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NBFC Master Directions

2016 - both integration and
disintegration
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On 1st September, 2016, the Reserve Bank of India(RBI) has issued
two new sets of master directions, namely Master Direction - NonBanking Financial Company - Non-Systemically Important NonDeposit taking Company (Reserve Bank) Directions, 2016and
Master Direction - Non-Banking Financial Company - Systemically
Important Non-Deposit taking Company and Deposit taking
Company (Reserve Bank) Directions, 2016(Collectively referred to
as Master Direction) for Non-Banking Financial Company (NBFCs)
wherein RBI has compiled all earlier scattered regulations namely
prudential norms, fair practice codes, registration requirements
etc., applicable to an NBFC, under one umbrella.
Few days earlier, RBI had come out with a similar direction for Core
Investment Company (CIC), namely the Master Direction - Core
Investment Companies (Reserve Bank) Directions, 2016)(CIC
Directions 2016) wherein it had consolidated all regulations
applicable to a CIC under one roof. With the new directions in
place, now one will not have to look beyond the CIC Directions
2016 to understand the provisions applicable to a CIC.
Likewise, with the Master Directions in place one will not have to
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Care one
No. 91-11navigate from
circular to another to understand the various

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Multiple NBFCs
Pursuant to Para 7.1 of the revised regulatory framework issued vide CC No. 002 dated
November 10, 2014the concept of multiple NBFCs was introduced wherein total assets of NBFCs
in a group including deposit taking NBFCs, if any, will be aggregated to determine if such
consolidation falls within the asset sizes of the two categories viz., NBFCs-ND (those with assets
of less than Rs. 500 crore) and NBFCs-ND-SI (those with assets of Rs. 500 crore and above). The
consequence of this consolidation was far-reaching. Where the total of the assets of all NBFCs in
the group would go beyond on Rs. 500 crores, prudential norms as applicable to an NBFC-ND-SI
would become applicable to all small NBFCs in the group as well. This meant that such small
NBFCs had to comply with the stringent norms of capital adequacy, credit concentration norms
etc. The introduction of this requirement was done with the purpose of curbing the malpractice
of various corporates, who would float various NBFCs carrying on the same business merely to
escape the rigid requirements laid down by RBI. The consolidation was faced with various
hurdles, of which one pertained to the inclusion of assets of CICs in the group. Following were
the views taken by the companies:
Aggregation of assets of NBFCs and all CICs (SIs and Non-SIs)
1. The rationale behind this approach is that CICs in their very foundation are nothing but
NBFCs, therefore they are to be included in the asset aggregation process.
Customer
Care No.
91-11- of NBFCs and only CIC-Sis
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Aggregation
of assets

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"Q 82. In terms of para 7.1 of the revised regulatory framework issued vide CC No. 002 dated
November 10, 2014, total assets of NBFCs in a group including deposit taking NBFCs, if any,
will be aggregated to determine if such consolidation falls within the asset sizes of the two
categories viz., NBFCs-ND (those with assets of less thanRs.500 crore) and NBFCs-ND-SI
(those with assets ofRs.500 crore and above). Regulations as applicable to the two categories
will be applicable to each of the NBFC-ND within the group. Will this aggregation of assets
apply to exempted category of CICs in the group?
Ans.No, the group requires to aggregate total assets of only those NBFCs which have been
granted Certificate of Registration by the Bank. However, it must be ensured that the capital of
the exempted category of CIC has not come, directly or indirectly, from an entity/ group
company which has accessed public funds."(Emphasis Supplied)
Therefore, companies only included the assets of CIC-SIs.
Aggregation of assets of only NBFCs in the group
3. The rationale behind this approach was that CICs, even though are NBFCs, but are governed
by different set of directions, therefore are not to be included in the asset aggregation process.

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