1. NBFCs - Certain Issues and developments JB Nagar CPE Study Circle WIRC, ICAI CA Jayant Thakur 8th September 2013,

2. Outline of law Act Various Directions, Circulars, etc. ◦ Acceptance of deposits ◦ Prudential Norms ◦ Auditors ◦ Others Recent Reports/draft Guidelines State Laws Companies Act, 2012/SEBI Ordinance CA Jayant Thakur, 8th September 2013 2

3. Position as on 31 st March 2010 Total NBFCs 12662 Deposit taking NBFCs 311 SI-ND taking NBFCs 295 Other ND taking NBFCs – 12056 Asset size of non-deposit accepting NBFCs grew from 250765 crores in 2006 to 566853 crores. CA Jayant Thakur, 8th September 2013 3

4. Auditors role General and comprehensive Registration Compliance of Prudential Norms and Deposits Directions Continuity of business Manner of reporting Miscellaneous CA Jayant Thakur, 8th September 2013 4

5. Important basic terms Definition of NBFC ◦ What constitutes NBFC ◦ 50% criteria  Financial assets Exempted companies Net owned funds Punishment for violation ◦ Non-compoundable Non-appealable CA Jayant Thakur, 8th September 2013 5

6. Core Investment Companies (CICs) Definition and concepts ◦ Basic conditions  SI  ND  Assets composition  Public Funds  Group Benefits Obligations CA Jayant Thakur, 8th September 2013 6

7. Mergers/takeovers of NBFCs Deposit Accepting Others Proposed changes CA Jayant Thakur, 8th September 2013 7

8. Thorat Committee Report Overview Public funds concept NBFCs < Rs. 50 crores assets ◦ Principal business condition NBFCs < Rs. 1000 crores assets ◦ Principal business condition Existing NBFCs? ◦ De-registration ◦ Re-registration/gestation period CA Jayant Thakur, 8th September 2013 8

9. Thorat Committee Report Change of control/mergers Reduction in deposit limits for AFCs No new deposit accepting NBFCs All deposit accepting NBFCs to get rated Multiple NBFCs Captive NBFCs CA Jayant Thakur, 8th September 2013 9

10. Thorat Committee Report Corporate governance ◦ More powers for RBI ◦ Clause 49 Mandatory disclosures CA Jayant Thakur, 8th September 2013 10

11. Recent letters to “NBFCs” Issues raised Other NBFCs CA Jayant Thakur, 8th September 2013 11

12. Debentures Private placement guidelines NBFCs raised 3,18,800 crores in 2011-12 ◦ ND-SI 2,95,000 crores Recent controversies and abuses Applies to private placements ◦ NCDs Time of completion - 6 months Gaps between 2 placements Names of subscribers CA Jayant Thakur, 8th September 2013 12

13. Debentures Private placement guidelines Maximum number of investors 49 Minimum amounts/multiples Only secured debentures/compulsorily convertible debentures Applicability - “as may be specified” CA Jayant Thakur, 8th September 2013 13

14. Companies Act, 2012 – some pointers Frauds in deposit acceptance Frauds generally Class actions Sahara/Saradha type of cases CA Jayant Thakur, 8th September 2013 14

15. Securities Laws Ordinance 2013 Arrangements/pooling with corpus of more than Rs. 100 crores NBFCs? CA Jayant Thakur, 8th September 2013 15

16. State Depositors’ Protection Laws Which States? Who are covered? What is deposits? When would there be violation? What action can be taken? Supreme Court – K. K. Baskaran, 4 th April 2011 Applicable to NBFCs? CA Jayant Thakur, 8th September 2013 16

17. THANK YOU!