For calculation of NOF of NBFC, substance to take precedence over form: RBI
Updated: Apr 07, 2014 04:20:50pm
Mumbai, Apr 7 (KNN) While arriving at the Net Owned Figure (NOF), investment made by an Non-Banking Financial Institution (NBFC) in entities of the same group concerns shall be treated alike, whether the investment is made directly or through an AIF / VCF, said RBI.
VCF or any such Alternative Investment Fund (AIF) means a pool of capital by investors and the investment made by such an AIF is done on behalf of the investors.
“It has been observed in certain cases that an NBFC while arriving at the NOF figure did not reckon its investment in group companies on the ground that investments in the group companies were made by the Venture Capital Fund (VCF) sponsored by the NBFC, although, in term, the contribution to the funds held by the VCF had come primarily from the NBFC itself,” said RBI.
Accordingly, “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 per cent or more; or where the beneficial owner, in the case of Trusts is the NBFC, if 50 per cent of the funds in the Trusts are from the concerned NBFC.
“For this purpose, “beneficial ownership” would mean holding the power to make or influence decisions in the Trust and being the recipient of benefits arising out of the activities of the Trust,” RBI today said giving clarification on calculation of NOF of an NBFC.
In other words, in arriving at the NOF, the substance would take precedence over form. NBFCs are advised to keep this principle in mind, always, while calculating their NOF. (KNN/SD)
VCF or any such Alternative Investment Fund (AIF) means a pool of capital by investors and the investment made by such an AIF is done on behalf of the investors.
“It has been observed in certain cases that an NBFC while arriving at the NOF figure did not reckon its investment in group companies on the ground that investments in the group companies were made by the Venture Capital Fund (VCF) sponsored by the NBFC, although, in term, the contribution to the funds held by the VCF had come primarily from the NBFC itself,” said RBI.
Accordingly, “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 per cent or more; or where the beneficial owner, in the case of Trusts is the NBFC, if 50 per cent of the funds in the Trusts are from the concerned NBFC.
“For this purpose, “beneficial ownership” would mean holding the power to make or influence decisions in the Trust and being the recipient of benefits arising out of the activities of the Trust,” RBI today said giving clarification on calculation of NOF of an NBFC.
In other words, in arriving at the NOF, the substance would take precedence over form. NBFCs are advised to keep this principle in mind, always, while calculating their NOF. (KNN/SD)
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