Overview of Core Investment Company – Complete Analysis

Overview of Core Investment Company, This article is about the company which is specifically incorporated for some different purpose, i.e. for investment purpose. They are the companies which own non transferrable shares or debentures in its group companies for holding the shares in the company, which has been classified as non banking financial companies by the Reserve Bank of India.

Registration of Core Investment Companies:

There is very simple process to register such core investment company. The only thing you need to know is that the every core investment company should apply to RBI within the 6 months form the date of such notification for the grant of certificate.

After applying for the certificate of registration, you can carry on the business, if the application has been given in the said period. Till the RBI gives the certificate of registration, they can carry on the activities in the old name.

Criteria for becoming Core Investment Company:

The following criterion needs to be satisfied to be eligible for Core Investment Company:

  • Holding not less than 90% of the shares or debentures or preference shares or bonds in the group companies.
  • Investments in the group companies should not be less than 60% of its own net assets. Here the net assets would include – Investments in the mutual funds, advance tax payments, cash and bank balances, deferred tax payments.
  • This company should be trading in any of these securities and would be keeping only for the investments purposes.
  • This company is not allowed to carry on any financial services except some service which are mentioned here:

a. Investments in – Mutual funds, Government Securities, Bank deposits, bonds by the group companies.
b. Guarantees for group companies
c. Loans to the group companies

Systematically Important Core Investment Companies:

Systematically Important CIC would be included if it satisfies the following conditions:

  • CIC (Core Investment Company) having the total assets not less than 100 crores. (It may be having the assets individually or having a combined CICs in the same group of companies)
  • It also raises or holds the public funds.

If core investment company is covered by Systematically Important CIC than it should maintain the following:

  • Every systematically important CIC should maintain the Adjusted Net worth should not be less than 30% of the risk weighted assets. (On the balance sheet date and Off the balance sheet on the previous last audited balance sheet date)
  • The leverage ratio of the systematically important core investment company should not exceed 2.5 times the Adjusted Net worth on the last balance sheet date.

Related Articles