The Reserve Bank of India (RBI) has decided to consider a case-to-case basis relaxation of the 50 per cent group limit norm for NBFCs (non-banking finance companies) in the equity of insurance joint venture.
"The IRDA (Insurance Regulatory and Development Authority) requires an insurance company to expand its capital, taking into account the stipulations of the Insurance Act and the solvency requirements of the insurance company,’’ the RBI said. The current restriction of a group limit of the NBFC to 50 per cent of the equity of the insurance JV ``may act as a constraint for the insurance company in meeting the requirement of IRDA,’’ the apex noted.
If more than one company (irrespective of doing financial activity or not) in the same group of the NBFC wishes to take a stake in the insurance company, the contribution by all companies in the same group have been counted for the limit of 50 per cent equity investment in the insurance JV under the existing guidelines.
``On a review, it has been decided that in cases where IRDA issues call for capital infusion into the insurance JV, the Bank may, on a case-to-case basis, consider need-based relaxation of the 50% group limit,’’ the apex bank said.
Application for such relaxation, along with supporting documents, should be submitted by the NBFC to the regional office of the RBI under whose jurisdiction its registered office is situated, the apex bank said.
