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Section 45IA - Requirement of registration and net owned fund : RBI Act 1934

 

 

What is the Requirement of registration and net owned fund? Section 45IA of Reserve Bank of India Act 1934

Section 45-IA of RBI Act 1934 : "Requirement of registration and net owned fund"

(1) Notwithstanding anything contained in this Chapter or in any other law for the time being in force, no non-banking financial company shall commence or carry on the business of a non-banking financial institution without-

(a) obtaining a certificate of registration issued under this Chapter; and

(b) having the net owned fund of twenty-five lakh rupees or such other amount, not exceeding two hundred lakh rupees, as the Bank may, by notification in the Official Gazette, specify.

(2) Every non-banking financial company shall make an application for registration to the Bank in such form as the Bank may specify :

Provided that a non-banking financial company in existence on the commencement of the Reserve Bank of India (Amendment) Act, 1997 (23 of 1997) shall make an application for registration to the bank before the expiry of six months from such commencement and notwithstanding anything contained in sub-section (1) may continue to carry on the business of a non-banking financial institution until a certificate of registration is issued to it or rejection of application for registration is communicated to it.

(3) Notwithstanding anything contained in sub-section (1), a non-banking financial company in existence on the commencement of the Reserve Bank of India (Amendment) Act, 1997 and having a net owned fund of less than twenty-five lakh rupees may, for the purpose of enabling such company to fulfil the requirement of the net owned fund, continue to carry on the business of a non-banking financial institution-

(i) for a period of three years from such commencement; or

(ii) for such further period as the bank may, after recording the reasons in writing for so doing, extend, subject to the condition that such company shall, within three months of fulfilling the requirement of the net owned fund, inform the Bank about such fulfillment :

Provided that the period allowed to continue business under this sub-section shall in no case exceed six years in the aggregate.

(4) The Bank may, for the purpose of considering the application for registration, require to be satisfied by an inspection of the books of the non-banking financial company or otherwise that the following conditions are fulfilled :-

(a) that the non-banking financial company is or shall be in a position to pay its present or future depositors in full as and when their claims accrue;

(b) that the affairs of the non-banking financial company are not being or are not likely to be conducted in a manner detrimental to the interest of its present or future depositors ;

(c) that the general character of the management or the proposed management of the non-banking financial company shall not be prejudicial to the public interest or the interest of its depositors ;

(d) that the non-banking financial company has adequate capital structure and earning prospects ;

(e) that the public interest shall be served by the grant of certificate of registration to the non-banking financial company to commence or to carry on the business in India ;

(f) that the grant of certificate of registration shall not be prejudicial to the operation and consolidation of the financial sector consistent with monetary stability, economic growth and considering such other relevant factors which the Bank may, by notification in the Official Gazette, specify ; and

(g) any other condition, fulfillment of which in the opinion of the Bank, shall be necessary to ensure that the commencement of or carrying on of the business in India by a non-banking financial company shall not be prejudicial to the public interest or in the interest of the depositors.

(5) The Bank may, after being satisfied that the conditions specified in sub-section (4) are fulfilled, grant a certificate of registration subject to such conditions which it may consider fit to impose.

(6) The Bank may cancel a certificate of registration granted to a non-banking financial company under this section if such company-

(i) ceases to carry on the business of a non-banking financial institution in India ; or

(ii) has failed to comply with any condition subject to which the certificate of registration had been issued to it; or

(iii) at any time fails to fulfill any of the conditions referred to in clauses (a) to (g) of sub-section (4); or

(iv) fails-

(a) to comply with any direction issued by the Bank under the provisions of this Chapter ; or

(b) to maintain accounts in accordance with the requirements of any law or any direction or order issued by the Bank under the provisions of this Chapter; or

(c) to submit or offer for inspection its books of account and other relevant documents when so demanded by an inspecting authority of the Bank; or

(v) has been prohibited from accepting deposit by an order made by the Bank under the provisions of this Chapter and such order has been in force for a period of not less than three months :

Provided that before cancelling a certificate of registration on the ground that the non-banking financial company has failed to comply with the provisions of clause (ii) or has failed to fulfill any of the conditions referred to in clause (iii) the Bank, unless it is of the opinion that the delay in cancelling the certificate of registration shall be prejudicial to public interest or the interest of the depositors or the non-banking financial company, shall give an opportunity to such company on such terms as the Bank may specify for taking necessary steps to comply with such provision or fulfillment of such condition :

Provided further that before making any order of cancellation of certificate of registration, such company shall be given a reasonable opportunity of being heard.

(7) A company aggrieved by the order of rejection of application for registration or cancellation of certificate of registration may prefer an appeal, within a period of thirty days from the date on which such order of rejection or cancellation is communicated to it, to the Central Government and the decision of the Central Government where an appeal has been preferred to it, or of the Bank where no appeal has been preferred, shall be final :

Provided that before making any order of rejection of appeal, such company shall be given a reasonable opportunity of being heard.

 

Explanation.-For the purposes of this section,-

(I) "net owned fund" means-

(a) the aggregate of the paid-up equity capital and free reserves as disclosed in the latest balance sheet of the company after deducting therefrom-

(i) accumulated balance of loss;

(ii) deferred revenue expenditure; and

(iii) other intangible assets ; and

(b) further reduced by the amounts representing-

(1) investments of such company in shares of-

(i) its subsidiaries;

(ii) companies in the same group ;

(iii) all other non-banking financial companies ; and

(2) the book value of debentures, bonds, outstanding loans and advances

(including hire-purchase and lease finance) made to, and deposits with,-

(i) subsidiaries of such company ; and

(ii) companies in the same group,

to the extent such amount exceeds ten per cent of (a) above.

(II) "subsidiaries" and "companies in the same group" shall have the same meanings assigned to them in the Companies Act, 1956 (1 of 1956)

 

RBI ACT 1934

Section 42 - Cash reserves of scheduled banks to be kept with the Bank

Section 43 - Publication of consolidated statement by the Bank

Section 43A - Protection of action taken in good faith

Section 45 - Appointment of agents

CHAPTER IIIA
COLLECTION AND FURNISHING OF CREDIT INFORMATION

Section 45A - Definitions

 

 

Section 45B - Power of Bank to collect credit information

Section 45C - Power to call for returns containing credit information

Section 45D - Procedure for furnishing credit information to banking companies

Section 45E - Disclosure of information prohibited

Section 45F - Certain claims for compensation barred

Section 45H Chapter IIIB not to apply in certain cases

 

 

Section 45I - Definitions

Section 45IA - Requirement of registration and net owned fund

Section 45 IB - Maintenance of percentage of assets

Section 45 IC - Reserve fund

Section 45 J - Bank to regulate or prohibit issue of prospectus or advertisement soliciting deposits of money

 

 

Section 45 JA - Power of Bank to determine policy and issue directions

Section 45 K - Power of Bank to collect information from non-banking institutions as to deposits and to give directions

Section 45 L - Power of Bank to call for information from financial institutions and to give directions

Section 45 M - Duty of non-banking institutions to furnish statements, etc., required by Bank

Section 45 MA - Powers and duties of auditors

Section 45 MB - Power of bank to prohibit acceptance of deposit and alienation of assets

Section 45 MC - Power of Bank to file winding up petition

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