Core Investement Company

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What is Core investment Company (CIC)?

A NBFC carrying on the business of acquisition of shares and securities which satisfies the following conditions:-
1)It holds not less than 90% of its total assets in the form of investment in equity shares, debt or loans in group companies.
2)Its investment in the equity shares ( including instruments compulsorily convertible into into equity shares within a period not exceeding 10 years from the date of issue) in group companies constitutes not less than 60% of its total assets.
3)It does not trade in its investment in shares, loans, or debt in group companies except through block sale for the purpose of delusion or disinvestment.
4)It does not carry on any other financial activity referred to in section 451(c) and 451(f) of the RBI Act, 1934 except investment in bank deposits, money market instruments, government securities, loans to and investment in debt issuances of group companies or guarantees issued on behalf of group companies.

Here RBI is regulated with the responsibility of regulating and supervising the Non Banking Financial Companies (NBFC) by virtue of power vested in the RBI Act, 1934. The regulatory and supervisory objective is to :-
-Ensure healthy growth of Financial Companies
-The quality of surveillance and supervision exercised by the banks over the NBFC is sustained by keeping pace with the developments.

Definition of Core investment Company

A systemically important core investment company is a Non banking Financial Companies:-

-Asset size of the company should be 100 Crores or more.
-Carrying on the business of acquisition of shares and securities and which satisfies the following conditions as on the date of the last audited Balance sheet.
-It holds not less than 90% of its net assets in the form of investment in equity shares, preference share, Bonds, Debentures, debt or loans in group companies.
-Its investment in the equity shares ( including instruments compulsorily convertible into into equity shares within a period not exceeding 10 years from the date of issue) in group companies constitutes not less than 60% of its net assets as mentioned in the clause.
-It does not trade in investment in shares, bonds, debentures, debt or loans in group companies except through block sale for the purpose of delusion or disinvestment.
-It accepts public funds.

FAQ

Common List Of Questioner That Our Customer Ask From Us -Solved !
Whether CICs having asset size below 100 crores are regulated by reserve Bank?
No, CICs which are having sie below than 100 crores are exempted form registration and regulation from RBI, except if they wish to make overseas investment in the financial sector.
Can CIC accept deposits?
No, CICs cannot accept deposits.
Is public Fund and Public Deposits are same?
Public Funds are not the same as Public Deposits. Public Funds includes Public Deposits, inter-corporate deposits, bank finance, and all funds received whether directly or indirectly from the outside sources. Such as funds issued by issue of commercial papers, debentures etc. however, even though Public Funds includes public deposits in the general course, it may be noted that CICs cannot accept public deposits.
In the definition of Public Funds what do indirect receipt of Public Funds Includes?
It means that funds not received directly but through associates, and group entities which have access to public funds.
Can CICs issue guarantees and will this be considered part of definition of Public Funds?
Yes, CIcs may be required to issue guarantees or take on another contingent liabilities on behalf of their group entities. Guarantees per se do not fall under the definition of public funds. However, it is possible that CICs which do not accept public funds take recourse to public funds if and when the guarantee devolves. hence , before doing so, CICs must ensure that they can meet the obligation there under, as and when they arise.

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