ISSUES IN FORMATION OF NBFC & FILING OF RETURNS BY C.A. ALOK SAKSENA

Transcription

1 ISSUES IN FORMATION OF NBFC & FILING OF RETURNS BY C.A. ALOK SAKSENA

2 NBFC DEFINITION

3 NBFC DEFINITION Section 45I of Reserve Bank of India (RBI) Act 1934 Section 45I (f) Non- Banking Finance Company (i) a financial institution which is a company; (ii) a non-banking institution which is a company and which has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner, or lending in any manner; (iii) such other non-banking institution or class of such institutions, as the Bank may, with the previous approval of the Central Government and by notification in the Official Gazette, specify;]

4 NBFC DEFINITION Contd Section 45I (e) Non Banking Institutions non-banking institution means a company, corporation [or cooperative society]. Section 45I (c)- Financial Institutions financial institution means any non-banking institution which carries on as its business or part of its business any of the following activities, namely: (i) the financing, whether by way of making loans or advances or otherwise, of any activity other than its own:

5 NBFC DEFINITION Contd (ii) the acquisition of shares, stock, bonds, debentures or securities issued by a Government or local authority or other marketable securities of a like nature: (iii) letting or delivering of any goods to a hirer under a hire-purchase agreement as defined in clause (c) of section 2 of the Hire-Purchase Act, 1972: (iv) the carrying on of any class of insurance business; (v) managing, conducting or supervising, as foreman, agent or in any other capacity, of chits or kuries as defined in any law which is for the time being in force in any State, or any business, which is similar thereto;

6 NBFC DEFINITION Contd (vi) collecting, for any purpose or under any scheme or arrangement by whatever name called, monies in lumpsum or otherwise, by way of subscriptions or by sale of units, or other instruments or in any other manner and awarding prizes or gifts, whether in cash or kind, or disbursing monies in any other way, to persons from whom monies are collected or to any other person, [but does not include any institution, which carries on as its principal business, (a) agricultural operations; or (aa) industrial activity; or]

7 NBFC DEFINITION Contd (b) the purchase or sale of any goods (other than securities) or the providing of any services; or (c) the purchase, construction or sale of immovable property, so however, that no portion of the income of the institution is derived from the financing of purchases, constructions or sales of immovable property by other persons;] [Explanation. For the purposes of this clause, industrial activity means any activity specified in sub-clauses (i) to (xviii) of clause (c) of section 2 of the Industrial Development Bank of India Act, 1964;]

8 NBFC DEFINITION Contd Simplified Version as applicable to Companies from Directions Non Banking Financial Company means only the non-banking institution which is a loan company or an investment company or an asset finance company or a mutual benefits finance company. Loan Company Loan Company means any company which is a financial institution carrying on as its principal business the providing of finance whether by making loans or advances or otherwise for any activity other than its own but does not include an Asset Finance Company. Investment Company Investment Company means any company which is a financial institution carrying on as its principal business the acquisition of securities.

9 Asset Finance Company NBFC DEFINITION Contd Asset Finance Company means any company which is a financial institution carrying on as its principal business the financing of physical assets supporting productive/ economic activity, such as automobiles, tractors, lathe machines, generator sets, earth moving and material handling equipments moving on own power and general purpose industrial machines. Mutual Benefit Financial Company Mutual Benefit Financial Company means any company which is a financial institution notified by the Central Government under section 620A of the Companies Act 1956 (1 of 1956).

10 CLASSIFICATION

11 CLASSIFICATION If any question arise as to whether a company is a financial institution or not, such question shall be decided by the Reserve Bank of India in consultation with the Central Government and such decision shall be final and be binding on all the parties concerned. If any question arises as to whether a company which is a financial institution is a loan company or [an asset finance company], such question shall be decided by the Reserve Bank of India, having regard to the principal business of the company and other relevant factors and such decision shall be final and be binding on all the parties concerned.

12 CLASSIFICATION Contd Leasing /hire purchase company treated as Asset Finance Company. Reclassification of NBFCs In terms of Company Circular DNBS.PD. CC No. 85 / / dated December 06, 2006 it was advised that NBFCs financing real / physical assets for productive / economic activity will be classified as Asset Finance Company (AFC) as per the criteria given under paragraph 4 of that circular. Consequent upon re-classification of NBFCs, in the proposed structure the following categories of NBFCs will emerge: (i) Asset Finance Company (ii) Investment Company (iii) Loan Company

13 CLASSIFICATION Contd Accordingly, it was advised that the companies satisfying the conditions specified may approach the Regional Office in the jurisdiction of which their Registered Office is located, along with the original Certificate of Registration (CoR) issued by the Bank to recognize their classification as Asset Finance Companies. Their request must be supported by their Statutory Auditors certificate indicating the asset / income pattern of the company as on March 31, As substantial time has elapsed, since the issue of the circular, it has now been decided that erstwhile EL/HP NBFCs should, duly supported by Statutory Auditors Certificate as on March 31, 2008, immediately approach the Regional Office concerned for appropriate classification latest by December 31, 2008 after which NBFCs which have not opted for the classification would be deemed to be loan companies.

14 SUB-CLASSIFICATION OF NBFC

15 SUB-CLASSIFICATION OF NBFC Deposit taking NBFC [NBFC D] Non deposit taking NBFC [NBFC- ND] Non deposit taking NBFC Systemically important [these having assets size of `. 100 crores or more] Core Investment Companies Non- deposit and Systemically important [NBFC- ND-S1] [CIC ND-SI]

16 REGISTRATION OF NBFC

17 REGISTRATION OF NBFC 45-IA Requirement Of Registration And Net Owned Fund. (1) Notwithstanding anything contained in this Chapter or in any other law for the time being in force, no non-banking financial company shall commence or carry on the business of a nonbanking financial institution without (a) obtaining a certificate of Chapter; and registration issued under this (b) having the net owned fund of twenty-five lakh rupees or such other amount, not exceeding two hundred lakh rupees, as the Bank may, by notification in the Official Gazette, specify. (2) Every non-banking financial company shall make an application for registration to the Bank in such form as the Bank may specify.

18 REGISTRATION OF NBFC Contd (3) The Bank may, for the purpose of considering the application for registration, require to be satisfied by an inspection of the books of the nonbanking financial company or otherwise that the following conditions are fulfilled: (a) that the non-banking financial company is or shall be in a position to pay its present or future depositors in full as and when their claims accrue; (b) that the affairs of the non-banking financial company are not being or are not likely to be conducted in a manner detrimental to the interest of its present or future depositors; (c) that the general character of the management or the proposed management of the non-banking financial company shall not be prejudicial to the public interest or the interest of its depositors; (d) that the non-banking financial company has adequate capital structure and earning prospects; (e) that the public interest shall be served by the grant of certificate of registration to the non-banking financial company to commence or to carry on the business in India;

19 REGISTRATION OF NBFC Contd... (f) that the grant of certificate of registration shall not be prejudicial to the operation and consolidation of the financial sector consistent with monetary stability, economic growth and considering such other relevant factors which the Bank may, by notification in the Official Gazette, specify; and (g) any other condition, fulfillment of which in the opinion of the Bank, shall be necessary to ensure that the commencement of or carrying on of the business in India by a non-banking financial company shall not be prejudicial to the public interest or in the interest of the depositors. (4) The Bank may, after being satisfied that the conditions specified in sub-section (4) are fulfilled, grant a certificate of registration subject to such conditions which it may consider fit to impose.

20 REGISTRATION OF NBFC Contd... Net Owned Funds (I) Net owned fund means (a) the aggregate of the paid-up equity capital and free reserves as disclosed in the latest balance-sheet of the company after deducting there from (i) accumulated balance of loss; (ii) deferred revenue expenditure; and (iii) other intangible assets; and (b) further reduced by the amounts representing (1) investments of such company in shares of -- (i) its subsidiaries; (ii) companies in the same group; (iii) all other non-banking financial companies; and

21 REGISTRATION OF NBFC Contd (2) the book value of debentures, bonds, outstanding loans and advances (including hire-purchase and lease finance) made to, and deposits with, (i) subsidiaries of such company; and (ii) companies in the same group, to the extent such amount exceeds ten per cent of (a) above. (II) subsidiaries and companies in the same group shall have the same meanings assigned to them in the Companies Act, Paid up preference share capital which is compulsorily convertible into equity share capital is to be treated as part of net owned funds. Free Reserves Free Reserves means the aggregate of the balance in the share premium account, capital and debenture redemption reserves and any other reserve shown or published in the balance sheet of a company and created through an allocation of profits not being a reserve created for repayment of any future liability or for depreciation in assets debts or a reserve created by revaluation of the assets of the company.

22 REGISTRATION OF NBFC Contd Vide Notification No. DNBS 132/CGM (VSNM)-99 dated , the Reserve Bank of India specifies the net owned fund to be two hundred lakhs of rupees, for a nonbanking financial company which commences the business of a non-banking financial institution on or after 21 st April This specification of higher net owned funds shall not be applicable to such company whose application for certificate of registration under section 45IA of the said Act is submitted to the Reserve Bank of India on or before 20 th April 1999.

23 ISSUES

24 A. Limited Liability Partnership ISSUES Whether the status is that of a company and can they be registered as NBFC? Pl. refer note 7 of form 1 under LLP Rules, 2009 that RBI in principle approval is required for NBFC activities. Trading in shares/securities is also a NBFI activity as per RBI Act, 1934 and for this NBFI activities only the company format of business is permitted as per RBI Act,1934. In LLP you can do this business only when RBI/Govt. of India allows for the same. As stated in your mail if registration of LLP is permitted ignoring LLP Rules read with Form- 1 requirement stated above, then problem is raised that who will regulate the activity of LLP. If RBI is agreed to you that if LLP is registered then they will permit you registration and regulate the LLP then we have no problem in registering LLP. The RBI maintains that only company can do NBFI activity as per RBI Act,1934. Thus It is not advisable to get registered unless RBI issues a general circular or ammend RBI Act,1934 allowing LLP to do NBFI activity. However, Ministry is perusing the RBI for allowing LLP for NBFI activity.

25 ISSUES Contd B. Partnership or incorporated association of individuals/firms. Whether they are regulated? One may look at section 45S of the RBI Act 1934 (1) No person, being an individual or a firm or an unincorporated association of individuals shall, accept any deposit (i) If his or its business wholly or partly includes any of the activities specified in clause (c) of section 45-I; or (ii) if his or its principal business is that of receiving of deposits under any scheme or arrangement or in any other manner, or lending in any manner; Provided that nothing contained in this sub-section shall apply to the receipt of money by an individual by way of loan from any of his relatives or to the receipt of money by a firm by way of loan from the relative or relatives of any of the partners. (2) Where any person referred to in sub-section (1) holds any deposit on the 1st day of April, 1997 which is not in accordance with sub-section (1), such deposit shall be repaid by that person immediately after such deposit becomes due for repayment or within three years from the date of such commencement, whichever is earlier; Provided that if the Bank is satisfied on an application made by any person to the Bank that such person is unable to repay a part of the deposits for reasons beyond

26 ISSUES Contd his control or such repayment shall cause extreme hardship to him, it may, by an order in writing, extend such period by a period not exceeding one year subject to such conditions as may be specified in the order. (3) On and from the 1st day of April, 1997, no person referred to in sub-section (1) shall issue or cause to be issued any advertisement in any form for soliciting deposit. Explanation. For the purposes of this section, a person shall be deemed to be a relative of another if, and only if, (i) they are members of a Hindu undivided family; or (ii) they are husband and wife; or (iii) the one is related to the other in the manner indicated in the List of Relatives below: List of relatives 1. Father, 2. Mother (including step-mother), 3. Son (including stepson), 4. Son s wife, 5. Daughter (including step-daughter), 6. Father s father, 7. Father s mother, 8. Mother s mother, 9. Mother s father, 10. Son s son, 11. Son s son s wife, 12. Son s daughter, 13. Son s daughter s husband, 14. Daughter s husband, 15. Daughter s son, 16. Daughter s son s wife, 17. Daughter s daughter, 18. Daughter s daughter s husband, 19. Brother (including stepbrother), 20. Brother s wife, 21. Sister (including step-sister), 22. Sister s husband.]

27 ISSUES Contd C. Securities / share trading company whether they are regulated? A pure share trading company which buys and sells shares/ securities and hold securities/ stocks as closing stock and consider the income as Business Income. Whether it would be an NBFC? D. Core Investment Companies (CIC) and to what extent regulated? What is the effect of the circular no. DNBS (PD) CC. No. 197/ / dated 12 th August 2010?

28 EXEMPTIONS

29 1. Introduction EXEMPTIONS Contd The Bank has issued notifications from time to time exempting some entities from the requirements of Chapter III B of the RBI Act, 1934 or part thereof. While the Master Circular has been prepared to enable the users to have the benefit of a consolidated circular for the purpose of operations, they should refer to the instructions / directions contained in the relevant notifications. The Master Circular is based on notifications listed in the Annex. 2 (i) Exemption from provisions of Chapter III B of the RBI Act, 1934 Housing Finance Institutions. The Bank has exempted a non-banking financial company which is a housing finance institution as defined in Section 2(d) of the National Housing Bank Act, 1987 from the provisions of Chapter III B of the RBI Act, (ii) Merchant Banking company : A merchant banking company has been exempted from the provisions of Section 45- IA [Requirement of registration and net owned fund], Section 45-IB [Maintenance of liquid assets] and 45-IC [Creation of Reserve Fund] of the RBI Act, 1934, 3 Non- Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 and 4 Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 subject to compliance with the following conditions:

30 EXEMPTIONS Contd (a) It is registered with the Securities and Exchange Board of India as a Merchant Banker under Section 12 of the Securities and Exchange Board of India Act, 1992 and is carrying on the business of merchant Banker in accordance with the Securities and Exchange Board of India Merchant Banking (Rules) 1992 and Securities and Exchange Board of India Merchant Banking (Regulations) 1992; (b) acquires securities only as a part of its merchant banking business; (c) does not carry on any other financial activity referred to in Section 45I(c) of the RBI Act, 1934; and (d) does not accept or hold public deposits as defined in paragraph 2(1)(xii) of the Notification No. DFC 118/DG(SPT)-98 dated January 31, (iii) Micro Finance Companies Sections 45-IA, 45-IB and 45-IC of the Reserve Bank of India Act, 1934 (2 of 1934) shall not apply to any non-banking financial company which is (a) engaged in micro financing5 activities, providing credit not exceeding `. 50,000 for a business enterprise and `.1,25,000 for meeting the cost of a dwelling unit to any poor person for enabling him to raise his level of income and standard of living; and (b) licensed under Section 25 of the Companies Act, 1956; and (c) not accepting public deposits as defined in paragraph 2(1)(xii) of Notification No. 118 /DG(SPT)-98 dated January 31, 1998.

31 EXEMPTIONS Contd Mutual Benefit Companies Sections 45-IA, 45-IB and 45-IC of the Reserve Bank of India Act, 1934 (2 of 1934) shall not apply to any non-banking financial company which being a mutual benefit company as defined in paragraph 2(1) (ixa) of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 contained in Notification No. DFC.118/DG(SPT)-98 dated January 31, 1998). A mutual benefit company means a company not notified under section 620A of the Companies Act, 1956 (1 of 1956) and carrying on the business of a non-banking financial institution, - (a) on 9th January 1997; and (b) having the aggregate of net owned funds and preferential share capital of not less than ten lakhs of rupees; and (c) has applied for issue of certificate of registration to the Bank on or before 9th July 1997; and (d) is complying with the requirements contained in the relevant provisions of the Directions issued under Section 637A of the Companies Act, 1956 to Nidhi Companies by the Central Government.

32 2(iv) Government Companies EXEMPTIONS Contd Sections 45-IB and 45-IC of the Reserve Bank of India Act, 1934 (2 of 1934), paragraphs 4 to 7 of the Non-Banking Financial Companies Acceptance of Public Deposits ( Reserve Bank) Directions, 1998 and Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 (since repealed by Prudential Norms Directions Notification No 192 dated February 22, 2007), except paragraph 13 A of the said directions relating to submission of information to Reserve Bank in regard to change of address, directors, auditors, etc. shall not apply to any non-banking financial company as defined in section 45-I(f) of the Reserve Bank of India Act, 1934 (2 of 1934) being a Government company6 as defined in section 617 of the Companies Act, A Government Company is a company in which not less than 51% of the paid up capital is held by the Central Government, or by any State Government or Governments or partly by the Central Government and partly by one or more State Governments and includes a company which is subsidiary of a Government Company as thus defined. 2(v) Venture Capital Fund Companies Section 45-IA and Section 45-IC of the Reserve Bank of India Act, 1934 (2 of 1934); Notification No. DFC.118/DG(SPT)-98 dated January 31, 1998; and Notification No. DFC.119 / DG(SPT)-98 dated January 31, 1998 shall not apply to a non-banking financial company, which is a venture capital fund company holding a certificate of registration obtained under Section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) and not holding or accepting public deposit as defined in paragraph 2(1)(xii) of the Notification No. DFC.118/DG(SPT)-98 dated January 31, 1998.

33 EXEMPTIONS Contd 2(vi) Insurance/Stock Exchange/Stock Broker/Sub-Broker The provisions of Section 45-IA, 45-IB, 45-IC, 45MB and 45MC of the Reserve Bank of India Act, 1934 (2 of 1934) and provisions of Non-Banking Financial Companies Acceptance of Public Deposit (Reserve Bank) Directions contained in Notification No. DFC.118 / DG(SPT)-98 dated January , Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 shall not apply to any non-banking financial company not holding or accepting public deposit as defined in paragraph 2(1)(xii) of the Notification No. DFC.118/DG(SPT)-98 dated January 31, 1998, and - (a) doing the business of insurance8, holding a valid certificate of registration issued under Section 3 of the Insurance Act, 1938 (IV of 1938); (b) being a stock exchange, recognised under Section 4 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) ; and (c) doing the business of a stock-broker or sub-broker holding a valid certificate of registration obtained under Section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992).

34 EXEMPTIONS Contd 2(vii) Nidhi Companies The provisions of Sections 45-IA, 45-IB and 45-IC of the Reserve Bank of India Act, 1934 (2 of 1934) shall not apply to any non-banking financial company (a) Notified under Section 620A of the Companies Act, 1956 (1 of 1956), known as Nidhi Companies; and 10[ The provisions contained in Non-Banking Financial Companies Acceptance of Company; Public Deposits ( Reserve Bank) Directions, 1998 shall not apply to a Mutual Benefit Financial Company or a Mutual Benefit company Provided that the application of Mutual Benefit Company is not rejected by Government of India under the provisions of the Companies Act, 1956( Act 1 of 1956). ] Chit Companies (b) doing the business of chits, as defined in clause (b) of Section 2 of the Chit Funds Act, 1982 (No. 40 of 1982).

35 EXEMPTIONS Contd Securitization and Reconstruction Companies (c) Securitization company or Reconstruction company registered with the Reserve Bank of India under Section 3 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act,2002. Mortgage Guarantee Companies (d) Mortgage Guarantee Companies notified as non-banking financial company in terms of Section 45 I (f)(iii) of the Reserve Bank of India Act, 1934 (2 of 1934) with the prior approval of the Central Government, and a company registered with the Bank under the scheme for registration of Mortgage Guarantee Companies. Core Investment Companies (CIC) Core Investment Companies (CIC) (Notification is awaited). CICs are defined as under: with an asset size of less than `.100 crores are proposed to be exempted A NBFC carrying on the business of acquisition of shares and securities which satisfied the following conditions: (i) (ii) (iii) it holds not less than 90% of its Total Assets in the form of investment in equity shares, preference shares, debt or loans in group companies; 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 Total Assets; it does not trade in its investments in shares, debt or loans in group companies except through block sale for the purpose of dilution or disinvestment; (iv) 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.

36 PROCEDURE FOR REGISTRATION

37 PROCEDURE FOR REGISTRATION SPECIMEN APPLICATION FORM FOR REGISTRATION WITH RBI FORM OF APPLICATION FOR CERTIFICATE OF REGISTRATION TO COMMENCE/CARRY ON THE BUSINESS OF A NON-BANKING FINANCIAL INSTITUTION BY A COMPANY Name and address of registered office of the company (in block letters) By Registered Post A.D./Hand Delivery To The General/Dy. General Manager*, Department of Non-Banking Supervision Reserve Bank of India, Regional Office,... (Place)

38 PROCEDURE FOR REGISTRATION Contd... Dear Sir, Application for a Certificate of Registration to commence/carry *on the business of a non-banking financial institution We make this application in terms of sub-section (2) of section 45-IA of the Reserve Bank of India Act, 1934 for issue of a Certificate of Registration. The required documents/information as per the instructions are furnished. We are desirous of commencing/carrying on* the business of a non-banking financial institution. Hence, we hereby request you to kindly issue the necessary Certificate of Registration under subsection (1) of section 45-IA of the Reserve Bank of India Act, 1934 to enable our company to commence/carry on* the business of a non-banking financial institution. We declare that to the best of our knowledge and belief the information furnished in the statements/annexes enclosed hereto is true/correct and complete. Date: Place: Company Seal: Encl. :...Sheets *Strike out whichever is not applicable. Yours faithfully, Signature: Name: Designation:

39 PROCEDURE FOR REGISTRATION 1 Minimum NOF requirement `. 200 lacs Contd... Requirements to be complied with and documents to be submitted to RBI by NBFCs for obtaining Certificate Of Registration 2 Application to be submitted in two separate sets tied up properly in two separate files 3 Annexure II to be submitted duly signed by the Director / authorised signatory and certified by the statutory auditors. 4 Annexure III (director s profile) to be separately filled up for each director. Care should be taken to give details of bankers in respect of firms/companies/entities in which directors have substantial interest. 5 In case the directors are associated or have substantial interest in other companies, indicate clearly the activity of the companies (whether NBFC or not) 6 Board resolution specifically approving the submission of the application and its contents and authorising signatory 7 Board resolution to the effect that the company has not accepted any public deposit, in the past (specify period)/ does not hold any public deposit as on date and will not accept in same in future without the prior approval of Reserve Bank of India in writing 8 Board Resolution stating that the company is not carrying on any NBFC activity/ stopped NBFC activity and will not carry on / commence the same before getting registration from RBI. 9 Auditor s certificate certifying that the company is / does not accept/ is not holding public deposit. 10 Auditor s certificate certifying that the company is not carrying on any NBFC activity 11 Net owned fund as on date

40 PROCEDURE FOR REGISTRATION Contd Certifying compliance with section 45C of Chapter IIIC of the RBI Act 1934 in which director/s of the company has substantial interest 13 Details of change in the Memorandum and Articles of Association duly certified 14 Last three years audited balance sheet along with director s and auditor s report 15 Details of clauses in the memorandum relating to financial business 16 Details of change in the management of company during last financial year till date if any and reasons thereof 17 Details of acquisitions, mergers of other companies if any together with supporting documents 18 Details of group companies/ associate concerns/ subsidiaries/ holding companies 19 Details of infusion of capital if any during last financial year together wit the copy of the return of allotment filed wit the Registrar of Companies 20 Details of bank balances/ bank accounts/complete postal address of the branch/ bank, loan/credit facilities etc. awaited. 21 Business plan for next three years indicating market segment to be covered without any element of public deposits

41 PROCEDURE FOR REGISTRATION Contd Cash flow statement, asset/ income pattern statement for next three years 23 Brief back ground note on the activities of the company during the last three years and the reasons for applying for NBFC registration 24 II (b) is the company engaged in any capital market activity? If so, whether there has been any noncompliance with SEBI regulations? (Statement to be certified by auditors) 25 Whether any prohibitory order was issued in the past to the company or any other NBFC/ RNBC with which the directors/ promote etc. were associated? If yes, details thereof. 26 Whether the company or any of its directors was / is involved in any criminal case, including under section 138(1) of the Negotiable Instruments Act? If yes, details thereof. 27 Whether the company was granted any permission by ECD to function as Full-fledged Money Changers? 28 Whether the company was/ is authorised by ECD to accept deposits from NRIs? 29 Whether Fit and Proper Norms for directors have been fulfilled?

42 PROCEDURE FOR REGISTRATION Contd... INSTRUCTIONS (Fill up the application form strictly in accordance with these instructions) GENERAL (1) Application should be made in the prescribed form only. Wherever space is insufficient, information may be furnished in separate sheet/s. (2) Application along with enclosures duly completed should be submitted in duplicate, before July 8, 1997 to the Department of Non-Banking Supervision, Reserve Bank of India, Regional Office under whose jurisdiction the registered office of the company is situated. (3) A photocopy of the application as submitted may be kept with the company for its record. (4) Application should be signed by any of the following officials authorised by the Board of Directors, in this behalf (viz., Chairman, Managing Director, Chief Executive Officer, Company Secretary, a whole-time Director or any other official). (5) Application should bear common seal of the company. (6) An acknowledgement for having submitted the application may be obtained from the Regional Office concerned. (7) The particulars/information to be furnished in Annex II of the application should be based on figures as disclosed in the latest annual audited balance-sheet. However, in the case of a company incorporated after , such particulars/information should be based on the balance-sheet as on a date falling within thirty days preceding the date of application.

43 PROCEDURE FOR REGISTRATION Contd... ANNEX I (8) In case the company has changed its name earlier, a list of all the earlier names of the company and date/s of change together with the names of Chief Executive Officer and Chairman at the time of change of name should be furnished. (9) If the company was registered with Reserve Bank of India in terms of Circular DFC (COC) No. 828/174-92/93, dated April 12, 1993, the letter in original advising registration should be enclosed. (10) If the company has ever defaulted in timely repayment of deposit and payment of interest, a list of all such pending cases and the action taken in respect of each case should be furnished. The company should also submit a list containing the details of all the court cases pending against it, including those pending in consumer forum, pertaining to its deposits acceptance activities. ANNEX II (11) This statement is to be filled only by a non-banking financial company which was in existence as on January 9, 1997 and carrying on business of a non-banking financial institution. (12) For filling up Annexure II, please refer to the guidelines to non-banking financial companies on prudential norms for income recognition, accounting standards, asset classification, provisioning for bad and doubtful debts, capital adequacy, concentration of credit/investment, etc. (13) The contents of Annexure II should be certified by a Chartered Accountant. ANNEX III (14) Substantial interest means holding of beneficial interest by an individual or his/her spouse or minor child, whether singly or taken together, in shares of a company/capital of a firm, the amount paidup on which exceeds 10 per cent of the paid-up capital of the company or total capital subscribed by all the partners of a partnership firm.

44 PROCEDURE FOR REGISTRATION Contd... ANNEX I IDENTIFICATION PARTICULARS COMPANY CODE (to be filled by RBI) Name of the Company Whether the company had changed its name earlier? [Please see item (8) of instructions] 2. Date of incorporation 3. Date of commencement of business 4. State in which the company is registered Full Address of the Company (i) (ii) Registered Office... Phone No....Fax... Corporate/Administrative* Office... Yes/No Phone No.... Fax...

45 PROCEDURE FOR REGISTRATION Contd No. of branches : 6. Status (a) Public (b) Private (c) Deemed public (d) Government company (e) Other (to be specified) 7. Whether the company was transacting the business of Yes/No Non-banking financial institution as on January 9, 1997? If yes (i) the date of commencement of such business: (ii) Classification as made by RBI... (EL/HP/LC/IC/Nidhi/RNBC/MNBC) (iii) Reference No. and date of RBI Classification advice... (iv) Whether the company was already registered with RBI? Yes/No [Please see item (9) of instructions] If yes, (a) Registration No.... (b) Reference No. and date of RBI advice...

46 PROCEDURE FOR REGISTRATION Contd... (v) Whether the company has been issued a Certificate in terms of Circular DFC (COC) No. 2/02/04/96-97, dated July 24, 1996? Yes/No If yes, (a) Certificate No.... (b) Reference No. and date of RBI advice... (vi) Whether the company has ever defaulted in the repayment of principal and/or payment of interest on deposits? Yes/No [Please see item (10) of instructions] (vii)(a)whether any of the group companies regulated by other regulators such as SEBI, IRDA, etc. Yes/No: (b) If yes, give details of the company: i) Name ii) Address iii) Nature of business iv) Regulator v) Approval/Certificate/ Registration No. (c)action if any initiated/ pending against the company by the regulator with details (strictures, penalties, adjudications, investigations etc)

47 PROCEDURE FOR REGISTRATION Contd Name/s of Statutory Auditor/s with address/es Name/s & Address/es of bankers Whether the company has committed any default in repayment of any loan, advance or any other credit facility availed from any bank? Yes/No 9.3 If yes, furnish full details, such as name of Bank/Branch, type of facility, period and quantum of default, etc. 10. Name and Designation of CEO/Authorised official... Date : Place :... Company Seal : Signature : Name : Designation :

48 PROCEDURE FOR REGISTRATION Contd... ANNEX II STATEMENT OF CAPITAL FUNDS AND RISK ASSETS AS ON*... PART A CAPITAL FUNDS - TIER-I (` in thousands) Item Name Item Code Amount (`) (i) Paid-up Equity Capital 111 (ii) Free reserves (Please see note below) (a) General Reserves 112 (b) Share Premium 113 (c) Capital Reserves (representing surplus on sale of assets held in separate account) (d) Debentures Redemption Reserve 115 (e) Capital Redemption Reserve 116 (f) Credit Balance in P & L Account 117 (g) Other free reserves (to be specified) 118 (iii) Total (111 to 118) 110 (iv) Accumulated balance of loss 121 (v) Deferred Revenue Expenditure 122 (vi) Other Intangible Assets 123 (vii) Total (121 to 123) 120 (viii) Owned funds ( )

49 PROCEDURE FOR REGISTRATION Contd... Note : Free reserves shall include balance in share premium account, capital and debenture redemption reserves and any other reserves shown in the balance-sheet and created through an allocation out of profits but not being (a) a reserve created for repayment of any future liability or for depreciation on assets or for bad debts, or (b) a reserve created by revaluation of assets of the company. (ix) Investment in shares of: [please see Note (1) below] : Item Name Item Code Amount ` (a) Subsidiaries 141 (b) Companies in the same Group 142 (c) Other non-banking financial companies 143 (x) The book value of debentures bonds, outstanding loans and advances (including hire-purchase and lease finance) made to and deposits with [please see note (2) below] : (a) Subsidiaries 144 (b) Companies in the same Group 145 (xi) Total (141 to 145) 140 (xii) Amount of item 140 in excess of 10 per cent of item 130 above 150 (xiii) Tier-I Capital: Net owned funds ( ) 151

50 PROCEDURE FOR REGISTRATION Contd... Notes : 1. Investments in shares includes investment in fully convertible debentures and/or convertible portion of partially convertible debentures. Investments held either in investment account or stock-in-trade should be included under this item. 2. Debentures whether held in investment account or by way of stock-in-trade should be included under this item. Non-convertible debentures, non-convertible portion of partially convertible debentures and optionally convertible debentures should also be included under this item. PART B CAPITAL FUNDS - TIER-II Item Name Item Code Amount `. (i) Preference Share Capital 161 (ii) Revaluation reserves (see para of guidelines) 162 (iii) General provisions and loss reserves (see para of guidelines) 163 (iv) Hybrid debt capital instruments (see para of guidelines) 164

51 PROCEDURE FOR REGISTRATION Contd... PART C RISK ASSETS AND OFF-BALANCE SHEET ITEMS Item Name Item Code Amount ` (i) Adjusted value of funded risk assets, i.e., on-balance 181 sheet items (Totally with Part D) (ii) Adjusted value of non-funded and off-balance sheet 182 items (Totally with Part E) (iii) Total risk-weighted assets/exposures ( ) 180 (iv) Percentage of capital funds to risk-weighted assets/exposures: (a) Tier-I capital (Percentage of Item 151 to Item 180) 191 (b) Tier-II capital (Percentage of Item 160 to Item 180) 192 (c) Total (Percentage of Item 170 to Item 180) 193

52 PROCEDURE FOR REGISTRATION Contd... Item Name Item code Book value Risk weight Adjusted value I. Cash and bank balances including fixed deposits & Certificates of Deposits II. Investments (see paras to of the guidelines) (a)government and approved securities as defined under section 45-IB of RBI Act, 1934 (b)shares/debentures/bonds/ units of mutual funds (i)amounts deducted in Part A [Item (ix)] (ii)amounts not deducted in Part A III. Current Assets PART D WEIGHTED ASSETS, I.E., ON-BALANCE SHEET ITEMS (a)stock on hire (Please see Note 3 below): (i)amounts deducted in Part A [Item (x)] (ii)amounts not deducted in Part A (b) Inter-corporate loans/deposits : (i) Amounts deducted in Part A [Item (x)] (ii) Amounts not deducted in Part A

53 PROCEDURE FOR REGISTRATION Contd... Item Name Item code Book value Risk weight Adjusted value (c) Loans and advances fully secured by company s own deposits (d) Loans to staff (e) Other secured loans and advances considered goods : (i) Amounts deducted in Part A [Item (x)] (ii) Amounts not deducted in Part A (f) Bills purchased/discounted: (i) Amounts deducted in Part A [Item (x)] (ii) Amounts not deducted in Part A (g) Others (to be specified) IV. Fixed Assets: (net of depreciation) (a) Assets leased out (i) Amounts deducted in Part A [Item (x)] (ii) Amounts not deducted in Part A (b) Premises (c) Furniture & Fixtures

54 PROCEDURE FOR REGISTRATION V. Other assets: Contd... Item Name Item code Book value Risk weight Adjusted value (a) Income-tax deducted at source (net of provisions) (b) Advance tax paid (net of provision) (c) Interest due on Government Securities (d) Others (to be specified) Total weighted assets (Items 210 to 258) 200 Notes : 1.Netting may be done in respect of assets where provisions for depreciation or for bad and doubtful debts have been made. 2.Unquoted shares are to be valued at cost or break-up value of the shares (as per last audited balance-sheet of the company concerned), whichever is less. 3.Stock on hire should be shown net of finance charges; i.e., interest and other charges, recoverable. 4.Assets which have been deducted from owned fund to arrive at net owned fund pursuant to Paragraph 5.1 of the guidelines will have a weightage of O.

55 PROCEDURE FOR REGISTRATION Contd PART E WEIGHTED NON-FUNDED EXPOSURES/OFF-BALANCE SHEET ITEMS Items Item code Book value Conversion factor Equivalent value Risk weight 1. Financial & Other guarantees 2. Share/debenture underwriting obligation 3. Partly paid shares/debentures 4. Bills discounted/rediscounted 5. Lease contracts entered into but yet to be executed 6. Other contingent liabilities (To be specified) 7. Total non-funded exposures (Items 310 to 360) Note : Cash margin/deposits shall be deducted before applying the conversion factors. Adjusted value

56 PROCEDURE FOR REGISTRATION Contd PART F OTHER DATA I. Aggregate of credit exposures categories into : Item Name Item Code Amount ` (i) Standard assets 411 (ii) Sub-standard assets 412 (iii) Doubtful assets 413 (iv) Loss assets 414 II. Aggregate provisioning in respect of I above as per the guidelines prescribed : Item name Item code Provision required (i) Sub-standard assets (10 per cent of total outstanding) 421 Actual provision made (ii) Doubtful assets (100 per cent to the extent not covered by realisable value of security + 20 to 50 per cent of the secured portion for the period the asset has remained doubtful) (see 4 of the guidelines) 422 (iii) Loss assets (100 per cent of the out-standing balance) 423

57 PROCEDURE FOR REGISTRATION Contd III. Other provisions in respect of : Item name Item code Provision required (i) Depreciation in fixed assets 431 (ii) Depreciation in investments 432 (iii) Loss/intangible assets 433 (iv) Taxation 434 (v)gratuity/provident fund 435 (vi) Others (to be specified) 436 Actual provision made PART G PARTICULARS REGARDING INVESTMENTS IN AND ADVANCES TO COMPANIES/FIRMS IN THE SAME GROUP AND OTHER NBFCs Item Name Item Code Amount `. (i) Outstanding loans and advances to and deposits with subsidiaries and companies in the same Group (Details enclosed in Appendix No.) (ii) Investments in shares of subsidiaries, companies in the same Group and non-banking financial companies (Details enclosed in Appendix No.) (iii) Investments by way of shares, debentures, loans and advances, leasing, hire-purchase finance, deposits, etc., in other companies, firms and proprietary concerns where directors of the company hold substantial interest (Details enclosed in Appendix No.)

58 PROCEDURE FOR REGISTRATION Contd PART H PARTICULARS REGARDING CONCENTRATION OF ADVANCES (INCLUDING OFF- BALANCE SHEET EXPOSURE AND INVESTMENTS) TO PARTIES OTHER THAN THOSE IN PART G ABOVE Item Name Item Code Amount `. (i) Loans and advances, including off-balance sheet exposures, to any single party in excess of 15 per cent of owned fund of the NBFC (Details enclosed in Appendix No.) (ii) Loans and advances, including off-balance sheet exposures, to a single group of parties in excess of 25 per cent of owned fund of the NBFC (Details enclosed in Appendix No.) (iii) Investments in other companies in excess of 25 per cent of the owned fund of the NBFC (Details enclosed in Appendix No.) Certified that the data/information furnished in this statement are in accordance with the guidelines issued by the Reserve Bank of India relating to income recognition, accounting standards, asset classification, provisioning for bad and doubtful debts, capital adequacy and concentration of credit and investments. They have been complied from the books of account and other records of the company and to the best of my knowledge and belief they are correct. For and on behalf of Date : Name of the Company Name : Place : Signature : Company Seal : Designation :

59 PROCEDURE FOR REGISTRATION Contd AUDITOR S REPORT We have examined the books of account and other records maintained by...limited in respect of the capital funds, risk assets/exposures and risk asset ratio, etc., as on...and report that to the best of our knowledge and according to the information and explanations given to us and as shown by the record examined by us, the figures shown in Parts A, B, C, D, E, F, G and H of the statement are correct. Place: Date : Chartered Accountants

60 PROCEDURE FOR REGISTRATION Contd ANNEX III INFORMATION ABOUT THE PROMOTERS, CHAIRMAN, MANAGING DIRECTOR, DIRECTORS AND THE CHIEF EXECUTIVE OFFICER OF THE COMPANY (PLEASE SEE NOTE ON PAGE 2) 1. Name : 2. Designation : Chairman/Managing Director/ Director/Chief Executive Officer* 3. Nationality : 4. Age : 5. Business Address : 6. Residential Address : 7. Educational/professional qualifications : 8. Line of business or vocation : 9. Name/s of other companies in which the person has held the post of Chairman/ Managing Director/Director/Chief Executive Officer 10. (i) Whether associated as Promoter, Managing Director, Chairman or Director with any NBFC including a Residuary Non-Banking Financial Company which has been prohibited from accepting deposits/prosecuted by RBI? (ii) If yes, the name/s of the company/ies 11 (i) Whether prosecuted/convicted for any economic offence either in the individual capacity or as a partner/director of any firm/company? : Yes/No Yes/No

61 PROCEDURE FOR REGISTRATION Contd (ii) If yes, particulars thereof : 12. Experience in the business of NBFC (number of years) : 13. Equity shareholding in the company No. of shares : Face value : `... Percentage to total equity share capital of the company : 14. Name/s of the companies, firms and proprietary concerns in which : the person holds substantial interest (Please see item 14 of instructions) 15. Names of the principal bankers to the concerns at 14 above : Signature : Date : Name : Place: Designation : (Chief Executive Officer) Company Seal : Note : Separate form should be submitted in respect of each of such functionaries, by using photocopy of this format.

62 DIRECTIONS AND THEIR APPLICABILITY

63 DIRECTIONS AND THEIR APPLICABILITY Directions Applicability Remarks Non- Banking Financial Companies Acceptance Of Public Deposits (Reserve Bank) Directions, Non-Banking Financial (Deposit Accepting Or Holding) Companies Prudential Norms (Reserve Bank) Directions, All NBFCs NBFC-D Para 4 to 8 which constitutes provisions relating to accepting deposits, rating, advertisement, investment in approved securities are applicable only to deposit taking NBFC (NBFC-D). NBFC-ND are exempted subject to passing a resolution every year to the effect that they have neither accepted public deposit nor would accept public deposit. Non-Banking Financial (Non-deposit Accepting Or Holding) Companies Prudential Norms (Reserve Bank) Directions, Non- Banking Financial Companies Auditor s Report (Reserve Bank) Directions, Reserve Bank Of India (Non Banking Financial Companies) Returns Specifications, NBS -3 and 3A have been prescribed. The Non Banking Financial Companies (Deposit Accepting) (Approval Of Acquisition Or Transfer Of Control) Directions, NBFC- ND All Auditors of NBFC NBFC- D NBFC-D CIC-ND-SI are also proposed to be exempted

64 RETURNS BY NBFC

65 RETURNS BY NBFC

66 RETURNS BY NBFC Contd

67 RETURNS BY NBFC Contd

68 RETURNS BY NBFC Contd

69 ANNUAL SUBMISSIONS

70 ANNUAL SUBMISSIONS All NBFCs are required to make two submissions to RBI irrespective whether they are accepting deposits or not accepting deposits (NBFC-D or NBFC- ND). 1. Balance sheets and Profit and loss A/c All NBFCs are required to finalize the annual accounts within three months from the year end. i.e. if the year ending is 31 st March, the accounts should be finalised by 30 th June as per circular dated 1 st December Issues: Whether finalised accounts refers to audited accounts is not clear as it would otherwise conflict with the Companies Act Statutory Auditor s certificate within one month of finalisation of the balance sheet and in any case is not later than 30 th December of that year. Format is given below: 3. NBFC with FDI has to submit a half yearly (half year ending March and September) certificate to the effect that it has complied with the minimum capitalisation norms and that its activities are restricted to the activities prescribed under FEMA. 4. CIC-ND-SI are required to submit an annual certificate regarding compliance with the guidelines relating to CIC as per circular dated 12 th August 2010.

71 ANNUAL SUBMISSIONS Contd To, The Assistant General Manager Department of Non-Banking Supervision Reserve Bank of India 1 st Floor, Near Gandhi Bridge Ahemadabad Dear Sir, Re: A Limited We, the Statutory Auditors of A Limited, Office No. hereby certify that for the financial year ending as at March 31,, the Company is engaged in the business of Non-Banking Financial Institution requiring to hold a Certificate of Registration under section 45-IA of the Reserve Bank of India Act, The pattern of the assets and income of the company as at March 31, and for the period ending March 31, is respectively as under: i. Asset Pattern S.No Particular Amount (`.) Percentage of Total Assets. 1 Investments 2 Loans & Advances* 3 Assets Finance 4 Total Financial Assets (1+2+3) 5 Total Asset