DNBS. PD. No. 7902/ 03.05.002/2006- 07 May
21, 2007 To
all public deposit taking NBFCs Dear
Sir, Requirement
of minimum Net Owned Fund (NOF) of Rs. 200 lakh for all public deposit taking
NBFCs – under Section 45-IA of the Reserve Bank of India Act, 1934 As
you may be aware, prior to April 21, 1999, the minimum Net Owned Fund (NOF) requirement
for the new companies for grant of Certificate of Registration (CoR) to commence
business of Non-Banking Financial Institution was stipulated at Rs. 25 lakh. The
minimum NOF requirement was raised to Rs. 200 lakh with effect from April 21,
1999. In terms of Section 45-IC of the RBI Act, NBFCs are required to create a
reserve fund and transfer therein a sum not less than twenty per cent of its net
profit every year. It has been seven years since the revised minimum NOF requirement
was put in place. The requirement of creation of reserve fund and transfer therein
a sum not less than twenty per cent of its net profit every year, would have given
intrinsic strength to the balance sheets of the companies existing before April
21, 1999. The position regarding requirement of NOF for deposit taking NBFCs has
been reviewed by the Bank and a draft Circular in this regard
is enclosed herewith. 2.
NBFCs and other stakeholders are requested to forward their comments and feedback
on the proposed draft Circular by close of business on June 07, 2007 at the following
address: The
Chief General Manager-in-Charge
Department of Non-Banking Supervision
Reserve
Bank of India
Central Office, Centre 1, World Trade Centre
Cuffe Parade,
Colaba
Mumbai – 400 005
Fax : (022) 22150540 & 22162768 The
comments/feedback may also be e-mailed.
Yours
faithfully, (P.
Krishnamurthy)
Chief General Manager-in-Charge
Draft
Circular – For Comments DNBS.
PD.No. / / 2006- 07 May
21, 2007 To
all public deposit taking NBFCs Dear
Sir, Section
45-IA of the RBI Act – Grant of CoR – Requirement of minimum Net Owned Fund (NOF)
of Rs. 200 lakh for all public deposit taking NBFCs In
terms of Section 45-IA of the RBI Act, the NBFCs existing as on January 9, 1997
were required to obtain a Certificate of Registration (CoR) from Reserve Bank
of India (RBI). Eligible NBFCs not holding public deposits or those which have
been incorporated after January 9, 1997 have been granted the CoR in the category
of non-deposit taking NBFCs. As a part of the terms and conditions subject to
which the CoR was issued, it was also stipulated that any such NBFC would have
to obtain prior permission of RBI before commencing acceptance of public deposits
and that such request would be entertained only after two years of track record
of performance of the company. Further, in terms of Notification No. DNBS.132
/ CGM (VSNM) – 99 dated April 21, 1999, the minimum NOF requirement for the new
companies applying for grant of CoR to commence business of an NBFI was raised
to Rs.200 lakhs. 2. It
has been seven years since the revised minimum Net Owned Fund (NOF) requirement
was put in place. The requirement of transfer of minimum 20% of the published
profit to Reserve Fund in terms of requirement of Section 45-IC of the RBI Act,
1934 would have given intrinsic strength to the balance sheets of companies existing
before April 21, 1999. Since, such Reserve Fund is treated as ‘Free Reserve’ for
the purpose of calculation of NOF, it would facilitate the NBFCs existing before
on April 21, 1999 to comply with minimum NOF requirement of Rs 200 lakh, in case
enhanced NOF prescription is made applicable to existing NBFCs. 3. It
has now been decided to prescribe that:
no deposit taking NBFC will be permitted to accept deposit, if its NOF is less
than Rs. 200 lakh;
deposit taking NBFCs having NOF less than Rs 200 lakh would be given two years
time from the date of this circular to attain enhanced NOF limit;
a
deposit taking NBFC not able to attain the revised minimum NOF requirement even
after the transition period of two years will be automatically converted to non-deposit
taking category and shall be required to repay the deposits held by it to the
depositors within three years time i.e. within 5 years from the date of circular.Yours
faithfully, (P.
Krishnamurthy)
Chief General Manager In-Charge |