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Core Investment Company

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What does Core Investment Company mean?

A Core Investment Company (CIC) is listed by the Reserve Bank of India (RBI) as a Non-Banking Financial Corporation (NBFC). Such companies invest primarily in stakeholding of stocks of their own collective firms, but they cannot participate in selling of these assets or conduct any other kind of financial activity.

What are the types of Investment Company?

No deposit can be accepted by any of the key investment companies. This is one of a core investment company's basic eligibility criteria. Of CIC's property category requirements are:-

  • Certified Core Investment Companies with capital of less than Rs. 100 crore valuations meet the NBFC Prudential Guidelines, 2015.
  • For those with assets over Rs. 100 core meets the standard set out in the NBFC Prudential Guidelines Systematically Essential, 2015.

Approval Requirements for Core Investment Company

Where Core Investment Companies (CICs) with an investment volume of Rs. 100 Crore or more shall be treated as a systemically relevant Core Investment Company (CIC-ND-SI) by RBI. It is required for all Core Investment Companies, according to section 45 IA of the RBI Act 1934, to obtain registration with the Reserve Bank of India and thus obtain a Registration certificate.

Exemptions from Registration:

  • Core Investment Company (CICs) with an asset size of less than Rs. 100 crore are excluded from registration in compliance with the Act–the cumulative asset size of the Core Investment Company is determined by adding the individual amounts of all CICs belonging to the company. The Core Investment Company will file if the maximum asset volume is Rs. 100 crore or more.
  • Core Investment Company (CICs) worth Rs. 100 crore or more are excluded from access to public funds.

Nevertheless, it is necessary to note here that Core Investment Company with asset sizes below Rs. 100 would be obliged to register with RBI if they are planning to invest in the financial sector overseas. They must also fulfill all the requirements and conditions applicable to the CIC-ND-SI registered. Nevertheless, if the individual Core Investment Company invests in the non-financial sector abroad, it does not require RBI registration.

According to the Act, all Core Investment Companies with an asset volume of less than Rs. 100 crore would be required to apply for a registration certificate within 3 months from the date of receipt of Rs. 100 crore in the balance sheet.

What is the common obligation for Core Investment Company?

According to the 2016 Guidelines of the Core Investment Companies (Reserve Bank), all Core Investment Companies will meet the following condition as per the last audited balance sheet:-

  • Core Investment Company shall hold at least 90% of its net assets in the form of stock, preferred stocks, notes, debentures, liabilities or loans to community businesses.
  • The remainder of 10 percent of Core Investment Companies net assets outside the group includes real estate or other forms of fixed assets that are important to the company's activity but cannot be financial investments or loans to non-group businesses.
  • It cannot sell its holdings in community businesses in stocks, bonds, debentures, securities or loans except through block transactions for the intention of diluting or disinvesting.
  • The company's contribution in community companies ' securities must be at least 60% of the net value of its capital.
  • No other financial activity may be carried out by the Core Investment Company other than:-
  • Corporation may provide assurances on behalf of group companies • may invest in bank deposits; money market mutual funds, liquid mutual funds and other money market instruments; government securities; group companies ' debt and debentures; and group companies loans.

A Core Investment Company requires an asset size of Rs. 100 crore and more, will collect or hold public funds and meet all of the above requirements.

It is necessary for such a corporation to be licensed with the Reserve Bank of India as functioning without receiving a certificate of approval from the central bank; they are found to be in breach of the Core Investment Companies (Reserve Bank) Guidelines, 2016.

What is the Core Investment Company approval system?

  • The Core Investment Company will have to access the registration application form from the RBI.
  • It must be completed and forwarded to the DNBS Regional Office (Department for Non-Banking Supervision) together with the supporting documents as stated in the form. The DNBS must be the one who declares the business under its control.
  • However, CICs exempt from registration must pass a Board Resolution that they will not be able to access public funds in the future.

What are the capital requirements of Core Investment Company?

  • The Core Investment Company Adjusted net worth (ANW) cannot be lower than 30% of risk-weighted assets (RWA).
  •  For circumstances where the total resource volume is determined, it is appropriate to record all Core Investment Companies within the category as separate Core Investment Company, the modified net amount being added separately.
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