Regarding chit fund companies

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

22 October 2013 DEAR EXPERTS
MY QUESTIONS ARE

1. WHETHER CHIT FUND COMPANIES ARE CATEGORIZED AS NBFC'S .

2. IS THE CHIT INSTALMENTS RECEIVED BY CHIT FUND COMPANIES IS CONSIDERED AS DEPOSITS U/S 58A AND 58AA FOR REPORTING PURPOSE.

3. CAN ANYONE PROVIDE ME WITH THE AUDIT REPORT FORMAT OF PRIVATE LIMITED CHIT FUND COMPANIES.

THANKS IN ANTICIPATION

Ajay Mishra

Ajay Mishra (Expert)
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23 October 2013 Hi

Housing Finance Companies, Merchant Banking Companies, Stock Exchanges, Companies engaged in the business of stock-broking/sub-broking, Venture Capital Fund Companies, Nidhi Companies, Insurance companies and Chit Fund Companies are NBFCs but they have been exempted from the requirement of registration under Section 45-IA of the RBI Act, 1934 subject to certain conditions.

Housing Finance Companies are regulated by National Housing Bank, Merchant Banker/Venture Capital Fund Company/stock-exchanges/stock brokers/sub-brokers are regulated by Securities and Exchange Board of India, and Insurance companies are regulated by Insurance Regulatory and Development Authority. Similarly, Chit Fund Companies are regulated by the respective State Governments and Nidhi Companies are regulated by Ministry of Corporate Affairs, Government of India.

It may also be mentioned that Mortgage Guarantee Companies have been notified as Non-Banking Financial Companies under Section 45 I(f)(iii) of the RBI Act, 1934.

Ajay Mishra

Ajay Mishra (Expert)
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23 October 2013
In terms of Section 45-IA of the RBI Act, 1934, it is mandatory that every NBFC should be registered with RBI to commence or carry on any business of non-banking financial institution as defined in clause (a) of Section 45 I of the RBI Act, 1934.
However, to obviate dual regulation, certain category of NBFCs which are regulated by other regulators are exempted from the requirement of registration with RBI viz. venture capital fund/merchant banking companies/stock broking companies registered with Sebi, insurance company holding a valid certificate of registration issued by IRDA, Nidhi companies as notified under Section 620A of the Companies Act, 1956, chit companies as defined in clause (b) of Section 2 of the Chit Funds Act, 1982 or housing finance companies regulated by National Housing Bank.
What are the different types of NBFCs registered with RBI?
The NBFCs that are registered with RBI are:
• (i) equipment leasing company;
• (ii) hire-purchase company;
• (iii) loan company;
• (iv) investment company.
With effect from December 6, 2006 the above NBFCs registered with RBI have been reclassified as
• (i) Asset Finance Company (AFC)
• (ii) Investment Company (IC)
• (iii) Loan Company (LC)
AFC would be defined as 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.
Principal business for this purpose is defined as aggregate of financing real/physical assets supporting economic activity and income arising therefrom is not less than 60% of its total assets and total income respectively.
The above type of companies may be further classified into those accepting deposits or those not accepting deposits.
Besides the above class of NBFCs the Residuary Non-Banking Companies are also registered as NBFC with the Bank.

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