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A company has invested its entire funds of Rs. 1.5 Crores in the shares of its Group Companies. The company is not doing any other activity than holding these shares and these investments are made in the year 2003. Do the company is required to be registered with the RBI as NBFC. Is there is any kind of default had been incurred by this company and if so, what is the recourse available.
Regards
Hitesh Joshi
9899773378
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Dear Mr Joshi,
Your company is a "financial institution" within the meaning of Section 45-I(c) of RBI Act and needs registration as NBFC u/s 45-IA. Minimum net owned funds required for NBFC is Rs.2 crores.
You have therefore to make application to RBI for registration. If you do not want to remain as NBFC you will have to start some other business also in the company so that income from financial assets is less than 50% of its income. RBI press release dated 8.4.1999 in this regrd is attached.
Regards,

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File Type: doc Press release 8.4.1999.doc (21.5 KB, 504 views)

A company has invested its entire funds of Rs. 3.00 Crores in acquiring shares of its Group Companies and making advances/loan without interest to group companies. The company is not doing any other activity than holding these shares and loans/advances and these investments are made in the year 2007. There is no dividend and /or interest income from the above acvities. Do the company is required to be registered with the RBI as NBFC. Is there is any kind of default had been incurred by this company and if so, what is the recourse available.
The situation mentioned by you is still a grey area. If we strictly go by the provisions of RBI Act and the volume of investments/loans made by the company it appears that in this case registration as an NBFC is necessary. One could take the stand that as per RBI press release dated 8.4.1999 cited above, company does not have any income at all and hence registration is not required. However, how far this stand will be valid is still not known. Further, if there is some little income from interest/dividend in any year, the company will carry risk of non-registration. Hence I feel it would be better to get the company registered as NBFC.
Regards,
PC Agrawal
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