Core Investment Company or CIC is a type of Non-banking Financial Company and primarily deals with the acquisition and investment of shares and securities. Compared to other NBFC’s registering and running a CIC is much relaxed and even has some exemptions. CIC’s are regulated by the RBI in India and have regulation when it comes to the range of products it can invest in. For example, as per the latest regulations a Core investment company cannot invest in:

  • Bank Deposits.
  • Government Securities.
  • Bonds and guarantees issued by group companies.
  • Money market instruments like treasury bills or Certificates of deposit (CD).

There are two types of Core investment companies:

  • Non-Systemically important CIC (NSI): The total value of assets is less than Rs 100Cr. and are exempt from NBFC registration and regulation.
  • Systemically important CIC (SI): The total value of assets is more than Rs. 100Cr and both have access to and raise public funds.

Registration and what documents do you need?

  • All applicants are required to download and fill the latest application form for the CIC-ND-SI category from the RBI website. The application is to be submitted to the regional office of the DNBS – Department of Non-Banking Supervision.
  • The application form has the updated document checklist however there might be additional documents required and depends on a case-to-case basis.

Eligibility Criteria

  • To be eligible as a Core investment company – CIC, at least 90% of the company’s total assets should be in listed assets, namely shares debentures, and securities.
  • At least 60% of the net assets of the company are in the form of equity shares. This is typically measured as on the last date of audit on the balance sheet.
  • Have obtained an NBFC registration with the RBI, adhering to the core investment companies act of 2016.
  • No lending against its own shares. The RBI does not allow CICs to invest in partnership firms including LLP’s and cannot deal in any funds with the same. Oversees transactions are typically not allowed unless special permission is received from the RBI. In the case of investment in the non-financial sector, simple notification of the investment to the regional DNBS within 30 days is sufficient.
  • Any CIC with overseas investment in the non-financial sector, in the future, will not be able to access public funds as per regulation.

RBI Guidelines to be adhered to include:

  • A minimum capital ratio of 30% is mandatory, i.e. the adjusted net worth of the company should not fall below the 30% aggregated risky assets on its balance sheet.
  • A maximum leverage ratio of 2.5 times its adjusted net worth as of the last audited balance sheet. This includes outside liabilities like all financial obligations and debt obligations issued on the liabilities side of the balance sheet.
  • Investments need to be effectively diversified – both short and long run options.
  • All investments meet the standards set in the ICAI accounting standards.
  • Annual certificates from a statutory auditory need to be produced and submitted to the DNBS.

How can HBF help?

  • Start with a quick check and get professional help meeting all the eligibility criteria.
  • Our consultants can greatly ease the burden of documentation and help with obtaining the NBFC registration and help streamline the entire process.
  • We liaise with the RBI on your behalf and support you all the way through the RBI license application.
  • Our financial experts can help guide and meet all compliance requirements when it comes to the financial regulations the RBI has stated. In the case of overseas investments, our consultants and team of experts can greatly facilitate any requirement of additional approval from the RBI on your behalf.

At HBF Directlimited, we take pride in providing the best service when it comes to establishing your own Core Investment company. Contact our team of experts to take the next step.

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December 14, 2020

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December 14, 2020

yes you can

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