Regulatory Atlas for Microfinance Institutions

RBI Norms for NBFC-MFIs

Prudential Norms

Directions

Sub-Committee of the Central Board of the Reserve Bank (Chairman: Shri Y. H. Malegam) was constituted to study issues and concerns in the MFI sector. The Committee submitted its report in January 2011. In the Monetary Policy Statement 2011-12, it was announced that the broad framework of regulations recommended by the Committee has been accepted by the Bank. It had decided to create a separate category of NBFCs viz; Non-Banking Financial Company-Micro Finance Institution (NBFC-MFI). The Master circular provides the guidelines for NBFC-MFIs.

Circular Type Circular Issue Date
Master Circular Click here to view circular 1-Jul-14

Revised Regulatory Framework for NBFCs

The RBI has published the revised regulatory framework for NBFCs based on the Usha Thorat Committee Report.

Circular Type Circular Issue Date
Notification Click here to view notification 10-Nov-14

Applicable Average Base Rate

Applicable Average Base Rate for the Quarter beginning July 01, 2014

The applicable average base rate for NBFC-MFIs to arrive at the interest rate they can charge their borrowers for the quarter beginning July 01, 2014 is 10.09%.

Circular Type Circular Issue Date
Notification Click here to view notification 30-Jun-14

Malegam Committee Report

Report of the Malegam Committee

The Board of Directors of the Reserve Bank of India, at its meeting held on October 15, 2010 formed a Sub-Committee of the Board to study issues and concerns in the microfinance sector. The link provides details of recommendations made by the Sub-Committee.

Circular Type Circular Issue Date
Committee Report Click here to view notification Jan-11

RBI Norms for NBFCs

Corporate Governance

Prudential Norms for NBFCs – ND

The Reserve Bank of India has consolidated all the instructions issued as at end of June 30, 2014 on Prudential Norms such as – Income Recognition, Asset Classification, Provisioning Requirements, etc.

Circular Type Circular Issue Date
Master Circular Click here to view circular 01-Jul-14

Reporting

Data Format for Furnishing of Credit Information to Credit Information Companies and other Regulatory Measures

A Committee to Recommend Data Format for Furnishing of Credit Information to Credit Information Companies (Chairman: Shri Aditya Puri) was constituted by the Reserve Bank of India (RBI). Based on the recommendations of the Committee and the comments/suggestions received, it has been decided to implement the following recommendations with modifications.

Circular Type Circular Issue Date
Notification Click here to view notification 20-Aug-14

Returns to be submitted by NBFCs- Introduction of ‘Branch info’ return

The RBI has provided has provided instructions to NBFCs are that they are required to file various periodical returns. With a view to capturing the reach and geographical spread of NBFCs, it is considered necessary to create a comprehensive database of branches of NBFCs and update the same on an on-going basis.

Circular Type Circular Issue Date
Notification Click here to view notification 01-Jul-14

Fraud Reporting

The Reserve Bank of India has consolidated all the instructions, on Fraud Monitoring, issued as at end of June 30, 2014 on various topics such as – Reporting of frauds to RBI, Quarterly Reports on Outstanding fraud, and Reporting to the Board on Frauds, etc.

Circular Type Circular Issue Date
Master Circular Click here to view circular 01-Jul-14

Money Transfer Service Scheme

Appointment of sub- agents under Money Transfer Service Schemes (MTSS)

In order to broaden the network of sub-agents under the Money Transfer Service Schemes (MTSS), it has been decided to permit Non-Deposit Accepting NBFCs with asset size of Rs. 100 crore and above to act as sub-agents under MTSS subject to the conditions in the circular.

Circular Type Circular Issue Date
Notification Click here to view notification 12-Aug-14

Investments

Interest Rate Futures

All non-deposit taking NBFCs with asset size of Rs. 1000 crore and above may also participate in the interest rate futures market permitted on recognized stock exchanges as trading members, subject to RBI/ SEBI guidelines.

Circular Type Circular Issue Date
Notification Click here to view notification 12-Aug-14

Investment through Alternative Investment Funds

It is clarified that while arriving at the NOF figure, investment made by an NBFC in entities of the same group concerns shall be treated alike, whether the investment is made directly or through an AIF / VCF, and when the funds in the VCF have come from the NBFC to the extent of 50% or more; or where the beneficial owner, in the case of Trusts is the NBFC, if 50% of the funds in the Trusts are from the concerned NBFC.

Circular Type Circular Issue Date
Notification Click here to view notification 07-Apr-14

Fair Practices Code

Fair Practices Code

The Reserve Bank of India has consolidated all the instructions issued on Fair Practice Code as at end of June 30, 2014 in the Master Circular. It has issued guidelines on various topics such as – Responsibility of the Board of Directors, Grievance Redressal Officer, Language and mode of communication, Disclosures in the Loan Agreement, non-coercive methods of recovery, etc.

Circular Type Circular Issue Date
Master Circular Click here to view circular 01-Jul-14

Corporate Governance

Corporate Governance

The Reserve Bank of India has consolidated all the instructions, on Corporate Governance, issued as at end of June 30, 2014. This includes guidelines on constitution of various committees such as Audit Committee, Nomination Committee, and Risk Management Committee.

Circular Type Circular Issue Date
Master Circular Click here to view circular 01-Jul-14

Acquisition / transfer of control

Acquisition / transfer of control

The Reserve Bank of India decided that prior written permission of the Reserve Bank of India shall be required for – (i) any takeover or acquisition of control of an NBFC, whether by acquisition of shares or otherwise; (ii) any merger/amalgamation of an NBFC with another entity or any merger/amalgamation of an entity with an NBFC that would give the acquirer / another entity control of the NBFC.

Circular Type Circular Issue Date
Notification Click here to view notification 01-Jul-14
Notification Click here to view notification 17-Sep-09

Miscellaneous Instructions

Miscellaneous Instructions

The Reserve Bank of India has consolidated all the instructions, which do not find a place in other master circulars have been compiled, issued as at end of June 30, 2014 on various topics such as – Change in Management and Mergers / Amalgamation, Monitoring Framework for non-deposit taking NBFCs, Capital Adequacy norms, ALM reporting, etc.

Circular Type Circular Issue Date
Master Circular Click here to view circular 01-Jul-14
Master Circular Click here to view circular 01-Jul-14

Rounding off transactions

NBFCs are advised that all transactions, including payment of interest on deposits/ charging of interest on advances, should be rounded off to the nearest rupee, i.e. fractions of 50 paise and above shall be rounded off to the next higher rupee and fractions of less than 50 paise should be ignored.

Circular Type Circular Issue Date
Notification Click here to view notification 27-May-14

Exemptions from the provisions of RBI Act, 1934

Exemptions from the provisions of RBI Act, 1934

The Bank has issued notifications from time to time exempting some entities from the requirements of Chapter III B of the RBI Act, 1934 or part thereof

Circular Type Circular Issue Date
Master Circular Click here to view circular 01-Jul-14

Allied activities

Entry into insurance business, issue of credit card and marketing and distribution of certain products

The Bank has issued instructions on various allied activities carried out by NBFCs as updated till June 30, 2014 have been compiled in the circular.

Circular Type Circular Issue Date
Master Circular Click here to view circular 07-Apr-14

Documentation of NBFC Registration

Documentation of NBFC Registration

The Reserve Bank of India has simplified the documentation for Non-Banking Financial Companies (NBFCs). Now, there will be a common application form for NBFCs, Non-Banking Financial Company-Micro Finance Institutions (NBFC-MFIs), NBFC-Factors and Infrastructure Debt Fund – Non-Banking Financial Companies (IDF-NBFCs).

Circular Type Circular Issue Date
Notification Click here to view notification 20-May-14

Guidelines on Securitisation Transactions

Guidelines on Securitisation Transactions – Reset of Credit Enhancement

Guidelines on reset of credit enhancement has been since issued to banks by the Bank vide circular (reference in table below) dated July 1, 2013. The guidelines cover in detail the manner in which such reset could be carried out subject to the conditions prescribed therein. It has been decided to extend the applicability of these instructions to securitization transactions undertaken by NBFCs as well.

Circular Type Circular Issue Date
Notification http://rbidocs.rbi.org.in/rdocs/notification/PDFs/RCE01072013.pdf 01-Jul-13
Notification http://rbidocs.rbi.org.in/rdocs/Notification/PDFs/CC372NO250314REN.pdf 24-Mar-14

Revisions on Guidelines for Securitisation

The revised guidelines are organised in three Sections. Section A contains the provisions relating to securitisation of assets. Section B contains stipulations regarding transfer of standard assets through direct assignment of cash flows. Section C enumerates the securitisation transactions which are currently not permissible in India.

Circular Type Circular Issue Date
Notification (Revisions) http://rbidocs.rbi.org.in/rdocs/notification/PDFs/C170RG21082012.pdf 21-Aug-12
Notification http://rbidocs.rbi.org.in/rdocs/notification/PDFs/68628.pdf 01-Feb-06

Fund Raising

Fund Raising – Debentures

The Reserve Bank for private placements has put in place a minimum set of guidelines for compliance by all NBFCs. In addition, certain clarifications are also made with regard to security cover for any debenture issue and the treatment of unsecured debentures as public deposits.

In order to facilitate the process of moving into a more robust ALM in a non-disruptive manner, it has been decided that the instruction with regard to minimum gap between two successive issuances of privately placed NCDs may not be operationalized immediately.

Circular Type Circular Issue Date
Notification (Revision) Click here to view notification 02-Jul-13
Notification Click here to view notification 27-Jun-13

Business Correspondents

Use of Business Correspondents

Taking into account the recommendations of the Dr. Mor Committee, the existing guidelines on appointment of Business Correspondents (BCs) have been reviewed and it has been decided by the RBI that banks will be permitted to engage in ND-NBFCs as BCs, subject to meeting conditions in the circular.

Circular Type Circular Issue Date
Notification Click here to view notification 30-Jun-14

RBI Norms for Banks

Bank Finance to NBFCs

Bank Finance to NBFCs

This Master Circular lays down the Reserve Bank of India’s regulatory policy regarding financing of NBFCs by banks.

Circular Type Circular Issue Date
Master Circular Click here to view circular 01-Jul-14

Priority Sector Lending

Targets and Classification-Bank loans to MFIs for on-lending-pricing criteria

The description of the priority sectors was later formalised in 1972 on the basis of the report submitted by the Informal Study Group on Statistics relating to advances to the Priority Sectors constituted by the Reserve Bank in May 1971. The guidelines were revised multiple times over the years till recently in 2011 when a committee was set up to re-examine the existing classification and suggest revised guidelines with regard to Priority Sector lending classification and related issues (Chairman: M V Nair). The recommendations of the Committee were examined based on the interface with various stakeholders; and revised guidelines were issued on July 20, 2012.

The guidelines were revised again during March 2014 to fall in line with the recent modifications on MFI Credit Pricing regulation.

Circular Type Circular Issue Date
Master Circular Click here to view circular 01-Jul-14

Reporting

Reporting of Credit Information to Credit Information Companies

A Committee to Recommend Data Format for Furnishing of Credit Information to Credit Information Companies (Chairman: Shri Aditya Puri) was constituted by the Reserve Bank of India (RBI). Based on the recommendations of the Committee and the comments/suggestions received, it has been decided to implement the following recommendations with modifications.

Circular Type Circular Issue Date
Master Circular Click here to view circular 01-Jul-14

For Insurance Companies

Insurance Handbooks

Insurance Handbooks

The Insurance Regulatory and Development Authority (IRDA) has published handbooks on several insurance products including Life, Health, Motor etc.

Circular Type Circular Issue Date
Life Insurance Handbook Click here to view handbook
Health Insurance Handbook Click here to view handbook
Motor Insurance Handbook Click here to view handbook
Property Insurance Handbook Click here to view handbook
Travel Insurance Handbook Click here to view handbook

Alternate Investment Funds

Investment in Alternate Investment Funds

The Insurance Regulatory and Development Authority (IRDA) issued guidelines allowing Insurance Companies to invest in Category I and II Alternative Investment Funds (AIFs).

Investment in the AIFs along with existing investments shall subject to following revised exposure limits.

Type of Insurer
(a)
Overall Exposure to Venture Funds and AIFs together
(b)
Exposure to single AIF/ Venture Fund
(c)
Life Insurance Companies 3% of respective Fund 10% of AIF/ Venture Fund or 20% of overall Exposure as per (b), which ever lower
General Insurance Companies 5% of Investment Assets 10% of AIF/ Venture Fund or 20% of overall Exposure as per (b), which ever lower
Circular Type Circular Issue Date
Notification Click here to view notification 23-Aug-13

Insurance Product for Rural & Social Sector

Exposure draft on Standard Insurance Product for Rural & Social Sector

The Authority imposed rural and social sector obligations to be undertaken by each insurer. Further, the IRDA came out with a set of Micro Insurance Regulation in 2005, which allowed tie-up between life and general insurance companies.

Further to the exposure draft on Micro Insurance (Modification) Regulations that was issued on 26th July, 2012 seeking the views from various stakeholders, the Authority on considering the feedback received, proposes to issue IRDA (Micro Insurance) (Modification) Regulations, 2014.

Circular Type Circular Issue Date
Modification Click here to view notification 31-Jan-14
Exposure Draft Click here to view exposure draft 21-Sep-12

Micro-insurance

Micro-Insurance

In order to ensure that an encouraging regulatory environment is created for promoting the Micro Insurance Business, it has been decided to revisit certain regulatory provisions of Micro Insurance Regulations with the proposals suggested in the exposure draft.

Circular Type Circular Issue Date
Exposure Draft Click here to view exposure draft 26-Jul-12
Master Circular Click here to view cirular 24-Jan-05

Micro-insurance Agents

Micro-Insurance Agents

In addition to the Micro-Insurance Agents defined in IRDA (Micro-Insurance) Regulations 2005, in order to supplement overall Financial Inclusion, additional entities and individuals were permitted and appointed as Micro-Insurance Agents.

Circular Type Circular Issue Date
Notification Click here to view notification 03-Apr-13

Foreign Investments

Issue/Transfer of Shares or Convertible Debentures

Foreign Direct Investment (FDI) in India – Issue/Transfer of Shares or Convertible Debentures – Revised pricing guidelines

  1. In case of listed companies – The pricing guidelines for FDI instruments with optionality clauses shall continue to be in accordance with A.P. (DIR Series) Circular No. 86 dated January 9, 2014.
  2. In case of unlisted companies – The guiding principle will be that the non-resident investor is not guaranteed any assured exit price at the time of making such investment/agreement and shall exit at a fair price computed as above at the time of exit subject to lock-in period requirement as applicable in terms of A.P. (DIR Series) Circular No. 86 dated January 9, 2014.
  3. Circular Type Circular Issue Date
    Notification Click here to view notification 15-Jul-14

Partly Paid Shares and Warrants

Issue of Partly Paid Shares and Warrants by Indian Company to Foreign Investors

Partly paid equity shares and warrants issued by an Indian company in accordance with the provision of the Companies Act, 2013 and the SEBI guidelines, as applicable, shall be eligible instruments for the purpose of FDI and foreign portfolio investment (FPI) by Foreign Institutional Investors (FIIs)/Registered Foreign Portfolio Investors(RFPIs) subject to compliance with FDI and FPI schemes

Circular Type Circular Issue Date
Notification Click here to view notification 14-Jul-14

ECB and Trade Credits

External Commercial Borrowings and Trade Credits

This Master Circular consolidates the existing instructions on the subject of “External Commercial Borrowings and Trade Credits” at one place.

Circular Type Circular Issue Date
Notification Click here to view notification 28-Jul-14
Master Circular Click here to view cirular 01-Jul-14

Foreign Investment in India

Foreign Portfolio Investment in India

The extant guidelines for Portfolio Investment Scheme for Foreign Institutional Investor (FII) and Qualified Foreign Investor (QFI) have since been reviewed and it has been decided to put in place a framework for investments under a new scheme called ‘Foreign Portfolio Investment’ scheme.

Circular Type Circular Issue Date
Master Circular Click here to view circular 01-Jul-14

Foreign Direct Investment in India

The Foreign Direct Investment (FDI) policy for 2014 has been notified by the Ministry of Finance through the Department of Industrial Policy and Promotion into India

Circular Type Circular Issue Date
Policy Circular Click here to view policy 17-Apr-14

Transfer or Issue of Security by Non-Resident

Transfer or Issue of Security by a Person Resident Outside India

A registered Foreign Portfolio Investor (RFPI) may purchase shares or convertible debentures of an Indian company under the Foreign Portfolio Investment (FPI) Scheme subject to the terms and conditions specified in Schedule 2A and the limits and margin requirements prescribed by RBI/ SEBI as well as the stipulations regarding collateral securities as specified by the Reserve Bank.

A Non-resident Indian may, without limit, purchase on non-repatriation basis, listed non-convertible/redeemable preference shares or debentures.

Circular Type Circular Issue Date
Corporate Debt including Commercial Papers USD 51 Billion FIIs, QFIs and Long terms investors registered with SEBI – Sovereign Wealth Funds (SWFs), Multilateral Agencies, Pension/ Insurance/ Endowment Funds, Foreign Central Banks. Eligible Investors may invest in Commercial Papers only up to USD 2 billion within the limit of USD 51 billion.
Circular Type Circular Issue Date
Notification (Revision) Click here to view amendment 14-Feb-14
Notification Click here to view amendment 01-Apr-13

Others

Corporate Laws

Companies Act, 2013

The Companies Act, 2013 (the ‘2013 Act’) received the assent of the President of India on 29 August 2013, and has now become law. The Act issued new guidelines on various topics including Corporate Social Responsibility.

Circular Type Circular Issue Date
Act Click here to view Act 29-Aug-13
CSR under Companies Act Click here to view notification
Click here to view notification
Click here to view notification
27-Feb-14

SHG Bank Linkage Program

SHG Bank Linkage Program

Linking of SHGs with banks have been emphasized in the Monetary policy of Reserve Bank of India and Union Budget announcements from time to time and various guidelines have been issued to banks in this regard. In order to enable the banks to have instructions at one place, a Master Circular incorporating the existing guidelines/instructions on the subject has been updated.

Circular Type Circular Issue Date
Master Circular Click here to view circular 01-Jul-14

Financial Markets

Financial Markets

Commercial Paper (CP), an unsecured money market instrument issued in the form of a promissory note, was introduced in India in 1990 with a view to enable highly rated corporate borrowers to diversify their sources of short-term borrowings and provide an additional instrument to the investors.

Circular Type Circular Issue Date
Master Circular Click here to view circular 01-Jul-14

Pension System

Handbook on National Pension Scheme

The National Pension System is an attempt towards finding a sustainable solution to the problem of providing adequate retirement income to every citizen of India. NPS aims at ensuring financial security to every citizen by encouraging them to start contributing towards the old age saving. This handbook on NPS has been issued by the Pension Fund Regulatory and Development Authority (PFRDA).

Circular Type Circular Issue Date
Handbook Click here to view

Swavalamban Scheme

Government of India announced a scheme under the name of ‘Swavalamban Yojana’ in which government has made a provision to pay an incentive contribution to each subscriber of Unorganized sector and NPS Lite sector who is willing to participate in this scheme and also fulfilling eligibility criterion.

Circular Type Circular Issue Date
Handbook Click here to view

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