What is Core Investment Companies (CICs)?
The Reserve Bank of India (RBI) is delegated with the responsibility of regulating and supervising the Non-Banking Financial Companies (NBFCs) by virtue of powers vested in the RBI Act, 1934. The regulatory and supervisory objective is to:
- ensure healthy growth of the financial companies;
- The quality of surveillance and supervision exercised by the Bank over the NBFCs is sustained by keeping pace with the developments.
Over last some years, RBI has carved out some specialised NBFCs like Core Investment Companies (CICs), NBFC- Infrastructure Finance Companies (IFCs), Infrastructure Debt Fund- NBFCs, NBFC-MFIs and NBFC-Factors being the most recent one.
Here, the Banking team of jagran josh brought out the details about the CICs which are useful for IBPS PO or any other banking examinations.
Definition of Core Investment Companies
A Systemically Important Core Investment Companies (CICs-ND-SI) is a Non-Banking Financial Company (NBFC)
i. with asset size of Rs 100 crore and above
ii. carrying on the business of acquisition of shares and securities and which satisfies the following conditions as on the date of the last audited balance sheet :-
iii. it holds not less than 90% of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies;
iv. its investments in the equity shares (including instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue) in group companies constitutes not less than 60% of its net assets as mentioned in clause
v. it does not trade in its investments in shares, bonds, debentures, debt or loans in group companies except through block sale for the purpose of dilution or disinvestment;
vi. it accepts public funds
Whether CICs having asset size below Rs. 100 crore are regulated by the Reserve Bank?
CICs having asset size of below Rs 100 crore are exempted from registration and regulation from the RBI, except if they wish to make overseas investments in the financial sector.
Can CICs/CICs-ND-SI accept deposits?
No, CICs/ CICs-ND-SI cannot accept deposits. That is one of the eligibility criteria.
What do the term public funds include? Is it the same as public deposits?
Public funds are not the same as public deposits. Public funds include public deposits, inter-corporate deposits, bank finance and all funds received whether directly or indirectly from outside sources such as funds raised by issue of Commercial Papers, debentures etc. However, even though public funds include public deposits in the general course, it may be noted that CICs/CICs-ND-SI cannot accept public deposits.
In the definition of public funds, what do the term “indirect receipt of public funds” mean?
Indirect receipt of public funds means funds received not directly but through associates and group entities which have access to public funds.
Can CICs issue guarantees and will this be considered part of definition of public funds?
Yes, CICs may be required to issue guarantees or take on other contingent liabilities on behalf of their group entities. Guarantees per se do not fall under the definition of public funds. However, it is possible that CICs which do not accept public funds take recourse to public funds if and when the guarantee devolves. Hence, before doing so, CICs must ensure that they can meet the obligation there under, as and when they arise.