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NBFCs - Certain Issues and developments

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  1. NBFCs - Certain Issues and developments JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,

  2. Outline of law • Act • Various Directions, Circulars, etc. • Acceptance of deposits • Prudential Norms • Auditors • Others • Recent Reports/draft Guidelines • State Laws • Companies Act, 2012/SEBI Ordinance CA Jayant Thakur, 8th September 2013

  3. Position as on 31st March 2010 • Total NBFCs 12662 • Deposit taking NBFCs 311 • SI-ND taking NBFCs 295 • Other ND taking NBFCs – 12056 • Asset size of non-deposit accepting NBFCs grew from 250765 crores in 2006 to 566853 crores. CA Jayant Thakur, 8th September 2013

  4. Auditors role • General and comprehensive • Registration • Compliance of Prudential Norms and Deposits Directions • Continuity of business • Manner of reporting • Miscellaneous CA Jayant Thakur, 8th September 2013

  5. Important basic terms • Definition of NBFC • What constitutes NBFC • 50% criteria • Financial assets • Exempted companies • Net owned funds • Punishment for violation • Non-compoundable • Non-appealable CA Jayant Thakur, 8th September 2013

  6. Core Investment Companies (CICs) • Definition and concepts • Basic conditions • SI • ND • Assets composition • Public Funds • Group • Benefits • Obligations CA Jayant Thakur, 8th September 2013

  7. Mergers/takeovers of NBFCs • Deposit Accepting • Others • Proposed changes CA Jayant Thakur, 8th September 2013

  8. ThoratCommittee Report • Overview • Public funds concept • NBFCs < Rs. 50 crores assets • Principal business condition • NBFCs < Rs. 1000 crores assets • Principal business condition • Existing NBFCs? • De-registration • Re-registration/gestation period CA Jayant Thakur, 8th September 2013

  9. ThoratCommittee Report • Change of control/mergers • Reduction in deposit limits for AFCs • No new deposit accepting NBFCs • All deposit accepting NBFCs to get rated • Multiple NBFCs • Captive NBFCs CA Jayant Thakur, 8th September 2013

  10. ThoratCommittee Report • Corporate governance • More powers for RBI • Clause 49 • Mandatory disclosures CA Jayant Thakur, 8th September 2013

  11. Recent letters to “NBFCs” • Issues raised • Other NBFCs CA Jayant Thakur, 8th September 2013

  12. Debentures Private placement guidelines • NBFCs raised 3,18,800 crores in 2011-12 • ND-SI 2,95,000 crores • Recent controversies and abuses • Applies to private placements • NCDs • Time of completion - 6 months • Gaps between 2 placements • Names of subscribers CA Jayant Thakur, 8th September 2013

  13. Debentures Private placement guidelines • Maximum number of investors 49 • Minimum amounts/multiples • Only secured debentures/compulsorily convertible debentures • Applicability - “as may be specified” CA Jayant Thakur, 8th September 2013

  14. Companies Act, 2012 – some pointers • Frauds in deposit acceptance • Frauds generally • Class actions • Sahara/Saradha type of cases CA Jayant Thakur, 8th September 2013

  15. Securities Laws Ordinance 2013 • Arrangements/pooling with corpus of more than Rs. 100 crores • NBFCs? CA Jayant Thakur, 8th September 2013

  16. State Depositors’ Protection Laws • Which States? • Who are covered? • What is deposits? • When would there be violation? • What action can be taken? • Supreme Court – K. K. Baskaran, 4th April 2011 • Applicable to NBFCs? CA Jayant Thakur, 8th September 2013

  17. THANK YOU!

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