NBFC MFI
NBFC MFI
A partial part of the notification containing the important details required to become an NBFC-MFI as issued by RBI is given below : To All NBFCs (excluding RNBCs) Dear Sir, Introduction of New Category of NBFCs – ‘Non-Banking Financial Company-Micro Finance Institutions’ (NBFC-MFIs) – Directions As indicated in the Second Quarter Review of Monetary Policy in November 2010, a 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.
2. Creation of a Separate Category of NBFC-MFI
It has been decided to create a separate category of NBFCs viz; Non-Banking Financial Company-Micro Finance Institution (NBFC-MFI). Consequently, there would be the following categories of NBFCs: 3. The Sub-Committee had recommended a role for industry associations in the monitoring of compliance by NBFC-MFIs with the regulations. Separate guidelines in this regard will follow. 4. The Notification DNBS.PD.No.234 CGM(US)2011 dated December 02, 2011, containing the regulatory framework for NBFC-MFIs, the amending notifications DNBS.PD.No.235/CGM(US) 2011 dated December 02, 2011, amending the Non-Banking Financial (Non-Deposit accepting or holding) Companies Prudential Norms (Reserve Bank) directions, 2007 and DNBS.PD.No.236/CGM(US)2011 dated December 02, 2011, amending the Non-Banking Financial Companies Auditor’s Report (Reserve Bank) Directions, 2008 are enclosed for meticulous compliance. Yours faithfully (Uma Subramaniam) Chief General Manager in Charge RESERVE BANK OF INDIA DEPARTMENT OF NON-BANKING SUPERVISION CENTRAL OFFICE CENTRE I, WORLD TRADE CENTRE, CUFFE PARADE, COLABA, MUMBAI 400 005 Notification DNBS. PD.No.234 / CGM(US)-2011 dated December 02, 2011 The Reserve Bank of India has considered it necessary in the public interest and being satisfied that for the purpose of enabling the Bank to regulate the credit system to the advantage of the country, it is necessary to give the directions set out below, hereby, in the exercise of the powers conferred by sections 45JA, 45K, 45L and 45M of the Reserve Bank of India Act, 1934 (2 of 1934), and of all the powers enabling it in this behalf, hereby gives the Directions hereinafter specified. PART I PRELIMINARY
NBFC-MFIs shall ensure that a Code of Conduct and systems are in place for recruitment, training, and supervision of field staff. The Code of Conduct should also incorporate the Guidelines on Fair Practices Code issued for NBFCs vide circular CC No.80 dated September 28, 2006, as amended from time to time. Recovery should normally be made only at a central designated place. Field staff shall be allowed to make recovery at the place of residence or work of the borrower only if the borrower fails to appear at the central designated place on 2 or more successive occasions. All other elements of the Fair Practices Code issued for NBFCs vide CC No 80 dated September 28, 2006, as amended from time to time shall be adhered to.
c. Corporate Governance The Master Circular issued for NBFCs on Corporate Governance vide CC No. 187 dated July 01, 2011, shall be applicable to NBFC-MFIs also. d. Improvement of Efficiency NBFC-MFIs shall review their back-office operations and make the necessary investments in Information Technology and systems to achieve better control, simplify procedures, and reduce costs. e. Others All NBFCs may refer to the circular RPCD.CO.Plan BC. 66 /04.09.01/2010-11 dated May 3, 2011, issued by the Rural Planning and Credit Department of RBI titled “Bank loans to Micro Finance Institutions (MFIs) – Priority Sector status” issued to banks with regard to guidelines on priority sector. 5. Existing NBFCs that satisfy the above conditions may approach the Regional Office in the jurisdiction of which their Registered Office is located, along with the original Certificate of Registration (CoR) issued by the Bank for change in their classification as NBFC-MFIs. Their request must be supported by their Statutory Auditor’s certificate indicating the asset (loan) pattern as on March 31, 2011. The onus of including only eligible assets for the purpose of classification as NBFC-MFI shall be that of the company concerned. The change in classification would be incorporated in the Certificate of Registration issued by the Bank as NBFC-MFI. 6. In terms of paragraph 15 of the Non-Banking Financial (Non-Deposit accepting or holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 all NBFCs are required to submit Statutory Auditors Certificate with reference to the position of the company as at end of the financial year ended March 31 every year. For an NBFC-MFI, such Certificate will also indicate that the company fulfills all conditions stipulated to be classified as an NBFC-MFI in this circular. 7. Non-compliance with these Directions shall invite penal provisions under the RBI Act, 1934. Yours sincerely (Uma Subramaniam) Chief General Manager-in-Charge
