What changed
RBI issued Master Circular DNBS (PD) CC No.341/03.10.001/2013-14 on July 1, 2013, consolidating all existing instructions on NBFC allied activities—insurance entry, credit card issuance, and mutual fund distribution—as of end-June 2013. This circular updates and replaces earlier notifications listed in its appendix.
What it means for you
NBFCs must follow consolidated norms for insurance JVs (max 50% equity, with group contributions counted together) and can do agency business without RBI approval if conditions are met. Core Investment Companies get separate, more flexible guidelines for insurance investment but cannot do agency business. NBFCs not eligible for JVs can invest up to 10% of owned fund or ₹50 crore (whichever lower) in an insurance company.
What you must do
- Review the master circular to ensure your NBFC's insurance, credit card, and mutual fund activities comply with consolidated instructions.
- For insurance JV participation, verify eligibility criteria and ensure equity contribution (including group entities) does not exceed 50% of the insurance company's paid-up capital.
- If your NBFC is a Core Investment Company, follow separate guidelines for insurance investment and note that agency business is prohibited.
- Submit applications for insurance entry with statutory auditor certification to the relevant RBI Regional Office.
- Check that any investment in an insurance company by an ineligible NBFC stays within the 10% of owned fund or ₹50 crore limit.
Who it affects
All registered NBFCs, Core Investment Companies (CICs), NBFCs planning insurance joint ventures or agency business, NBFCs issuing credit cards or distributing mutual funds
Can an NBFC hold more than 50% equity in an insurance joint venture?
Normally, maximum equity is 50% of the insurance company's paid-up capital. RBI may permit a higher initial stake on a selective basis, but the NBFC must divest the excess within a prescribed period.
Are Core Investment Companies allowed to do insurance agency business?
No, CICs cannot undertake insurance agency business. They have separate guidelines for investment in insurance joint ventures with no ceiling on equity, but must follow IRDA norms if exempted from RBI registration.
What is the investment limit for NBFCs not eligible for an insurance JV?
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.