As per the extant instructions in relation to NBFCs participating in the insurance business issued on May 27, 2011, in case more than one company (irrespective of doing financial activity or not) in the same group of the NBFC wishes to take a stake in the insurance company, the contribution by all companies in the same group shall be counted for the limit of 50 per cent equity investment in the Insurance JV company.
In the operation of an insurance company, very often, the IRDA requires an insurance company to expand its capital taking into account the stipulations of the Insurance Act and the solvency requirements of the insurance company. The restriction of a group limit of the NBFC to 50% of the equity of the insurance JV company prescribed in the above mentioned circular may act as a constraint for the insurance company in meeting the requirement of IRDA.
Upon review, the RBI has decided that in cases where IRDA issues calls for capital infusion into the insurance JV company, the RBI may, on a case to case basis, consider need-based relaxation of the 50% group limit specified in the RBI circular dated May 27, 2011. The relaxation, if permitted, will be subject to compliance by the NBFC with all regulatory conditions specified in the relevant RBI circular dated February 10, 2004 and such other conditions as may be necessary in the specific case.