What changed
RBI issued a master circular updating all existing exemptions from Chapter III-B of the RBI Act, 1934, as of June 30, 2009. It consolidates previous notifications for housing finance institutions, merchant banking companies, micro finance companies, mutual benefit companies, Government companies, and venture capital fund companies. No new exemptions were introduced; the circular merely compiles existing instructions.
What it means for you
Banks and lenders dealing with NBFCs must verify that counterparties claiming exemptions meet the specific conditions, such as SEBI registration for merchant bankers or Section 25 licensing for microfinance companies. The circular does not alter regulatory obligations but provides a single reference point for compliance checks. Lenders should update their due diligence processes to reference this master circular.
What you must do
- Update internal compliance manuals to reference this master circular for NBFC exemption checks.
- Verify that housing finance institutions claiming exemption are registered with NHB under Section 2(d) of NHB Act, 1987.
- Ensure merchant banking counterparties are SEBI-registered and do not accept public deposits.
- Confirm micro finance companies are licensed under Section 25 of the Companies Act, 1956 and provide credit not exceeding ₹50,000 for a business enterprise and ₹1,25,000 for meeting the cost of a dwelling unit.
- Review mutual benefit company status to ensure they are not notified under Section 620A of the Companies Act, 1956 and meet additional conditions (net owned funds ≥ ₹10 lakh, applied for registration by 9 July 1997, etc.).
Who it affects
Housing finance institutions, Merchant banking companies, Micro finance companies, Mutual benefit companies, Government companies, Venture capital fund companies, NBFCs seeking exemptions, Banks and lenders dealing with exempted NBFCs
Which sections of the RBI Act are exempted for merchant banking companies?
Merchant banking companies are exempted from Sections 45-IA (registration and net owned fund), 45-IB (maintenance of liquid assets), and 45-IC (creation of reserve fund), provided they are SEBI-registered and do not accept public deposits.
What are the credit limits for micro finance companies to qualify for exemption?
Micro finance companies must provide credit not exceeding ₹50,000 for a business enterprise and ₹1,25,000 for meeting the cost of a dwelling unit to any poor person, and must be licensed under Section 25 of the Companies Act, 1956.
Does this master circular introduce new exemptions?
No, it consolidates and updates existing exemptions from notifications issued up to June 30, 2009. For operational purposes, refer to the original notifications listed in the annex.