NBFCs NBFCs - Certain Issues and - Certain Issues and

developmentsdevelopments

JB Nagar CPE Study CircleWIRC, ICAI

CA Jayant Thakur8th 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

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

Auditors role General and comprehensiveRegistrationCompliance of Prudential Norms

and Deposits DirectionsContinuity of businessManner of reporting Miscellaneous

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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

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

◦Basic conditions SI ND Assets composition Public Funds Group

BenefitsObligations

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Mergers/takeovers of NBFCs Deposit AcceptingOthersProposed changes

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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

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Thorat Committee ReportChange of control/mergersReduction in deposit limits for

AFCsNo new deposit accepting NBFCsAll deposit accepting NBFCs to

get ratedMultiple NBFCsCaptive NBFCs

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Thorat Committee ReportCorporate governance

◦More powers for RBI ◦Clause 49

Mandatory disclosures

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

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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

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

debentures/compulsorily convertible debentures

Applicability - “as may be specified”

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

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Securities Laws Ordinance 2013 Arrangements/pooling with

corpus of more than Rs. 100 crores

NBFCs?

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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?

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THANK YOU!