RBI Act 45-IAChapter III · Provisions Relating to Non-banking Institutions Receiving Deposits and Financial Institutions
Section 45-IA · Requirement of registration and net owned fund
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1[45-IA. Requirement of registration and net owned fund.-- ((1) Notwithstanding anything
contained in this Chapter or in any other law for the time being in force, no non-banking financial
company shall commence or carry on the business of a non-banking financial institution without--
(a) obtaining a certificate of registration issued under this Chapter; and
2[(b) having the net owned fund of twenty-five lakh rupees or such other amount, not exceeding hundred crore rupees, as the Bank may, by notification in the Official Gazette, specify:
Provided that the Bank may notify different amounts of net owned fund for different categories of non-banking financial companies.]
(2) Every non-banking financial company shall make an application for registration to the Bank in such form as the Bank may specify:
Provided that a non-banking financial company in existence on the commencement of the Reserve Bank of India (Amendment) Act, 1997 (23 of 1997) shall make an application for registration to the Bank before the expiry of six months from such commencement and notwithstanding anything contained in sub-section (1) may continue to carry on the business of a non-banking financial institution until a certificate of registration is issued to it or rejection of application for registration is communicated to it.
(3) Notwithstanding anything contained in sub-section (1), a non-banking financial company in existence on the commencement of the Reserve Bank of India (Amendment) Act, 1997 (23 of 1997) and having a net owned fund of less than twenty-five lakh rupees may, for the purpose of enabling such company to fulfil the requirement of the net owned fund, continue to carry on the business of a nonbanking financial institution--
(i) for a period of there years from such commencement; or
(ii) for such further period as the Bank may, after recording the reasons in writing for so doing, extend,
subject to the condition that such company shall, within three months of fulfilling the requirement of the net owned fund, inform the Bank about such fulfillment:
(4) The Bank, for the purpose of considering the application for registration, may require to be satisfied by an inspection of the books of the non-banking financial company or otherwise that the following conditions are fulfilled:--
(a) that the non-banking financial company is or shall be in a position to pay its present or future depositors in full as and when their claims accrue;
(b) that the affairs of the non-banking financial company are not being or are not likely to be conducted in a manner detrimental to the interest of its present or future depositors;
(c) that the general character of the management or the proposed management of the non-banking financial company shall not be prejudicial to the public interest or the interests of its depositors;
(d) that the non-banking financial company has adequate capital structure and earning prospects;
(e) that the public interest shall be served by the grant of certificate of registration to the nonbanking financial company to commence or to carry on the business of India;
(f) that the grant of certificate of registration shall not be prejudicial to the operation and consolidation of the financial sector consistent with monetary stability, and economic growth considering such other relevant factors which the Bank may, by notification in the Official Gazette, specify; and
(g) any other condition, fulfilment of which in the opinion of the Bank, shall be necessary to ensure that the commencement of or carrying on of the business in India by a non-banking financial company shall not be prejudicial to the public interest or in the interests of the depositors.
(5) The Bank may, after being satisfied that the conditions specified in subsection (4) are fulfilled, grant a certificate of registration subject to such conditions which it may consider fit to impose.
(6) The Bank cancel a certificate of registration granted to a non-banking financial company under this section if such company--
(i) ceases to carry on the business of a non-banking financial institution in India; or
(ii) has failed to comply with any condition subject to which the certificate of registration had been issued to it; or
(iii) at any time fails to fulfil any of the conditions referred to in clauses (d) to (g) of sub-section (4); or
(iv) fails--
(a) to comply with any direction issued by the Bank under the provisions of this Chapter; or
(b) to maintain accounts in accordance with the requirements of any law or any direction or order issued by the Bank under the provisions of this Chapter; or
(c) to submit or offer for inspection its books of account and other relevant documents when so demanded by an inspecting authority of the Bank; or
(v) has been prohibited from accepting deposit by an order made by the Bank under the provisions of this Chapter and such order has been in force for a period of not less than three months:
Provided that before cancelling a certificate of registration on the ground that the non-banking financial company has failed to company with the provisions of clause (ii) or has failed to fulfil any of the conditions referred to in clause (iii) the Bank, unless it is of the opinion that the delay in cancelling the certificate of registration shall be prejudicial to public interest or the interest of the depositors or the non-banking financial company, shall give an opportunity to such company on such term as the Bank may specify for taking necessary steps to comply with such provision or fulfilment of such condition:
Provided further that before making any order of cancellation of certificate of registration, such company shall be given a reasonable opportunity of being heard.
(7) A company aggrieved by the order of rejection of application for registration or cancellation of certificate of registration may prefer an Appeal, within a period of thirty days from the date on which such order of rejection or cancellation is communicated to it, to the Central Government and the decision of the Central Government where an appeal has been preferred to it, or of the Bank where no appeal has been preferred, shall be final:
Provided that before making any order of rejection of appeal, such company shall be given a reasonable opportunity of being heard.
Explanations.-- For the purposes of this section,--
(I) "net owned fund" means--
(a) the aggregate of the paid-up equity capital and free reserves as disclosed in the latest balance-sheet of the company after deducting there from--
(i) accumulated balance of loss;
(ii) deferred revenue expenditure; and
(iii) other intangible assets; and
(b) further reduced by the amounts representing--
(1) investments of such company in shares of
(i) its subsidiaries;
(ii) companies in the same group;
(iii) all other non-banking financial companies; and
(2) the book value of debentures, bonds, outstanding loans and advances (including hire-purchase and lease finance) made to, and deposits with,--
(i) subsidiaries of such company; and
(ii) companies in the same group,
to the extent such book value exceeds ten per cent. of (a) above.
(II) "subsidiaries" and "companies in the same group" shall have the same meanings assigned to them in the Companies Act, 1956, (1 of 1956).
(a) obtaining a certificate of registration issued under this Chapter; and
2[(b) having the net owned fund of twenty-five lakh rupees or such other amount, not exceeding hundred crore rupees, as the Bank may, by notification in the Official Gazette, specify:
Provided that the Bank may notify different amounts of net owned fund for different categories of non-banking financial companies.]
(2) Every non-banking financial company shall make an application for registration to the Bank in such form as the Bank may specify:
Provided that a non-banking financial company in existence on the commencement of the Reserve Bank of India (Amendment) Act, 1997 (23 of 1997) shall make an application for registration to the Bank before the expiry of six months from such commencement and notwithstanding anything contained in sub-section (1) may continue to carry on the business of a non-banking financial institution until a certificate of registration is issued to it or rejection of application for registration is communicated to it.
(3) Notwithstanding anything contained in sub-section (1), a non-banking financial company in existence on the commencement of the Reserve Bank of India (Amendment) Act, 1997 (23 of 1997) and having a net owned fund of less than twenty-five lakh rupees may, for the purpose of enabling such company to fulfil the requirement of the net owned fund, continue to carry on the business of a nonbanking financial institution--
(i) for a period of there years from such commencement; or
(ii) for such further period as the Bank may, after recording the reasons in writing for so doing, extend,
subject to the condition that such company shall, within three months of fulfilling the requirement of the net owned fund, inform the Bank about such fulfillment:
(4) The Bank, for the purpose of considering the application for registration, may require to be satisfied by an inspection of the books of the non-banking financial company or otherwise that the following conditions are fulfilled:--
(a) that the non-banking financial company is or shall be in a position to pay its present or future depositors in full as and when their claims accrue;
(b) that the affairs of the non-banking financial company are not being or are not likely to be conducted in a manner detrimental to the interest of its present or future depositors;
(c) that the general character of the management or the proposed management of the non-banking financial company shall not be prejudicial to the public interest or the interests of its depositors;
(d) that the non-banking financial company has adequate capital structure and earning prospects;
(e) that the public interest shall be served by the grant of certificate of registration to the nonbanking financial company to commence or to carry on the business of India;
(f) that the grant of certificate of registration shall not be prejudicial to the operation and consolidation of the financial sector consistent with monetary stability, and economic growth considering such other relevant factors which the Bank may, by notification in the Official Gazette, specify; and
(g) any other condition, fulfilment of which in the opinion of the Bank, shall be necessary to ensure that the commencement of or carrying on of the business in India by a non-banking financial company shall not be prejudicial to the public interest or in the interests of the depositors.
(5) The Bank may, after being satisfied that the conditions specified in subsection (4) are fulfilled, grant a certificate of registration subject to such conditions which it may consider fit to impose.
(6) The Bank cancel a certificate of registration granted to a non-banking financial company under this section if such company--
(i) ceases to carry on the business of a non-banking financial institution in India; or
(ii) has failed to comply with any condition subject to which the certificate of registration had been issued to it; or
(iii) at any time fails to fulfil any of the conditions referred to in clauses (d) to (g) of sub-section (4); or
(iv) fails--
(a) to comply with any direction issued by the Bank under the provisions of this Chapter; or
(b) to maintain accounts in accordance with the requirements of any law or any direction or order issued by the Bank under the provisions of this Chapter; or
(c) to submit or offer for inspection its books of account and other relevant documents when so demanded by an inspecting authority of the Bank; or
(v) has been prohibited from accepting deposit by an order made by the Bank under the provisions of this Chapter and such order has been in force for a period of not less than three months:
Provided that before cancelling a certificate of registration on the ground that the non-banking financial company has failed to company with the provisions of clause (ii) or has failed to fulfil any of the conditions referred to in clause (iii) the Bank, unless it is of the opinion that the delay in cancelling the certificate of registration shall be prejudicial to public interest or the interest of the depositors or the non-banking financial company, shall give an opportunity to such company on such term as the Bank may specify for taking necessary steps to comply with such provision or fulfilment of such condition:
Provided further that before making any order of cancellation of certificate of registration, such company shall be given a reasonable opportunity of being heard.
(7) A company aggrieved by the order of rejection of application for registration or cancellation of certificate of registration may prefer an Appeal, within a period of thirty days from the date on which such order of rejection or cancellation is communicated to it, to the Central Government and the decision of the Central Government where an appeal has been preferred to it, or of the Bank where no appeal has been preferred, shall be final:
Provided that before making any order of rejection of appeal, such company shall be given a reasonable opportunity of being heard.
Explanations.-- For the purposes of this section,--
(I) "net owned fund" means--
(a) the aggregate of the paid-up equity capital and free reserves as disclosed in the latest balance-sheet of the company after deducting there from--
(i) accumulated balance of loss;
(ii) deferred revenue expenditure; and
(iii) other intangible assets; and
(b) further reduced by the amounts representing--
(1) investments of such company in shares of
(i) its subsidiaries;
(ii) companies in the same group;
(iii) all other non-banking financial companies; and
(2) the book value of debentures, bonds, outstanding loans and advances (including hire-purchase and lease finance) made to, and deposits with,--
(i) subsidiaries of such company; and
(ii) companies in the same group,
to the extent such book value exceeds ten per cent. of (a) above.
(II) "subsidiaries" and "companies in the same group" shall have the same meanings assigned to them in the Companies Act, 1956, (1 of 1956).
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