Context:
RBI assessing Tata Sons’ plea for de-registration as NBFC.
RBI Regulations on NBFC
According to RBI regulations, the company must get listed on the exchanges within three years of such classification. The upper-layer NBFCs are subject to enhanced regulatory scrutiny for at least the first five years.
Why RBI Cancels the Registration Certificate of NBFC?
The RBI can cancel the registration certificate of a non-banking financial company if such a company ceases to conduct NBFC business in India or fails to abide by the conditions of its registration certificate.
- Besides, an NBFC can even deregister voluntarily if it satisfies certain conditions. Classification of NBFCs by RBI
- The RBI classifies NBFCs into four groups based on the size, type of activity, and risk of the NBFC.
- The upper layer consists of NBFCs that the RBI identifies as needing more intense regulatory supervision.
- The top ten NBFCs by asset size are always in the upper layer.
RBI’s de-Registration Process
- The RBI can cancel an NBFC’s registration certificate if it fails to comply with the conditions of its registration certificate.
- NBFCs that qualify under certain criteria can apply for voluntary deregistration.
Tata Sons’ Application for de-Registration
- Tata Sons applied for the cancellation of its core investment company (CIC) status on March 28, 2024.
- Core Investment Company (CIC)
- A Core Investment Company (CIC) is a type of non-banking financial company (NBFC) that invests in shares and securities of other companies in the same group. CICs are primarily focused on investment management, and do not engage in other financial activities like lending or asset financing.
- Core Investment Company (CIC)
- RBI said that Tata Sons would continue to be an upper-layer NBFC as it processes its application.
