India / Core Investment Companies can have only 2 layers: RBI

New Delhi: The Reserve Bank on Thursday came out with revised guidelines for Core Investment Companies (CICs) under which the number of layers of CICs within a group will be restricted to two.

A CIC is a non-banking financial company engaged in the business of acquisition of shares and securities. It holds not less than 90 percent of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies.

Under the revised norms, the CICs will be required to set up a Group Risk Management Committee and maintain a functional website containing basic information about themselves and the group.

The revised guidelines are based on the recommendations of a Working Group (WG) to set up under former corporate affairs secretary Tapan Ray to review the regulatory and supervisory framework for CICs, the RBI said.

In order to address the complexity in group structures and the existence of multiple CICs within a group, the RBI has “decided that the number of layers of CICs within a Group (including the parent CIC) shall be restricted to two, irrespective of the extent of direct or indirect holding/ control exercised by a CIC in the other CIC."

As per the revised guidelines, if a CIC makes any direct/ indirect equity investment in another CIC, it will be deemed as a layer for the investing CIC.

The RBI further said the existing entities will be required to reorganise their business structure and adhere to the revised guideline latest by March 31, 2023.

The RBI also said the parent CIC in the group or the CIC with the largest asset size, in case there is no identifiable parent CIC in the group, shall constitute a Group Risk Management Committee (GRMC).

"The GRMC shall report to the Board of the CIC that constitutes it and shall meet at least once in a quarter," it said.

Among other responsibilities, the GRMC will analyse the material risks to which the group, its businesses and subsidiaries are exposed.

Also, a CIC with an asset size of more than Rs 5,000 crore has to appoint a chief risk officer (CRO) with clearly specified roles and responsibilities.