Knowing Core Investment Company

In Today's article will try to cover the provisions and regulations applicable for governance of a Core Investment Company (CIC) in india.

INTRODUCTION

A CIC-ND-SI is a Non-Banking Financial Company

(i) with asset size of Rs 100 crore and above

(ii) carrying on the business of acquisition of shares and securities and which satisfies the following conditions as on the date of the last audited balance sheet :-

(iii) it holds not less than 90% of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies;

(iv) its investments in the equity shares (including instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue) in group companies constitutes not less than 60% of its net assets as mentioned in clause (iii) above;

(v) it does not trade in its investments in shares, bonds, debentures, debt or loans in group companies except through block sale for the purpose of dilution or disinvestment;

(vi) it does not carry on any other financial activity referred to in Section 45I(c) and 45I(f) of the RBI act, 1934 except investment in bank deposits, money market instruments, government securities, loans to and investments in debt issuances of group companies or guarantees issued on behalf of group companies.

(vii) it accepts public funds

What is step down CIC?

A Step-down CIC means the subsidiary company of a company which is a subsidiary of another company. Step-down CICs may not be permitted to invest in any other CIC, while allowing them to invest freely in other group companies

Regulatory provisions are contained in the Master Direction - Core Investment Companies (Reserve Bank) Directions, 2016. This direction can also be viewed at RBI's website here

REGISTRATION

Every CIC-ND-SI shall apply to the RBI for grant of Certificate of Registration, irrespective of any advice in the past, issued by RBI, to the contrary.

Every CIC shall apply to RBI for grant of Certificate of Registration within a period of three months from the date of becoming a CIC-ND-SI.

Every CIC exempted from registration requirement with Bank shall pass a Board Resolution that it will not, in the future, access public funds. 

However CICs may be required to issue guarantees or take on other contingent liabilities on behalf of their group entities. Before doing so, all CICs must ensure that they can meet the obligations thereunder, as and when they arise. In particular, CICs which are exempt from registration requirement must be in a position to do so without recourse to public funds in the event the liability devolves, else they shall approach the Bank for registration before accessing public funds. If unregistered CICs with asset size above 100 crore access public funds without obtaining a Certificate of Registration (CoR) from the Bank, they shall be seen as violating Core Investment Companies (Reserve Bank) Directions, 2016.