Tuesday, June 26, 2012

Et Cetera...

1. The RBI has issued a clarification regarding Core Investment Companies (CICs) issuing guarantees. As per the said clarification, before issuing guarantees or taking on other contingent liabilities for group entities, CICs must ensure that they can meet the obligations thereunder, as and when they arise. CICs which are exempt from registration requirements must be in a position to honour the obligation/s without recourse to public funds. If unregistered CICs with asset size above Rs. 100 crores access public funds without obtaining a certificate of registration from RBI, they will be seen as violating Core Investment Companies (Reserve Bank) Directions 2011 dated January 5, 2011.

2. As per a news article, the RBI has ruled out equal treatment for NBFCs and banks which are engaged in providing gold loans. It has declined to raise a cap of 60% of the value of ornaments that gold loan companies are allowed to lend to customers or bring commercial banks under the ambit of the ceiling, thus maintaining the edge of banks, which can lend more for the same pledged worth.

3. Per news reports, the Government of Karnataka is prosecuting NBFCs which are charging excessive interest on loans granted.

4. The Bombay High Court has admitted a petition filed by a NBFC, M/s. Alternative Investment and Credits Limited (AICL) against a RBI order canceling its certificate of registration. The single judge however left the maintainability issue open. As per news reports, AICL is 10 year old NBFC functioning as per the principles of Islamic finance, i.e. a non-interest bearing participatory finance model.

The call for contributors remains open. Comments/ suggestions/ criticism of all nature welcomed.

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