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Core Investment Company


A core investment company is a limited company with equity & preference shares or debentures in some other company. These companies are created as group businesses to control the subsidiaries by holding a majority of the shares. These companies basically invest in shares of their own group companies for stake holding but cannot trade these instruments or carry out any other kind of financial activity. Reserve Bank of India (RBI) states that core investment companies must register as NBFCs. They cannot trade in shares and debentures. RBI asserts that the CICs which have a net asset of Rs. 100 crore or above shall be considered as systemically important (SI) companies.
Core investment companies are required to be registered with RBI under section 45 IA of the RBI Act 1934 and obtain a Certificate of Registration (CoR).

Categories of Core Investment Company


The basic eligibility criteria of a Core Investment company is that it can accept deposits. The asset classification norms for CICs are:

  • Registered CICs with assets worth less than Rs. 100 crore must follow the norms specified in the Non-Systematically Important NBFC Prudential Norms, 2015.
  • For CICs with assets increasing Rs. 100 core are to follow the norms as specified in Systematically Important NBFC (NBFC-ND-SI) Prudential Norms Directions, 2015. Here ND is short for Non Deposit taking entities.

Exemptions from Registration


  • CICs with an asset size of less than Rs. 100 crore are exempt from registration as CICs according to the RBI Act. The aggregate asset size is calculated by adding individual sizes of all the CICs belonging to a particular group. If the aggregate asset size is Rs. 100 crore or more the Core Investment Company has to register.
  • Cs with a minimum net worth of Rs. 100 crore but are not accessing public funds are exempted.
  • Those CICs with asset size below Rs. 100 would be required to register, mandatorily, with RBI if they are planning to make overseas investments in the financial sector. They also need to fulfil all the regulations applicable to registered CIC-ND-SI. However, if the investment is being done in the non-financial sector, then that Core Investment Company does not require to be registered with RBI.
  • As per the Act, the CIC with asset size less than Rs. 100 crore must apply for the CoR within 3-months from the date of achieving Rs. 100 crore in the balance sheet.

General Obligations for a Core Investment Company


According to the Core Investment Companies (Reserve Bank) Directions, 2016, the following provisions need to be fulfilled by all CICs, as per the last audited balance sheet:-

The CIC needs to hold at least 90% of its net assets in the form of investment in equity shares, preference shares, debentures, bonds, debt or loans in group companies. The remaining 10% can be held in investments outside the group. Such as real estate or other types of fixed assets, essential for running the company. But not to be financial investments or loans in non-group companies.


The CIC needs to hold at least 90% of its net assets in the form of investment in equity shares, preference shares, debentures, bonds, debt or loans in group companies. The remaining 10% can be held in investments outside the group. Such as real estate or other types of fixed assets, essential for running the company. But not to be financial investments or loans in non-group companies.


The investment of the CIC in the shares of the group companies must be minimum 60% of the net worth of its assets.


It is not allowed to carry out any other financial activity other than:

  • issue guarantees on behalf of group companies
  • invest in bank deposits, liquid mutual funds, money market mutual fund, and/or other money market instruments, government securities, bonds and debentures of group companies, and granting loans to group companies

For a CIC-ND-SI, it is mandatory to be registered with RBI. In case it does not have a CoR from RBI, it shall are viewed as in violation of the Core Investment Companies (Reserve Bank) Directions, 2016.


Registration Process of CIC-ND-SI


  • Download the application form for registration from the website of RBI.
  • Fill it and submit online. Along with the relevant documents for NBFC registration. A hard copy of the documents as submitted are to be sent to the Regional Office of DNBS (Department of Non-Banking Supervision). The DNBS office has to be the one under whose jurisdiction the company is registered

The CICs that are exempt from registration, however, need to pass a Board Resolution that they will not indulge in accessing public funds, in the future.

Capital Requirements for CIC-ND-SI


  • The adjusted net worth (ANW) of the CIC-ND-SI must be over 30% of the risk-weighted assets (RWA).
  • In situations where the aggregate asset size is calculated, it is required that all the CICs within the group are registered as individual CIC-ND-SI, the adjusted net worth being applied individually.

Documents Required


RBI states a comprehensive list of documents for a company to register itself as CIC. Only some of them can be listed here, as RBI may ask for other documents, as it considers necessary.

  • Details of access to Public Funds.
  • Application to be submitted in two separate sets properly in two separate files with properly enumerated pages.
  • Identification Details (Annex I).
  • Statement on prudential norms (Annex II).
  • Any change in the management of the company during the last financial year till date, its details, and reasons thereof.

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FAQ


    No. CICs/ CICs-ND-SI cannot accept deposits.

    A CIC-ND-SI is an NBFC (Non-Banking Financial Company)
    • with asset size of Rs 100 crore or more,
    • carrying on the business of acquiring shares & securities and satisfying the following conditions as on the date of the last audited balance sheet:
    o holds not less than 90% of its net assets in the form of investment in equity shares, preference shares, debentures, bonds, debt or loans in group companies.
    o investments in equity shares (includes instruments, compulsorily convertible into equity shares within maximum 10-years from the date of issue) in group companies constitutes not less than 60% of its net assets.
    o does not trade in its investments in shares, debentures, bonds, debt or loans in group companies except by block sale for dilution or disinvestment.
    o does not carry on any other financial activity referred to in Section 45I(c) and 45I(f) of the RBI act, 1934 except investing in bank deposits, government securities, money market instruments, loans to and investments in debt issuances of group entities or guarantees issued on account of group companies.
    o accepts public funds.

    They would have to apply afresh, as the application form is separate for CICs-ND-SI.

    These include real estate or other fixed assets which are essential for effective functioning of a company, but should not include other financial investments/loans in non-group companies.

    No. Only investments in registered companies would be regarded as investments in Group companies while calculating 90% investment in Group companies. Moreover, CICs are not to contribute capital to any partnership firm or to be partners in partnership firms including Limited Liability Partnerships (LLPs) or any such similar association.

    NOC from Department of Non-Banking Supervision (DNBS) for investing in the financial sector abroad. However, a registered CIC investing in the non-financial sector abroad doesn’t need RBI’s prior approval. Only that such investments must be reported within 30 days of such investment.

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