New norms for core investment cos

The new guidelines were based on the recommendations of the Working Group to Review Regulatory and Supervisory Framework for CICs, headed by Tapan Ray, former secretary of the corporate affairs ministry. The report was published by RBI on November 6, 2019.

The Reserve Bank of India (RBI) on Thursday announced stricter guidelines for core investment companies (CICs), mandating more disclosures, better risk management and a simpler group structure.

CICs are non-bank lenders holding not less than 90% of their net assets as investments in equity shares, preference shares, bonds, debentures, debt or loans in group companies. (REUTERS)

The new guidelines were based on the recommendations of the Working Group to Review Regulatory and Supervisory Framework for CICs, headed by Tapan Ray, former secretary of the corporate affairs ministry. The report was published by RBI on November 6, 2019.

CICs are non-bank lenders holding not less than 90% of their net assets as investments in equity shares, preference shares, bonds, debentures, debt or loans in group companies. Experts have been seeking a review of CIC guidelines ever since defaults by Infrastructure Leasing and Financial Services Ltd, a large systemically important CIC.

RBI said the parent CIC in the group, or the CIC with the largest asset size, will have to form a group risk management committee (GRMC), which will report to the board of the CIC that constitutes it and must meet at least once in a quarter. It will comprise at least five members, with two independent directors. The GRMC will have to analyse material risks to which the group, its businesses and subsidiaries are exposed. Moreover, all CICs with assets of over ₹5,000 crore will have to appoint a chief risk officer with clearly specified roles and responsibilities.