By way of a circular dated April 1, 2013,
the RBI has notified a separate regulatory framework for the entry of CICs into
the insurance business. Prior to this, CICs
were governed by the guidelines applicable to NBFCs under the circular
DNBS(PD).CC.No.13/02.01/99-2000, dated June 30, 2000 issued by the RBI.
As per this circular, only
such CICs registered with RBI, which satisfy the eligibility criteria
(as mentioned below), are permitted to set up a joint venture company
for undertaking insurance business with risk participation, subject to
certain safeguards. The eligibility criteria for joint venture
participant are as follows (as per the latest available audited balance sheet):
(a) The Owned Fund of the CIC shall not be less that INR 5,000,000,000;
(b) The level of net non performing
assets shall be not more that 1% of the total outstanding advances;
(c) The CIC should have registered net profit continuously for three (3) consecutive
years;
(d) The track record of performance of the subsidiaries, if any, of the
concerned CIC should be satisfactory;
(e)The CIC shall comply with all the applicable regulations (including provisions
of the the Master Circular on Regulatory
Framework for Core Investment Companies dated July 2, 2012, issued by
the RBI ('CIC
Master Circular')).
While no limit on the investment has been set by the said notification,
the maximum equity contribution that such a CIC can hold in the joint
venture company will be as per the Insurance Regulatory and Development
Authority approval.
Further,
NBFCs (in the group or outside the group) are not allowed to join an
insurance company on risk participation basis and hence are required
not to provide direct or indirect financial support to the insurance
venture. Within the group, CICs are permitted to invest up to 100% of
the equity of the insurance company (either on solo basis or in joint
venture with other non-financial entities in the group).
CICs are prohibited from entering into insurance business in
the capacity of “agents”. Further CICs cannot carry on insurance business departmentally.
As per this circular, all CICs
(registered with the RBI) entering into insurance business as investor
or on risk participation basis will be required to obtain prior
approval of the RBI.
CICs exempted from registration with the RBI (CICs other than
systemically important CICs, as per the CIC Master Circular)
are exempted from requirement of prior approval under the CIC Insurance
Notification, provided such CICs fulfill all the necessary conditions
of exemptions under the CIC Master Circular.
Labels: CIC, Insurance, Prudential Norms