What changed
This Master Circular consolidates all prior instructions on NBFCs entering insurance, issuing credit cards, and marketing/distributing certain products into a single document as of June 30, 2011. It updates and replaces the individual notifications listed in the appendix, providing a unified reference for NBFCs.
What it means for you
NBFCs now have a single source for rules on insurance agency (fee-based, no risk, no RBI approval needed) and risk-participation JVs (max 50% equity, group contributions counted together). For non-eligible NBFCs, investment in insurance companies is capped at 10% of owned fund or ₹50 crore, whichever is lower. Prior RBI approval is mandatory for any risk-participation or investment-based entry.
What you must do
- Review the Master Circular to ensure your NBFC's insurance, credit card, and product distribution activities comply with consolidated instructions.
- For insurance agency on fee basis without risk, confirm conditions are met; no RBI approval needed.
- For JV or investment in insurance, prepare application with statutory auditor certification and submit to your regional RBI office.
- Ensure group equity contributions in an insurance JV do not exceed 50% combined limit.
- Verify that no NBFC departmentally conducts insurance business; use a subsidiary or JV structure only.
Who it affects
All Non-Banking Financial Companies (NBFCs) registered with RBI, NBFCs planning to enter insurance business as agents, JV partners, or investors, NBFCs issuing credit cards or marketing/distributing financial products
Can an NBFC act as an insurance agent without RBI approval?
Yes, if the NBFC takes up insurance agency business on a fee basis and without risk participation, and meets the conditions specified in the Master Circular, no prior RBI approval is needed.
What is the maximum equity an NBFC can hold in an insurance joint venture?
Normally, the NBFC's equity contribution in the insurance JV company cannot exceed 50% of the paid-up capital. If multiple group companies invest, their combined stake counts toward this limit.
What is the investment limit for NBFCs not eligible for a JV in insurance?
Such NBFCs can invest up to 10% of their owned fund or ₹50 crore, whichever is lower, in an insurance company, subject to eligibility criteria.