Compliances w.r.t. ND-NSI-Non

Banking Financial Company

DATE: FEBRUARY 03, 2019 CS MANISH TIWARY

+91 98747 86912

MANISHTIWARY73@GMAIL.COM

Non Banking Financial Company-

Introduction

Section 45(I) of RBI Act, 1934, NBFC is

Financial Institution

which is a Company

a non-banking

institution which is a

company, and which

has as its principal

business

- the receiving of

deposits,

- or lending in any

manner

Financial

Company

Non-banking

2

Financial Institution

as per RBI Act, 1934

NBFC which carries on its business in any of the following activities:

1. financing by loans or advances or otherwise;

2. acquisition of securities;

3. Hire-purchase business;

4. Insurance Business;

5. managing, conducting or supervising of chits or kuries;

6. collecting monies whether in cash or kind or disbursing monies in

any other way, by way of subscriptions or by sale of units, or other

instruments or in any other manner and awarding prizes or gifts, to persons from whom monies are collected

3

Determination of principal business

(50-50 test)

Financial Assets>50%

of Total Assets

Income from Financial

Assets>50% of Gross Income

principal business of

NBFC

4

Exemption from registration

Housing Finance Company

Micro Finance Company

Securitisation and Reconstruction Company

Nidhi Company

Chit Fund Company

Mortgage Guarantee Company

Merchant Banking Company

Insurance Company

Stock Exchange, Stock Brokers and Sub-brokers

Venture Capital Fund Company

Non- Systemically Important Core Investment Company

5

Distribution of NBFCs in INDIA-

ND NSI

4768

2084

1061

280

240200

197 154

146

126

109

109

10336

25

18

NBFC Non-

Systemically

Important-ND

Kolkata

New Delhi

Mumbai

Chennai

Ahmedabad

Chandigarh

Jaipur

Lucknow

Hyderabad

Thiruvananthapuram

Bengaluru

Guwahati

Bhopal

Patna

Jammu

Bhubaneswar

6

Distribution of NBFCs in INDIA-ND SI

140

122

52

24

23

19

9 7 4

3 2

1

1

NBFC Systemically Important-ND Hyderabad

Mumbai

New Delhi

Chennai

Kolkata

Bengaluru

Thiruvananthapuram

Ahmedabad

Chandigarh

Lucknow

Jaipur

Bhubaneswar

Guwahati

7

Prudential Regulations

8

9

Income RecognitionIncome from Loans Cash Basis

Income from Investments:

Dividends

- From Companies

- From Mutual Fund Units

Accrual Basis

Cash Basis

Bonds & Debentures Accrual Basis

10

11Asset ClassificationCategory Particulars Provisioning

(on outstanding)

Standard Assets No default 0.25%

Sub-standard assets Upto 18 months NPA 10%

Doubtful assets More than 18 months sub-

standard

≥1 Year 20%

1-3 Year 30%

>3 Years 50%

Loss assets Identified as such by the

NBFC

100%

Non –Performing Asset (NPA): Loan Instalment and/or Interest due for more

than 6 months

Loan & Investment Policy

- Important Factors

Loan Policy

• Loan Appraisal

• Repayment terms

• Determination of Rate of interest

• Timeline for payment of interest

• Review of Loan performance

Investment Policy

• Current & non-current investment

• Inter-class transfer

•Grouping/ Classification of Quoted/ Unquoted investments

12

KYC Policy- Key Elements

Customer Acceptance Policy;

Customer Identification Procedures;

Monitoring of Transactions;

Risk management

13

Information w.r.t. change in

information

Postal Address

Telephone number and fax number

Directors

Principal Officer

Auditors

Authorised Signatory

14

Governance Issue- Transfer of

Control

Change>

26%

Includes Progressive

change

Share

holding

15

Change>

30%

Excluding Independent

Directors

Directors

NBFCs not to be

partners in partnership firms

16

Companies in a group

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 SAST regulations) for

listed companies,

Related party (defined in terms of AS 18),

Common brand name, and

Investment in equity shares of 20% and above

17

18

Capital Funds- Tier I INR(Lakhs)

1 Paid up Equity Capital 257.98

2 Pref. shares to be compulsorily converted into equity -

Free Reserves:

a. General Reserve -

b. Share Premium 3752.32

c. Capital Reserves -

d. Debenture Redemption Reserve -

e. Capital Redemption Reserve -

f. Credit Balance in P&L Account 382.89

g. Other free reserves (may be specified) -

4 Special Reserves 100.29

Total of 1 to 4 4493.48

5 Less: i. Accumulated balance of loss -

ii. Deferred Revenue Expenditure -

ii. Deferred Tax Assets (Net) -

iii. Other intangible Assets -

Owned Fund 4493.48

Investment in shares of

(i) Companies in the same group -

(ii) Subsidiaries -

(iii) Wholly Owned Subsidiaries -

(iv) Other NBFCs -

Book value of debentures, bonds outstanding loans and advances, bills purchased and is counted (including H.P. and lease finance) made to, and deposits with

(i) Companies in the same group

(ii) Subsidiaries -

(iii) Wholly Owned Subsidiaries/ Joint Ventures Abroad -

8 Total of 6 and 7 -

9 Amount in item 8 in excess of 10% of Owned Fund -

10 Net Owned Fund 4493.48

3

6

7

Fair Practice Code (FPC) Grievance Redressal Mechanism

Timely reports to Board;

Appointment of Grievance Redressal Officer

Appointment of Nodal Officer – Ombudsman Scheme

[NBFC Asset Size> 100 Cr]

Transparency in Interest Rate Policies

19

Credit Information Companies

ExperianCrif Hi-Mark

EquifaxCibil

• Registration with all CICs

• Monthly data submission

Exemption: Investment

Companies without Customer

Interface

20

Exemption from NBFC Regulations 21

NBFC-ND-NSI

- No Public Funds

- No customer interface

Prudential Issues; KYC Directions and FPC

- With Public Funds

- No customer interface

KYC Directions and FPC

- No Public Funds

- With customer interface

Prudential Issues

- With Public Funds

- With customer interface

Complete regulation shall apply

...contd

Public Fund:

• Funds raised through public

deposits either directly or indirectly;

• Inter corporate Deposits;

• Bank Finance;

• Funds raised by issue of

Commercial Papers, Debentures,

etc. (excluding instruments

compulsorily convertible into equity

within five years)

“customer interface” means

interaction between the NBFC and its

customers while carrying on its

business

22

PMLA Guidelines Compliances

23

CERSAI- CKYC Registry

Applicable on intermediaries like Stock Exchange, Depository

Participants, NBFCs

Registration Procedure

All NBFCs having customer interface

For identification, registration of customers

Unique CKYC registration number

24

FIU-IND Registration

Registration of Company

on FIU-IND portal

- Register

- E-mail Ack

Appointment of Principal

Officer

Appointment of

Designated Director

25

Reporting under FIU-IND

CTR Reporting STR Reporting

• All Cash Transactions> Rs. 10 Lakh

• Within 15 days of quarter end

• Suspicious Transactions

• Within 7 days of suspicion getting

confirmed

26

Loan against quoted shares

Maintain Loan to Value Ratio of 50%

Quarterly Reporting to Stock Exchange information about pledged

shares including following information:

Name of Company

ISIN

No. of shares held

PAN

27

Periodical Submission of data to RBI

Sl.

No.

Particulars Timeline

1. Non- acceptance of Public Deposit 30 Days from F.Y. end

2. Provisional NBFC Annual Return

NBS-8 (Asset size=100 - 500 Cr)

NBS-9 (Asset size< 100 Cr)

30 May

3. Statutory Auditor Certificate (SAC) 1 month from Balance Sheet

finalisation

4. Final NBFC Annual Return

NBS-8 (Asset size=100 - 500 Cr)

NBS-9 (Asset size< 100 Cr)

1 month from Balance Sheet

finalisation

28

THANK YOU

29