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Core Investment Company

A core investment company is a limited company with equity & preference shares or debentures in some other company. These companies are created as group businesses to control the subsidiaries by holding a majority of the shares. These companies basically invest in shares of their own group companies for stake holding but cannot trade these instruments or carry out any other kind of financial activity. Reserve Bank of India (RBI) states that core investment companies must register as NBFCs. They cannot trade in shares and debentures. RBI asserts that the CICs which have a net asset of Rs. 100 crore or above shall be considered as systemically important (SI) companies.

Core investment companies are required to be registered with RBI under section 45 IA of the RBI Act 1934 and obtain a Certificate of Registration (CoR).

Categories of Core Investment Company

The basic eligibility criteria of a Core Investment company is that it can accept deposits. The asset classification norms for CICs are:

  • Registered CICs with assets worth less than Rs. 100 crore must follow the norms specified in the Non-Systematically Important NBFC Prudential Norms, 2015.

  • For CICs with assets increasing Rs. 100 core are to follow the norms as specified in Systematically Important NBFC (NBFC-ND-SI) Prudential Norms Directions, 2015. Here ND is short for Non Deposit taking entities.

Exemptions from Registration

  • CICs with an asset size of less than Rs. 100 crore are exempt from registration as CICs according to the RBI Act. The aggregate asset size is calculated by adding individual sizes of all the CICs belonging to a particular group. If the aggregate asset size is Rs. 100 crore or more the Core Investment Company has to register.

  • CICs with a minimum net worth of Rs. 100 crore but are not accessing public funds are exempted.

  • Those CICs with asset size below Rs. 100 would be required to register, mandatorily, with RBI if they are planning to make overseas investments in the financial sector. They also need to fulfil all the regulations applicable to registered CIC-ND-SI. However, if the investment is being done in the non-financial sector, then that Core Investment Company does not require to be registered with RBI.

  • As per the Act, the CIC with asset size less than Rs. 100 crore must apply for the CoR within 3-months from the date of achieving Rs. 100 crore in the balance sheet.

General Obligations for a Core Investment Company

According to the Core Investment Companies (Reserve Bank) Directions, 2016, the following provisions need to be fulfilled by all CICs, as per the last audited balance sheet:-

Registration Process of CIC-ND-SI

  • Download the application form for registration from the website of RBI.

  • Fill it and submit online. Along with the relevant documents for NBFC registration. A hard copy of the documents as submitted are to be sent to the Regional Office of DNBS (Department of Non-Banking Supervision). The DNBS office has to be the one under whose jurisdiction the company is registered

The CICs that are exempt from registration, however, need to pass a Board Resolution that they will not indulge in accessing public funds, in the future.

Capital Requirements for CIC-ND-SI

  • The adjusted net worth (ANW) of the CIC-ND-SI must be over 30% of the risk-weighted assets (RWA).

  • In situations where the aggregate asset size is calculated, it is required that all the CICs within the group are registered as individual CIC-ND-SI, the adjusted net worth being applied individually.

Documents Required</b

RBI states a comprehensive list of documents for a company to register itself as CIC. Only some of them can be listed here, as RBI may ask for other documents, as it considers necessary.

  • Details of access to Public Funds.

  • Application to be submitted in two separate sets properly in two separate files with properly enumerated pages.

  • Identification Details (Annex I).

  • Statement on prudential norms (Annex II).

  • Any change in the management of the company during the last financial year till date, its details, and reasons thereof.

Frequently Asked Questions

Can CICs/CICs-ND-SI accept deposits?
What is Systemically Important Core Investment Company (CIC-ND-SI)?
For an existing NBFC-ND-SI converted later into a CIC-ND-SI after fulfilling the criteria, will the existing CoR continue?
What items are included in the 10% of Net assets which CIC/CIC-ND-SI can hold outside the group?
Whether investments in a group entity (not a Company) by CICs-ND-SI could be regarded as investments in Group Companies to calculate 90% investment in Group Companies?
What is CICs-ND-SI want to invest abroad?
Do exempted CICs investing overseas, need NOC from DNBS?
Are CICs with asset size below Rs. 100 crore regulated by RBI?
What is meant by public funds?
How can a company register as a CIC-ND-SI?
Are Current Liabilities part of Outside Liabilities? How will DTL, Advance Tax Due and Provision for Income Tax be treated? Will they be Outside Liabilities?