Loan by nbfc to any sister concern

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Swasti Tripathi

Swasti Tripathi (Querist)
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30 March 2014 can an nbfc registered as limited give loan to its sister concern as per rbi guidelines?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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30 March 2014 well practical experience wise, NBFCs do lend to their related parties.

However the impact of section 185/186 of the Companies Act 2013 needs to be checked out.

Swasti Tripathi

Swasti Tripathi (Querist)
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31 March 2014 I need explanation on rbi guidelines issued on this matter.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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31 March 2014 as per RBI it is clearly allowed. rather these loans are specifically reduced from the net owned funds.

please refer https://rbidocs.rbi.org.in/rdocs/notification/PDFs/57MC01072013BF.pdf

Nikhil Kaushik

Nikhil Kaushik (Expert)
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31 March 2014 however NBFCs are not eligible to have bank credit for such lending to subsidiaries.

Swasti Tripathi

Swasti Tripathi (Querist)
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31 March 2014 means upon giving loans to sister concern, net owned funds of the lending NBFC shall get reduced by 10%..

Nikhil Kaushik

Nikhil Kaushik (Expert)
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31 March 2014 no. it means that lets say aggregate capital plus reserves is Rs 100...so upto ten percent ie Rs 10, investment/loan to subsidiaries etc is no issue. Anything above 10% shall be reduced. so if loan to subsidiary is Rs 15, then for computation of net owned funds, amounts in excess of Rs 10, ie Rs 5 shall be deducted.

also refer to Point 5 of the circular.

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