nbfcs - certain issues and developments jb nagar cpe study circle wirc, icai ca jayant thakur 8th...

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NBFCs NBFCs - Certain Issues and - Certain Issues and developments developments JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,

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Page 1: NBFCs - Certain Issues and developments JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,

NBFCs NBFCs - Certain Issues and - Certain Issues and

developmentsdevelopments

JB Nagar CPE Study CircleWIRC, ICAI

CA Jayant Thakur8th September 2013,

Page 2: NBFCs - Certain Issues and developments JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,

Outline of law ActVarious Directions, Circulars, etc.

◦Acceptance of deposits◦Prudential Norms ◦Auditors ◦Others

Recent Reports/draft Guidelines State LawsCompanies Act, 2012/SEBI

Ordinance CA Jayant Thakur, 8th September 2013 2

Page 3: NBFCs - Certain Issues and developments JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,

Position as on 31Position as on 31stst March March 20102010Total NBFCs 12662 Deposit taking NBFCs 311SI-ND taking NBFCs 295Other ND taking NBFCs – 12056Asset size of non-deposit

accepting NBFCs grew from 250765 crores in 2006 to 566853 crores.

CA Jayant Thakur, 8th September 2013 3

Page 4: NBFCs - Certain Issues and developments JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,

Auditors role General and comprehensiveRegistrationCompliance of Prudential Norms

and Deposits DirectionsContinuity of businessManner of reporting Miscellaneous

CA Jayant Thakur, 8th September 2013 4

Page 5: NBFCs - Certain Issues and developments JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,

Important basic terms Definition of NBFC

◦What constitutes NBFC◦50% criteria

Financial assets

Exempted companiesNet owned fundsPunishment for violation

◦Non-compoundableNon-appealable

CA Jayant Thakur, 8th September 2013 5

Page 6: NBFCs - Certain Issues and developments JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,

Core Investment Companies Core Investment Companies (CICs)(CICs)Definition and concepts

◦Basic conditions SI ND Assets composition Public Funds Group

BenefitsObligations

CA Jayant Thakur, 8th September 2013 6

Page 7: NBFCs - Certain Issues and developments JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,

Mergers/takeovers of NBFCs Deposit AcceptingOthersProposed changes

CA Jayant Thakur, 8th September 2013 7

Page 8: NBFCs - Certain Issues and developments JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,

Thorat Committee ReportOverviewPublic funds conceptNBFCs < Rs. 50 crores assets

◦Principal business conditionNBFCs < Rs. 1000 crores assets

◦Principal business condition Existing NBFCs?

◦De-registration◦Re-registration/gestation period

CA Jayant Thakur, 8th September 2013 8

Page 9: NBFCs - Certain Issues and developments JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,

Thorat Committee ReportChange of control/mergersReduction in deposit limits for

AFCsNo new deposit accepting NBFCsAll deposit accepting NBFCs to

get ratedMultiple NBFCsCaptive NBFCs

CA Jayant Thakur, 8th September 2013 9

Page 10: NBFCs - Certain Issues and developments JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,

Thorat Committee ReportCorporate governance

◦More powers for RBI ◦Clause 49

Mandatory disclosures

CA Jayant Thakur, 8th September 2013 10

Page 11: NBFCs - Certain Issues and developments JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,

Recent letters to “NBFCs”Recent letters to “NBFCs”Issues raisedOther NBFCs

CA Jayant Thakur, 8th September 2013 11

Page 12: NBFCs - Certain Issues and developments JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,

Debentures Private placement guidelines NBFCs raised 3,18,800 crores in

2011-12◦ND-SI 2,95,000 crores

Recent controversies and abusesApplies to private placements

◦NCDsTime of completion - 6 monthsGaps between 2 placementsNames of subscribers

CA Jayant Thakur, 8th September 2013 12

Page 13: NBFCs - Certain Issues and developments JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,

Debentures Private placement guidelines Maximum number of investors 49Minimum amounts/multiples Only secured

debentures/compulsorily convertible debentures

Applicability - “as may be specified”

CA Jayant Thakur, 8th September 2013 13

Page 14: NBFCs - Certain Issues and developments JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,

Companies Act, 2012 – some pointers Frauds in deposit acceptanceFrauds generallyClass actionsSahara/Saradha type of cases

CA Jayant Thakur, 8th September 2013 14

Page 15: NBFCs - Certain Issues and developments JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,

Securities Laws Ordinance 2013 Arrangements/pooling with

corpus of more than Rs. 100 crores

NBFCs?

CA Jayant Thakur, 8th September 2013 15

Page 16: NBFCs - Certain Issues and developments JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,

State Depositors’ Protection State Depositors’ Protection LawsLawsWhich States?Who are covered? What is deposits?When would there be violation?What action can be taken?Supreme Court – K. K. Baskaran,

4th April 2011Applicable to NBFCs?

CA Jayant Thakur, 8th September 2013 16

Page 17: NBFCs - Certain Issues and developments JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,

THANK YOU!