NBFC - Compliances

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-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 Deposits (Reserve Bank) Directions, 1998

Notification No. DFC.118/DG(SPT)-98, Dated January 31, 1998

Para 9

Non-applicability of Direction to certain types of NBFC

a)    Insurance company

b)   Loan company, an investment company, an assets Finance 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( non-Deposit Accepting or Holding) Companies Prudential Norms( Reserve Bank) Directions, 2007

Notification No. DNBS/(VL)2007, Dated 22.02.2007

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.

Ongoing

All NBFC

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 and guidance notes issued by ICAI shall be followed

Accounting of investment

1. Board of Directors shall frame Investment Policy and implement the same.

2.  Classify the investments into Current and Long Term Investment

3.   No inter-class transfer on ad hoc basis

4.   Inter-class transfer, if warranted, shall be effected only on April 1 or October 1, with the approval of Board of Directors

5.   Investment shall be transferred scrip wise, from Current Investment to long –term investment or vice versa at book value or market value, whichever is lower.

6.    Quoted Current Investment shall, for the purpose of valuation, shall be valued at cost or market value, whichever is lower.

7.  Unquoted equity shares in the nature of current investment shall be valued at cost or break-up value, whichever is lower.

8.   Long term Investment shall be valued in accordance with Accounting Standard issued by ICAI.

Para 7

Need for Policy on Demand / Call Loans

Policy for demand / call loan shall be framed

Ongoing

All NBFC giving loan etc.

Para 8, 9 and 10

Asset classification

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

Ongoing

All NBFC

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

Ongoing

Disclosure in the Balance Sheet

Separately disclosure the provisions made as per para 9,  without netting them from the income or against the value of assets.

Yearly

Para 11

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 12 and 13

Accounting Year

Every NBFC shall prepare its B/S and P/L as on 31^st March

Yearly

All NBFC

Schedule to the Balance Sheet

Every NBFC shall append to its B/S particulars in the format as set in schedule

Para 14

Transaction in Government Securities

NBFC shall hold investment in approved securities in a dematerialised form only.

Ongoing

All NBFC

Para 15

Submission of Auditors Certificate

- That the Company is engaged in the business of NBFI requiring it to hold a Certificate of Registration u/s 45IA of RBI Act indicating income and assets pattern of the company making it eligible for classification as Asset Finance, loan or Investment Company.

Latest by 30^th June every year.

All NBFC

Para 16

Requirement as to Capital adequacy

Company shall maintain w.e.f. 01.04.2007, a minimum capital ratio   (consisting of Tier I and Tier II capital) which shall not be less than 10% of its weighted asset and the risk adjusted value of off-balance sheet items.

Ongoing.

Systemically important –ND taking NBFC

Para 17

Loan against NBFC’s own shares prohibited

No loan against own shares shall be given

Ongoing

All NBFC

Para 18

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

Systemically important –ND taking NBFC

Para 19

Information in regard to change of address, directors, auditors, Principal officer, etc.

Information to be submitted by every NBFC company within 30 days from the date of occurrence of any change

Within 30 days of occurrence of  any  change

All NBFC

Para 20

Norms relating to Infrastructure Loan

Restructuring of Infrastructure Loan.

All NBFC giving Infrastructure Loan

Under various Notification / Press release issued by Reserve Bank

Notification No. DNBS.192/DG(VL)-2007 dated 22.02.2007

Monthly return on important financial parameters on NBFC not accepting / holding public deposits and having assets size of Rs.100 crores and above

Monthly

Systemically important –ND taking NBFC

Notification No. DNBS(PD)CC. No. 93/03.05.002/2006-07 dated 27.04.2007

Annual Statement of capital funds, risk assets/exposures and risk etc.

Annual (30^th June)

Form NBS-7

Systemically important –ND taking NBFC

Notification No. DNBS(PD)CC. No. 106/03.10.042/2005-06 dated 04.09.2007

Frauds – Future approach towards monitoring of frauds in NBFC.

-where the amount invlolved in the fraud is Rs. 25 lacs and above

-Quarterly Return on frauds of Rs. l lakh and above.

Form FMR-1

Form FMR-3

All NBFC

Circular No. DNBS(PD) CC No. 48/10.42/2004-05 dated 21.02.2005

NBFC is required to formulate a policy on  Know your customer(KYC) and Anti Money Laundering measures and put in place with the approval of Board of Directors within 3 months of the date of circular.

All NBFC

Circular No. DNBS(PD) CC No. 64/03.10.42/2005-06 dated 05.04.2006

-Appointment of Principal officer

-Maintenance of record under rule 3 of Money Laundering Act (PMLA), 2002

(cash/suspicious transactions)

-Report information relating to cash and suspicious transactions to the Director  Financial Intelligence Unit , New Delhi

All NBFC

Circular No. DNBS(PD) CC No. 80/03.10.42/2005-06 dated 28.09.2006

Fair Practice Code to be framed and approval of the same by the Board of Directors of the Company within one month from the date of circular.

All NBFC

Circular No. DNBS(PD) CC No. 95/03.05.002/2006-07 dated 24.05.2007

Board of Directors of NBFC to lay out appropriate internal principles and procedures in determining interest rates, processing and other charges on the guidelines indicated in fair practice code.

To ensure that excessive interest, beyond a certain level are not charged ( interest rates are not regulated by RBI)

All NBFC

Notification No. DNBS(PD)CC. No. 94/03.05.002/2006-07 dated 08.05.2007

Guidelines on Corporate Governance

1. Constitution of Audit Committee

Assets Size of Rs. 50 crore and above

2. Constitution of Nomination Committee

3. Constitution of Risk Management Committee

Systemically important –ND taking NBFC

Information to be placed before the Board

at regular interval, prescribed by the Board:

-      progress made in putting in place a progressive risk management system, and risk management policy and strategy followed

-      conformity with corporate governance standards, viz, in the composition of various committees, their role and functions, periodicity of the meeting and compliance with coverage and review functions etc.

Systemically important –ND taking NBFC

Assets Size of Rs. 50 crore and above

Connected Lending

The NBFC should comply with the instructions on connected lending relationship, as detained in Annexure.

Note:  These directions are put on hold) o

Systemically important –ND taking NBFC

GUIDELINES FOR ASSET –LIABILITY MANAGEMENT(ALM)

Circular No. DNBS (DD) CC. No. 15/02.01/2000-01 dated 27/06/2001

Half-yearly Return for the period ended 31^st March and 30^th September, in three parts:

(i)           Statement of structural liquidity

(ii)          Statement of Short term dynamic liquidity

(iii)        Statement of Interest Rate Sensitivity

Within one month of ending of half-year

Systemically important –ND taking NBFC

Constitution of Asset Liability Management Committee (ALCO)

Systemically important –ND taking NBFC

Board of Directors should oversee the implementation of the system and review its functioning periodically.

Systemically important –ND taking NBFC