Investment in NBFCs from FATF non-compliant jurisdictions

Last updated: 13 February 2021

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The Reserve Bank of India has issued new guidelines regarding investments in Non-Banking Financial Companies (NBFCs) from jurisdictions identified by the Financial Action Task Force (FATF) as non-compliant. These new rules differentiate between investments from compliant and non-compliant jurisdictions. Existing investors from non-compliant jurisdictions can continue their investments or make new ones as per current regulations to ensure business continuity. However, new investors from or via these non-compliant jurisdictions must not acquire 'significant influence' in the NBFC, with aggregate voting power capped below 20%.

RESERVE BANK OF INDIA www.rbi.org.in RBI/2020-2021/97 DOR.CO.LIC.CC No.119/03.10.001/2020-21 February 12, 2021 To Non-Banking Financial Companies (NBFCs) (including Housing Finance Companies) and Asset Reconstruction Companies Madam / Dear Sir, Investment in NBFCs from FATF non

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FAQ :

FATF non-compliant jurisdictions are those identified by the Financial Action Task Force as having weak measures to combat money laundering and terrorist financing. They appear on lists such as 'High-Risk Jurisdictions subject to a Call for Action' or 'Jurisdictions under Increased Monitoring'.

Yes, investors in existing NBFCs who held investments prior to the jurisdiction being classified as FATF non-compliant may continue with their investments or make additional ones as per existing regulations to support business continuity in India.

New investors from or through FATF non-compliant jurisdictions, whether in existing NBFCs or companies seeking registration, should not be allowed to directly or indirectly acquire 'significant influence'. Their aggregate voting power (including potential voting power) must be less than 20% of the NBFC's voting power.

For the purpose of these rules, 'significant influence' is defined according to applicable accounting standards. Essentially, new investors from non-compliant jurisdictions should not collectively hold more than 20% of the voting power.

Yes, these instructions are applicable with immediate effect from February 12, 2021.

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Notification No : RBI/2020-2021/97 DOR.CO.LIC.CC No.119/03.10.001/2020-21
Published in Community & General
Source : https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12027&Mode=0

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