RBI Master Circular No: RBI/2014-15/629 (11-Jun-15) Master Circular â Systemically Important Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015
DNBR (PD) CC No. 037/03.01.001/2014-15
To
All Systemically Important Non-Deposit taking NBFCs,
Dear Sirs,
As you are aware, in order to have all current instructions on the subject at one place, the Reserve Bank of India issues updated circulars / notifications. The instructions contained in the Notification No. DNBR.009/CGM (CDS)-2015 dated March 27, 2015 updated till the date as indicated above are reproduced below. The updated notification has also been placed on the RBI web-site (http://rbi.org.in/).
Yours faithfully,
C.D.Srinivasan
Chief General Manager
Table of Contents
| | Particulars |
| 1 | Short title, commencement and applicability of the Directions |
| 2 | Definitions |
| 3 | Income recognition |
| 4 | Income from investments |
| 5 | Accounting standards |
| 6 | Accounting of investments |
| 7 | Need for policy on demand/call loans |
| 8 | Asset classification |
| 9 | Provisioning requirements |
| 10 | Standard asset provisioning |
| 11 | Disclosure in the balance sheet |
| 12 | Accounting year |
| 13 | Schedule to the balance sheet |
| 14 | Transactions in government securities |
| 15 | Submission of a certificate from Statutory Auditor to the Bank |
| 16 | Requirement as to capital adequacy |
| 17 | Loans against non-banking financial company''s own shares prohibited |
| 18 | Loans against security of single product - gold jewellery |
| 19 | Verification of the ownership of gold |
| 20 | Standardization of Value of Gold accepted as collateral in arriving at LTV Ratio |
| 21 | Safety and security measures to be followed by Non-Banking Financial Companies lending against collateral of gold jewellery |
| 22 | Opening Branches exceeding one thousand in number |
| 23 | Loans against security of shares |
| 24 | Concentration of credit/investment |
| 25 | Information with respect to change of address, directors, auditors, etc. to be submitted |
| 26 | NBFCs not to be partners in partnership firms |
| 27 | Norms for restructuring of advances |
| 28 | Flexible Structuring of Long Term Project Loans to Infrastructure and Core Industries |
| 29 | Submission of ''Branch Info'' Return |
| 30 | Exemptions |
| 31 | Interpretations |
| 32 | Repeal and Saving |
| Appendix |
NOTIFICATION No.DNBR.009/CGM (CDS)-2015 dated March 27, 2015
The Reserve Bank of India, having considered it necessary in the public interest, and being satisfied that, for the purpose of enabling the Bank to regulate the credit system to the advantage of the country, it is necessary to issue the Directions relating to the prudential norms as set out below, in exercise of the powers conferred by Section 45JA of the Reserve Bank of India Act, 1934 (2 of 1934) and of all the powers enabling it in this behalf, and in supersession of the Notification No. DNBS. 193/ DG (VL)-2007 dated February 22, 2007, gives the Directions hereinafter specified.
Short title, commencement and applicability of the Directions:
1. (1) These Directions shall be known as the "Systemically Important Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015".
(2) These Directions shall come into force with immediate effect.
(3) (i) The provisions of these Directions, save as provided for in clauses (ii), (iii) and (iv) hereinafter, shall apply to every non-banking financial company not accepting / holding public deposits and having an asset size of Rs. 500 crore and above as per the last audited balance sheet,.
(ii) These Directions, except the provisions of paragraph 25 shall not apply to a non-banking financial company being a Government company as defined under clause (45) of Section 2 of the Companies Act, 2013 (18 of 2013) and not accepting / holding public deposit.*
(iii) The provisions of paragraphs 15, 16 and 24 of these Directions shall not apply to a Systemically Important Core Investment Company as defined in the CIC Directions.
(iv) The provisions of paragraphs 8, 9 and 24 of these Directions shall not apply to an NBFC-MFI as defined in the Non-Banking Financial Company- Micro Finance Institutions (Reserve Bank) Directions, 2011.
Definitions
2. (1) For the purpose of these Directions, unless the context otherwise requires:
(i) "break up value" means the equity capital and reserves as reduced by intangible assets and revaluation reserves, divided by the number of equity shares of the investee company;
(ii) "carrying cost" means book value of the assets and interest accrued thereon but not received;
(iii) 'companies in the group'', shall mean an arrangement involving two or more entities related to each other through any of the following relationships: Subsidiary -- parent (defined in terms of AS 21), Joint venture (defined in terms of AS 27), Associate (defined in terms of AS 23), Promoter-promotee (as provided in the SEBI (Acquisition of Shares and Takeover) Regulations, 1997) for listed companies, a related party (defined in terms of AS 18), Common brand name, and investment in equity shares of 20% and above."
(iv) "Conduct of business regulations" means the directions issued by the Bank from time to time on Fair Practices Code and Know Your Customer guidelines.
(v) "current investment" means an investment which is by its nature readily realisable and is intended to be held for not more than one year from the date on which such investment is made;
(vi) "customer interface" means interaction between the NBFC and its customers while customers while carrying on its NBFI business.
(vii) "doubtful asset" means:
which remains a sub-standard asset for a period ''exceeding 18 months'' for the financial year ended March 31, 2015; ''exceeding 16 months'' for the financial year ended March 31, 2016; ''exceeding 14 months'' for the financial year ending March 31, 2017 and ''exceeding 12 months'' for the financial year ending March 31, 2018 and thereafter.
(viii) "earning value" means the value of an equity share computed by taking the average of profits after tax as reduced by the preference dividend and adjusted for extra-ordinary and non-recurring items, for the immediately preceding three years and further divided by the number of equity shares of the investee company and capitalised at the following rate:
Note: If, an investee company is a loss making company, the earning value will be taken at zero;
(ix) "fair value" means the mean of the earning value and the break up value;
(x) "hybrid debt" means capital instrument which possesses certain characteristics of equity as well as of debt;
(xi) "Infrastructure Finance Company" means a non-deposit taking NBFC that fulfills the following criteria:
Explanation: A Credit facility extended by lenders (i.e. NBFCs) to borrower for exposure in the following infrastructure sub-sectors will qualify as "Infrastructure loans" --
| Sr. No. | Category | Infrastructure sub-sectors |
|
| 1. | Transport | i | Roads and bridges |
| ii | Ports1 |
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| iii | Inland Waterways |
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| iv | Airport |
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| v | Railway Track, tunnels, viaducts, bridges2 |
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| vi | Urban Public Transport (except rolling stock in case of urban road transport) |
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| 2. | Energy | i | Electricity Generation |
| ii | Electricity Transmission |
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| iii | Electricity Distribution |
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| iv | Oil pipelines |
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| v | Oil / Gas / Liquefied Natural Gas (LNG) storage facility3 |
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| vi | Gas pipelines4 |
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| 3. | Water & Sanitation | i | Solid Waste Management |
| ii | Water supply pipelines |
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| iii | Water treatment plants |
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| iv | Sewage collection, treatment and disposal system |
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| v | Irrigation (dams, channels, embankments etc) |
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| vi | Storm Water Drainage System |
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| vii | Slurry Pipelines |
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| 4. | Communication | i | Telecommunication (Fixed network)5 |
| ii | Telecommunication towers |
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| iii | Telecommunication & Telecom Services |
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| 5. | Social and Commercial Infrastructure | i | Education Institutions (capital stock) |
| ii | Hospitals (capital stock)6 |
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| iii | Three-star or higher category classified hotels located outside cities with population of more than 1 million |
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| iv | Common infrastructure for industrial parks, SEZ, tourism facilities and agriculture markets |
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| v | Fertilizer (Capital investment) |
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| vi | Post harvest storage infrastructure for agriculture and horticultural produce including cold storage |
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| vii | Terminal markets |
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| viii | Soil-testing laboratories |
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| ix | Cold Chain7 |
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| x. | Hotels with project cost8 of more than Rs.200 crores each in any place in |
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| xi. | Convention Centres with project cost8 of more than Rs.300 crores each |
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| Notes |
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| 1 | Includes Capital Dredging |
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| 2 | Includes supporting terminal infrastructure such as loading / unloading terminals, stations and buildings |
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| 3 | Includes strategic storage of crude oil |
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| 4 | Includes city gas distribution network |
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| 5 | Includes optic fibre / cable networks which provide broadband / internet |
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| 6 | Includes |
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| 7 | Includes cold room facility for farm level pre-cooling, for preservation or storage of agriculture and allied produce, marine products and meat. |
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| 8. | Applicable with prospective effect from the date of this circular and available for eligible projects for a period of three years; Eligible costs exclude cost of land and lease charges but include interest during construction. |
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(xii) "NBFC-MFI" means a non-deposit taking NBFC (other than a company licensed under Section 25 of the Indian Companies Act, 1956) that fulfils the following conditions:
For the purpose of (b) above,
"net assets" are defined as total assets other than cash and bank balances and money market instruments; and
1"Qualifying assets" shall mean a loan which satisfies the following criteria:-
Provided that loan, if any availed towards meeting education and medical expenses shall be excluded while arriving at the total indebtedness of a borrower.
(xiii) "Non-Banking Financial Company -- Factor" means a non-banking financial company as defined in clause (f) of section 45-I of the...
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