no mis­match between the CDS and the hedged bond, the cred­it pro­tec­tion will be per­mit­ted to be recog­nised to a max­i­mum of 80% of the expo­sure hedged. There­fore, the NBFC will con­tin­ue to main­tain cap­i­tal charge for the cor­po­rate bond to the extent of 20% of the applic­a­ble cap­i­tal charge. This can be achieved by tak­ing the expo­sure val­ue at 20% of the mar­ket val­ue of the bond and then mul­ti­ply­ing that with the risk weight of the issu­ing enti­ty. In addi­tion to this, the bought CDS posi­tion will attract a cap­i­tal charge for coun­ter­par­ty risk which will be cal­cu­lat­ed by apply­ing a cred­it con­ver­sion fac­tor of 100 per­cent and a risk weight as applic­a­ble to the pro­tec­tion sell­er i.e. 20 per cent for banks and 100 per cent for others.

(ii) For cor­po­rate bonds held in per­ma­nent cat­e­go­ry and hedged by CDS where there is no mis­match between the CDS and the hedged bond, NBFCs can recog­nise full cred­it pro­tec­tion for the under­ly­ing asset and no cap­i­tal will be required to be main­tained there­on. The expo­sure will stand ful­ly sub­sti­tut­ed by the expo­sure to the pro­tec­tion sell­er and attract risk weight as applic­a­ble to the pro­tec­tion sell­er i.e. 20 per cent for banks and 100 per cent for others.”

Lever­age ratio

17. The lever­age ratio of every Non-Bank­ing Finan­cial Com­pa­ny shall not be more than 7 at any point of time, with effect from March 31, 2015.

Loans against non-bank­ing finan­cial company’s own shares prohibited

18. (1) No non-bank­ing finan­cial com­pa­ny shall lend against its own shares.

(2) Any out­stand­ing loan grant­ed by a non-bank­ing finan­cial com­pa­ny against its own shares on the date of com­mence­ment of these Direc­tions shall be recov­ered by the non-bank­ing finan­cial com­pa­ny as per the repay­ment schedule.

Loans against secu­ri­ty of sin­gle prod­uct — gold jewellery

19. (a) All NBFCs shall

(i) main­tain a Loan-to-Val­ue (LTV) Ratio not exceed­ing 75 per cent for loans grant­ed against the col­lat­er­al of gold jewellery;

Pro­vid­ed that the val­ue of gold jew­ellery for the pur­pose of deter­min­ing the max­i­mum per­mis­si­ble loan amount shall be the intrin­sic val­ue of the gold con­tent there­in and no oth­er cost ele­ments shall be added there­to. The intrin­sic val­ue of the gold jew­ellery shall be arrived at as detailed in para­graph 21(1) of the Directions.

(ii) dis­close in their bal­ance sheet the per­cent­age of such loans to their total assets.

(b) NBFCs should not grant any advance against bul­lion / pri­ma­ry gold and gold coins. NBFCs should not grant any advance for pur­chase of gold in any form includ­ing pri­ma­ry gold, gold bul­lion, gold jew­ellery, gold coins, units of Exchange Trad­ed Funds (ETF) and units of gold mutu­al fund.

Ver­i­fi­ca­tion of the own­er­ship of gold

20.(1) Where the gold jew­ellery pledged by a bor­row­er at any one time or cumu­la­tive­ly on loan out­stand­ing is more than 20 grams, NBFCs shall keep a record of the ver­i­fi­ca­tion of the own­er­ship of the jew­ellery. The own­er­ship ver­i­fi­ca­tion need not nec­es­sar­i­ly be through orig­i­nal receipts for the jew­ellery pledged but a suit­able doc­u­ment shall be pre­pared to explain how the own­er­ship of the jew­ellery has been deter­mined, par­tic­u­lar­ly in each and every case where the gold jew­ellery pledged by a bor­row­er at any one time or cumu­la­tive­ly on loan out­stand­ing is more than 20 grams.

(2) NBFCs shall have an explic­it pol­i­cy in this regard as approved by the Board in their over­all loan policy.

Stan­dard­iza­tion of Val­ue of Gold accept­ed as col­lat­er­al in arriv­ing at LTV Ratio

21. (1) The gold jew­ellery accept­ed as col­lat­er­al by the Non-Bank­ing Finan­cial Com­pa­ny shall be val­ued by the fol­low­ing method:

  1. The gold jew­ellery accept­ed as col­lat­er­al by the Non-Bank­ing Finan­cial Com­pa­ny shall be val­ued by tak­ing into account the pre­ced­ing 30 days’ aver­age of the clos­ing price of 22 carat gold as per the rate as quot­ed by The Bom­bay Bul­lion Asso­ci­a­tion Ltd. (BBA) 5or the his­tor­i­cal spot gold price data pub­licly dis­sem­i­nat­ed by a com­mod­i­ty exchange reg­u­lat­ed by the For­ward Mar­kets Commission.
  2. If the puri­ty of the gold is less than 22 carats, the NBFC should trans­late the col­lat­er­al into 22 carat and state the exact grams of the col­lat­er­al. In oth­er words, jew­ellery of low­er puri­ty of gold shall be val­ued proportionately.
  3. NBFC, while accept­ing the gold as col­lat­er­al should give a cer­tifi­cate to the bor­row­er on their let­ter­head, of hav­ing assayed the gold and stat­ing the puri­ty (in terms of carats) and the weight of the gold pledged.

    NBFCs may have suit­able caveats to pro­tect them­selves against dis­putes dur­ing redemp­tion, but the cer­ti­fied puri­ty shall be applied both for deter­min­ing the max­i­mum per­mis­si­ble loan and the reserve price for auction.

(2) Auc­tion

a. The auc­tion should be con­duct­ed in the same town or talu­ka in which the branch that has extend­ed the loan is located.

b. 6While auc­tion­ing the gold, the NBFC should declare a reserve price for the pledged orna­ments. The reserve price for the pledged orna­ments should not be less than 85 per cent of the pre­vi­ous 30 day aver­age clos­ing price of 22 carat gold as declared by the Bom­bay Bul­lion Asso­ci­a­tion Ltd. (BBA) or the his­tor­i­cal spot gold price data pub­licly dis­sem­i­nat­ed by a com­mod­i­ty exchange reg­u­lat­ed by the For­ward Mar­kets Com­mis­sion and val­ue of the jew­ellery of low­er puri­ty in terms of carats should be pro­por­tion­ate­ly reduced.

c. It shall be manda­to­ry on the part of the NBFCs to pro­vide full details of the val­ue fetched in the auc­tion and the out­stand­ing dues adjust­ed and any amount over and above the loan out­stand­ing should be payable to the borrower.

d. NBFCs shall dis­close in their annu­al reports the details of the auc­tions con­duct­ed dur­ing the finan­cial year includ­ing the num­ber of loan accounts, out­stand­ing amounts, val­ue fetched and whether any of its sis­ter con­cerns par­tic­i­pat­ed in the auction.

Safe­ty and Secu­ri­ty Mea­sures to be fol­lowed by Non-Bank­ing Finan­cial Com­pa­nies lend­ing against col­lat­er­al of gold jewellery

22. (1) Non-Bank­ing Finan­cial Com­pa­nies, which are in the busi­ness of lend­ing against col­lat­er­al of gold jew­ellery, shall ensure that nec­es­sary infra­struc­ture and facil­i­ties are put in place, includ­ing safe deposit vault and appro­pri­ate secu­ri­ty mea­sures for oper­at­ing the vault, in each of its branch­es where gold jew­ellery is accept­ed as col­lat­er­al. This is required to safe­guard the gold jew­ellery accept­ed as col­lat­er­al and to ensure con­ve­nience of borrowers.

a. No new branch/es shall be opened with­out suit­able arrange­ments for secu­ri­ty and for stor­age of gold jew­ellery, includ­ing safe deposit vault.

23. Loans against secu­ri­ty of shares

7NBFCs lend­ing against the col­lat­er­al of list­ed shares shall,

  1. main­tain a Loan to Val­ue (LTV) ratio of 50% for loans grant­ed against the col­lat­er­al of shares. LTV ratio of 50% is required to be main­tained at all times. Any short­fall in the main­te­nance of the 50% LTV occur­ring on account of move­ment in the share prices shall be made good with­in 7 work­ing days.
  2. in case where lend­ing is being done for invest­ment in cap­i­tal mar­kets, accept only Group 1 secu­ri­ties (spec­i­fied in SMD/ Policy/ Cir — 9/ 2003 dat­ed March 11, 2003 as amend­ed from time to time, issued by SEBI) as col­lat­er­al for loans of val­ue more than ₹. 5 lakh, sub­ject to review by the Bank.
  3. report on-line to stock exchanges on a quar­ter­ly basis, infor­ma­tion on the shares pledged in their favour, by bor­row­ers for avail­ing loans in for­mat as giv­en in Annex VI.

24. Con­cen­tra­tion of credit/investment

An NBFC which is held by an NOFHC shall not

  1. have any expo­sure (cred­it and invest­ments includ­ing invest­ments in the equi­ty / debt cap­i­tal instru­ments) to the Promoters/ Pro­mot­er Group enti­ties or indi­vid­u­als asso­ci­at­ed with the Pro­mot­er Group or the NOFHC;
  2. make invest­ment in the equity/ debt cap­i­tal instru­ments in any of the finan­cial enti­ties under the NOFHC;
  3. invest in equi­ty instru­ments of oth­er NOFHCs.

Expla­na­tion: For the pur­pos­es of this Para­graph, the expres­sion, ‘Pro­mot­er’ and ‘Pro­mot­er Group’ shall have the mean­ings assigned to those expres­sions in Annex 1 to the “Guide­lines for Licens­ing of New Banks in the Pri­vate Sec­tor” issued by Reserve Bank (Annex II).

Open­ing Branch­es exceed­ing one thou­sand in number

25. Non-Bank­ing Finan­cial Com­pa­ny shall obtain pri­or approval of the Reserve Bank to open branch­es exceed­ing 1000. How­ev­er NBFCs which already have more than 1000 branch­es may approach the Bank for pri­or approval for any fur­ther branch expan­sion. Besides, no new branch­es will be allowed to be opened with­out the facil­i­ties for stor­age of gold jew­ellery and min­i­mum secu­ri­ty facil­i­ties for the pledged gold jewellery.

Infor­ma­tion with respect to change of address, direc­tors, audi­tors, etc. to be submitted

26. Every non-bank­ing finan­cial com­pa­ny shall com­mu­ni­cate, not lat­er than one month from the occur­rence of any change in:

  1. the com­plete postal address, tele­phone number/s and fax number/s of the registered/corporate office;
  2. the names and res­i­den­tial address­es of the direc­tors of the company;
  3. the names and the offi­cial des­ig­na­tions of its prin­ci­pal officers;
  4. the names and office address of the audi­tors of the com­pa­ny; and
  5. the spec­i­men sig­na­tures of the offi­cers autho­rised to sign on behalf of the company

to the Region­al Office of the Depart­ment of Non-Bank­ing Super­vi­sion of the Reserve Bank of India as indi­cat­ed in the Sec­ond Sched­ule to the Non-Bank­ing Finan­cial Com­pa­nies Accep­tance of Pub­lic Deposits (Reserve Bank) Direc­tions, 1998.

NBFCs not to be part­ners in part­ner­ship firms

27. (1) No non-bank­ing finan­cial com­pa­ny shall con­tribute to the cap­i­tal of a part­ner­ship firm or become a part­ner of such firm.

(2) A non-bank­ing finan­cial com­pa­ny, which had already con­tributed to the cap­i­tal of a part­ner­ship firm or was a part­ner of a part­ner­ship firm shall seek ear­ly retire­ment from the part­ner­ship firm.

(3) In this con­nec­tion it is fur­ther clar­i­fied that;

a) Part­ner­ship firms men­tioned above shall also include Lim­it­ed Lia­bil­i­ty Part­ner­ships (LLPs).

b) Fur­ther, the afore­said pro­hi­bi­tion shall also be applic­a­ble with respect to Asso­ci­a­tion of per­sons; these being sim­i­lar in nature to part­ner­ship firms

NBFCs which had already con­tributed to the cap­i­tal of a LLP/ Asso­ci­a­tion of per­sons or was a part­ner of a LLP or mem­ber of an Asso­ci­a­tion of per­sons are advised to seek ear­ly retire­ment from the LLP/ Asso­ci­a­tion of persons.

Norms for restruc­tur­ing of advances

28. Norms for restruc­tur­ing of advances by NBFCs shall be on the lines of the norms spec­i­fied by the Reserve Bank of India for banks as mod­i­fied and set forth in Annex-III.

Flex­i­ble Struc­tur­ing of Long Term Project Loans to Infra­struc­ture and Core Industries -

29. Norms for Flex­i­ble Struc­tur­ing of Long Term project loans to Infra­struc­ture and Core Indus­tries by NBFCs shall be on the lines of the norms spec­i­fied by the Reserve Bank of India for banks as mod­i­fied and set forth in Annex-IV.

Sub­mis­sion of ‘Branch Info’ Return

30. With effect from June 30, 2013, all Non-deposit tak­ing NBFCs hav­ing total assets more than Rs.50 crore, shall sub­mit a quar­ter­ly return on Branch Infor­ma­tion with­in ten days of the expiry of the rel­a­tive quar­ter as on March 31, June 30, Sep­tem­ber 30 and Decem­ber 31 every year, in the for­mat avail­able in the Annex V, to the Region­al Office of the Depart­ment of Non-Bank­ing Super­vi­sion of the Reserve Bank of India, under whose juris­dic­tion the reg­is­tered office of the com­pa­ny is locat­ed. The return shall be sub­mit­ted online in the for­mat avail­able on https://cosmos.rbi.org.in.

Exemp­tions

31. The Reserve Bank of India may, if it con­sid­ers it nec­es­sary for avoid­ing any hard­ship or for any oth­er just and suf­fi­cient rea­son, grant exten­sion of time to com­ply with or exempt any non-bank­ing finan­cial com­pa­ny or class of non-bank­ing finan­cial com­pa­nies, from all or any of the pro­vi­sions of these Direc­tions either gen­er­al­ly or for any spec­i­fied peri­od, sub­ject to such con­di­tions as the Reserve Bank of India may impose.

Inter­pre­ta­tions

32. For the pur­pose of giv­ing effect to the pro­vi­sions of these Direc­tions, the Reserve Bank of India may, if it con­sid­ers nec­es­sary, issue nec­es­sary clar­i­fi­ca­tions in respect of any mat­ter cov­ered here­in and the inter­pre­ta­tion of any pro­vi­sion of these Direc­tions giv­en by the Reserve Bank of India shall be final and bind­ing on all the par­ties concerned.

Repeal and Saving

33. (1) The Non-Bank­ing Finan­cial Com­pa­nies (Non-Deposit Accept­ing or Hold­ing) Pru­den­tial Norms (Reserve Bank) Direc­tions, 2007 shall stand repealed by these Directions.

(2) Notwith­stand­ing such repeal, any cir­cu­lar, instruc­tion, order issued under the Direc­tions in sub–section (1) shall con­tin­ue to apply to non-bank­ing finan­cial com­pa­nies in the same man­ner as they applied to such com­pa­nies before such repeal.

(C D Srinivasan)
Chief Gen­er­al Manager

* Gov­ern­ment Com­pa­nies were advised vide DNBS.PD/CC.No.86/03.02.089/2006–07 dat­ed Decem­ber 12, 2006 to sub­mit a road map for com­pli­ance with the var­i­ous ele­ments of the NBFC reg­u­la­tions, in con­sul­ta­tion with the Gov­ern­ment, and sub­mit the same to the Reserve Bank (Depart­ment of Non Bank­ing Super­vi­sion – (DNBS)

1 Sub­sti­tut­ed vide Noti­fi­ca­tion No.DNBR.014/CGM(CDS)-2015 dat­ed April 08, 2015

2 http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=28191

3 It was clar­i­fied in DNBS (PD) C.C.No.81/03.05.002/2006–07 dat­ed Octo­ber 19, 2006, that the busi­ness of non-bank­ing finan­cial insti­tu­tion (NBFI) means a com­pa­ny engaged in the busi­ness of finan­cial insti­tu­tion as con­tained in Sec­tion 45I(a) of the RBI Act, 1934. For this pur­pose, the def­i­n­i­tion of ‘Prin­ci­pal Busi­ness’ giv­en, vide Press Release 1998–99/1269 dat­ed April 8, 1999 may be followed.

4 Insert­ed vide Noti­fi­ca­tion No.DNBR.023/CGM(CDS)-2015 dat­ed May 14, 2015

5 Insert­ed vide Noti­fi­ca­tion No. DNBR.026/CGM(CDS)-2015 dat­ed May 21, 2015

6 Sub­sti­tut­ed vide Noti­fi­ca­tion No. DNBR.026/CGM(CDS)-2015 dat­ed May 21, 2015

7 Sub­sti­tut­ed vide Noti­fi­ca­tion No. DNBR(PD) 017/CGM(CDS)-2015 dat­ed April 10, 2015

Leave a Reply

Your email address will not be published. Required fields are marked *