What changed
RBI added a new para (4) to Part II of the CIC Directions, 2011. It mandates that every CIC exempt from registration must pass a board resolution stating it will not access public funds in the future. The circular also clarifies that unregistered CICs with assets above Rs.100 crore accessing public funds without registration violate the Directions.
What it means for you
CICs that are systemically important (assets >= Rs.100 crore and holding public funds) must register with RBI. Exempt CICs can still issue guarantees for group entities but must ensure they can meet liabilities without public funds. Failure to comply could lead to regulatory action for violating the CIC Directions.
What you must do
- Ensure your CIC's asset size is assessed individually and group-wise to determine registration requirement.
- If exempt, pass a board resolution explicitly stating no future access to public funds.
- Before issuing guarantees for group entities, verify that obligations can be met without recourse to public funds.
- If asset size exceeds Rs.100 crore and public funds are accessed, apply for Certificate of Registration immediately.
Who it affects
All Core Investment Companies (CICs), Systemically Important CICs (CIC-ND-SI), CICs exempt from registration, Group entities of CICs
What qualifies as 'public funds' under this circular?
Public funds include funds raised via public deposits, commercial papers, debentures, inter-corporate deposits, and bank finance. Excluded are instruments compulsorily convertible into equity within 10 years.
Can an unregistered CIC with assets above Rs.100 crore issue guarantees?
Yes, but only if it can meet the guarantee obligation without accessing public funds. If it needs public funds, it must first obtain a Certificate of Registration from RBI.
What happens if an exempt CIC accesses public funds without registration?
It will be considered in violation of the Core Investment Companies (Reserve Bank) Directions, 2011, and may face regulatory action.