The Reserve Bank of India (RBI) on August 13, 2020 has issued guidelines for Core Investment Companies (CIC). After the comments and suggestions received from the stakeholders, RBI has decided to revise these guidelines.
The following guidelines have been revised:
• The Adjusted Net Worth (ANW) represents direct or indirect capital contribution made by one CIC to another CIC. In case the ANW is more than 10% of the owned funds, the CIC shall be deducted.
• In case the ANW is more than 10% of the owned funds, the CIC might not be deducted till March 31, 2023.
• With the investment of one CIC to another CIC, the involvement has been restricted to two CIC’s forming a group structure. All the existing entities shall reorganise their group structure and adhere to these guidelines as of March 31, 2023.
• The Parent CIC (CIC investing the most amount) shall have a Group Risk Management Committee (GMRC). The GMRC shall meet atleast once in a quarter. Following is the constitution of the GMRC:
1. There shall be 5 members including executive members.
2. Out of them atleast 2 members shall be independent members, out of which one should be the Chairperson of the GMRC.
3. All the members shall have proper experience in the process of risk management.
Responsibilities of the GMRC:
1. Discuss the risk management strategies and look at material risks the group is exposed at.
2. Identify intra-group conflict of interests.
3. Assess the effectiveness of the risk management systems.
4. Assess the corporate governance system and manage it according to the risk management system.
5. Carry out proper formal review of the group and internal controls.
6. Monitor the leverage of the group and articulate them.
• CIC’s having asset value of more than Rupees 5000 crores shall appoint a Chief Executive Officer with the responsibilities properly stated.
• Proper corporate governance policies shall be put into place and shall be monitored from a time to time basis.
• All the consolidated financial statements shall be prepared by the CIC’s to provide a clear view of the financials of the Company.
• CIC’s having the asset size of less than Rupees 100 crores shall not be liable to register with a bank.
[RBI Circular No. DOR (NBFC) (PD) CC No.117/03.10.001/2020-21]
