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Compliances

RBI Directions

RBI has notified following directions applicable to NBFC's

A) NBFC acceptance of Public Deposits (RBI) Directions, 1998;

B) NBFC Prudential Loans (RBI) Directions, 1998;

C) NBFC Auditors Report (RBI) Directions, 1998

Regulation for NBFC's not accepting public deposits

NBFC's Not Accepting Public Deposit can further be classified into two categories:

1) NBFC engaged in Hire Purchase, Leasing and Loan Investment Company

2) NBFC which acquires shares or securities of their group companies

What is Public Deposits

“Public deposits” means any receipt of money by way of deposit or loan or in any other form but however which excludes the following:

1. Amount received by way of share capital

2. Amount contributed as a capital by partners of firm

3. Amount received from bank or financial institutions

4. Amount received in the ordinary course of business by way of security deposits, dealership deposits, earnest money and advances against order of goods or properties or services

5. Amount received from a registered money lender (not being a company)

6. Amount received from Government or Semi Government Bodies

7. Any amount received by company from any other company (inter corporate deposits)

8. Amount received from a director or shareholder by a Private company (subject to furnishing a declaration that amount has not been given out of borrowed funds)

9. Amount raised by issue of bonds or debentures

10. Amount brought in by promoters by way of unsecured loans in pursuance or in accordance with lending institution

11. Amount received from a relative of a Director

Changes as per Revised Regulatory Framework forNBFCs’ on November 10, 2014

Under Particular Frequency Applicability
Under Reserve Bank of India Act, 1934
Section 45-IA NBFC have to make application for registration with RBI and shall not commence or carry on business of a non-banking financial institution without obtaining registration from RBI and maintaining NOF.
NOF requirement for NBFC registered
Before 21/04/1999 = Rs.25 lacs
On or after 21/04/1999 = Rs.200 lacs 		One time All NBFC
Section 45-IB Maintenance of percentage of assets Invest and continue to invest 5% to 25% (specified by RBI) of deposits outstanding on the last working day of the second preceding quarter in unencumbered approved securities.
Notification No. DFC.121/ED(G)-98 dated 31.01.1998 and No. DFC(COC) NO.108-ED(JRP)-97 dated 30.04.1997 		Ongoing NBFC accepting / holding Public Deposit
Section 45-IC Reserve Fund Every NBFC shall create a reserve fund and transfer therein a sum not less than 20% of its net profit every year as disclosed in the profit and loss account and before any dividend is declared. Yearly All NBFC
Section 45-M Duty of NBFC to furnish statements etc., required by Bank When asked for All NBFC
Under Non-Banking Financial Companies Acceptance of Public Deposit (Reserve Bank) Directions, 1998 Notification No.DFC.118/DG(SPT)-98 dated 31.01.1998
Para 4 Minimum Credit Rating, Prohibition on acceptance of Deposit, repayable on demand, Period of Deposit (12 to 60 Months only), Ceiling on quantum of deposits (depends on status, rating, etc.), Status in case of Downgrading of credit rating, Regularisation of Public Deposit accepted earlier, Ceiling on the rate of interest (max 11%), Payment of Brokerage, etc. ongoing All NBFC Not applicable subject to
1) not accepting Public Deposit
2) passed a resolution under para 9
Para 4A, 4B Branches, agents, closures of branches ongoing All NBFC Not applicable subject to
1) not accepting Public Deposit
2) passed a resolution under para 9
Para 5 Information to be included in the Board’s report
e.g. total no. of accounts of public deposit, total amount due or unpaid, etc. 		ongoing All NBFC Not applicable subject to
1) not accepting Public Deposit
2) passed a resolution under para 9
Para 6 Safe custody of approved securities ongoing All NBFC Not applicable subject to
1) not accepting Public Deposit
2) passed a resolution under para 9
Para 7 Employee Security Deposit ongoing All NBFC Not applicable subject to
1) not accepting Public Deposit
2) passed a resolution under para 9
Para 8 Copies of balance sheet and accounts together with the Directors’ report, auditors’ report, notes on accounts, returns in Form – NBS 1 and intimation of any change in address, directors, principal officers, specimen signatures etc should be furnished to the Reserve Bank within 30 days of the occurrence of event. ongoing All NBFC Not applicable subject to
1) not accepting Public Deposit
2) passed a resolution under para 9
Para 9 Non-applicability of Direction to certain types of NBFC
a) Insurance company
b) Loan company, an investment company, a hire purchase company or equipment leasing company not holding or accepting public deposits and pass a resolution to the effect within 30 days of the commencement of the financial year
c) An investment company (investing only in group companies not less than 90% of its assets) and pass a resolution that has not accepted and would not accept Public Deposit and would not trade in such shares/ securities within 30 days of the commencement of the financial year. 		Every year within 30 days from the commencement of financial year All NBFC, which wants to claim exemptions
Under Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 Notification No.DFC.119/DG(SPT)-98 dated 31.01.1998
Para 3, 4, 5, 6

Income recognition
Income from NPA shall be recognized only when actually realised. All unrealised income on NPA shall be reversed.

Income from investment
Dividend income on shares and units of Mutual Funds shall be taken on cash basis. Income from Bonds and Debentures from Govt. Securities may be taken on accrual basis. Income from securities (guaranteed by Central Govt. or State Govt.) may be taken on accrual basis.

Accounting Standards
Accounting standards shall be followed

Accounting of investment
Board of Directors shall frame investment policy Other requirement regarding accounting of investment

Ongoing All NBFC
Para 6A Need for Policy on Demand / Call Loans
Policy for demand / call loan shall be framed 		Ongoing All NBFC giving loan etc.
Para 7, 8, 9

Asset classification
Assets shall be classified as Standard, Sub-standard, Doubtful and Loss assets.

Provisioning requirements
Provision for assets (i.e. loans, advances or other credit facilities including bills purchased & discounted, Leased and hire purchased assets) shall be made

Disclosure in the Balance Sheet
Provision as in para 8 should be disclosed without netting off

Ongoing


Ongoing



Yearly

 All NBFC
Para 9A Constitution of Audit Committee Company having assets of Rs.50 crore and above shall constitute an Audit Committee. Ongoing NBFC having assets of Rs.50 crore and above
Para 9B, 9BB Accounting Year Every NBFC shall prepare its B/S and P/L as on 31st March Schedule to the Balance Sheet Every NBFC shall append to its B/S particulars in the format as set in schedule Yearly All NBFC
Para 9C Transaction in Government Securities NBFC shall hold investment in approved securities in a dematerialised form only. Ongoing All NBFC
Para 10 Requirement as to Capital adequacy NBFC shall maintain minimum capital ratio Ongoing NBFC accepting / holding Public Deposit
Para 11 Loan against NBFC’s own shares prohibited No loan against own shares shall be given Ongoing All NBFC
Para 11A NBFC failing to repay public deposit prohibited from making loans and investments As long as default exists/td> NBFC accepting / holding public deposit
Para 11B Restrictions on investment in land and building and unquoted shares Restriction has been specified (10% of NOF) Ongoing NBFC accepting / holding public deposit
Para 12 Concentration of credit / investment Restriction has been specified (Lend or invest to single person 15% and group 25%) (Both lend and invest 25% and 40% respectively) Ongoing NBFC accepting / holding Public Deposits
Para 13 Submission of half-yearly return Half yearly return in Form – NBS-2 to be submitted Half Yealy NBFC accepting / holding Public Deposit and RNBFC
Para 13A Information in regard to change of address, directors, auditors, Principal officer, etc. to be submitted by NBFC’s not accepting/holding public deposit Within 30 days from the date of occurrence of any change Whenever change occur All NBFC
Para 13B Exposure to Capital Market Quarterly return in Form NBS-6 Quarterly NBFC holding public deposit of Rs.50 crore or more and RNBFC having liabilities of Rs.50 crores or more
Para 13C Norms relating to Infrastructure Loan Restructuring of Infrastructure Loan. All NBFC giving Infrastructure Loan

Under various Notification / Press release issued by Reserve Bank

Circular No. DNBS (DD) CC.No. 15/02.01/2000-01 dated 27/06/2001
Asset – Liability Management (ALM) System 		Ongoing All NBFC having assets more than Rs.100 crores
Para 13C Notification No. RBI/2005-06/157 dated 6th September 2005 Monthly return on important financial parameters on NBFC not accepting / holding public deposits and having assets size of Rs.100 crores and above Monthly All NBFC having assets more than Rs.100 crores
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