Annual general Meeting by a company (AGM Compliance by a Company)

Compliance to be made by a Company:

      Annual General Meeting held in accordance with section 166 can be adjourned by filing Form 61 Extension of period of annual general meeting by three months under section166(1) or for Extending the period of annual accounts up to eighteen months under section 210(4).

Section 166(1) of Companies Act:

Under this section every company should hold Annual general Meeting not more than fifteen months lapse of one annual meeting. Provided Registrar may for any special reason extend the time shall be held not exceeding three months. The application should be accompanied by a resolution of the Board of directors giving full information as to why the company is unable to comply with the statutory requirements. 

Special Reason: It has not able to prepare the accounts for the period as mentioned in 210(3).

In case of Non Compliance:

       In case of non compliance by a company under section 165, every director or other officer to company who is in default shall be punishable with fine extended up to Five thousand rupees.

       Compounding of offences under sec. 621 A of Companies Act.

Section 210(4) of Companies Act:

Sub-section 3 (b) of section 210 specifies that the company is required to hold its annual general meeting within six months from the end of the financial year.

Under this section time may extend upto eighteen months where a special permission has been granted by Registrar.

In case of Non Compliance:

      In case of non compliance by a company under section 210, any person, being director of a company shall be punishable  with imprisonment for a term which may extend upto six months or fine which may extend upto ten thousand rupees or with both.

      Non compoundable.

Contradiction between the provision of section 166 and 210:

Section 166 allows holding of an annual general meeting within fifteen months of the last annual general meeting of the company. While this does not need approval of the Registrar of Companies (ROC),  this may at times result in a company not being able to hold the annual general meeting within six months from the end of the financial year as envisaged in section 210(3)(b). 

Registrar's powers to grant extension of time under the second proviso to section 166(1) does not become exercisable if the extension sought by the company is for holding the meeting falling within the time-limits mentioned in the said section 166 and is asked solely on the ground that it has not been able to prepare the accounts for the period mentioned in section 210(3).

Filing should be done: (reading 166 & 210 together):

15 months from the date of the last annual general meeting.

The last day of the calendar year.

6 months from the close of the financial year. 

Validity of Transfer of Shares of a company without stamping

Section 108 of Companies Act, 1956 states that (1) A company shall not register a transfer of shares in, or debentures of, the company, unless a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any, of the transferee, has been delivered to the company along with the certificate relating to the shares or debentures or if no such certificate is in existence, along with the letter of allotment of the shares or debentures.

Transfer of share is possible only if proper transfer deed in the form 7B duly stamped and executed under section 108 of Companies Act, 1956

Section 108 provides that adequate stamp should be there on transfer deed so as to make it a valid transfer. In case of default it shall be deemed as null and void. As words "shall not register" employed in Section 108, are indicative of the legislative intent that the provisions contained in the section are mandatory.

According to section 12 of Indian Stamp Act, if the stamp is not cancelled at or time of execution, the instrument shall be deemed to be unstamped.

The Honorable Supreme Court held that the registration of transfers contrary to mandatory provisions of section 108 and pending attachment of the shares was illegal. When the receiver held the scripts and blank transfers, it was not open to the persons in whose names the share originally stood to exercise the right of ownership in respect of such shares or transfers that ownership to anyone else.

Analysis: Shares which are not stamped and cancelled, transferring it would be considered illegal or void. For a valid transfer share transfer form must be adequately stamped and cancelled to provide legal validity to the transfer.  Even in case, where registrar have registered it but overlooking it, it would be considered as void. 

In such situations, application to the concerned authority should be made within time frame prescribed, so as to validate the transfer. 

Carbon Credit in India

Meaning:

The concept of carbon credits evolved from the Kyoto Protocol Treaty under the UNFCCC (United Nations Framework Convention on Climate Change). The Kyoto Protocol has created a mechanism under which countries that have been emitting more carbon and other gases (greenhouse gases include ozone, carbon dioxide, methane, nitrous oxide and even water vapor) have voluntarily decided that they will bring down the level of carbon they are emitting to the levels of early 1990s. The treaty requires the industrialized countries to reduce their collective emissions of greenhouse gases by 5.2 percent (compared to the year 1990) by 2012. The treaty was negotiated in Kyoto, Japan, in December 1997, and the agreement came into force on February 16, 2005. Developed countries, mostly European, had said that they will bring down the level in the period from 2008 to 2012. In 2008, these developed countries have decided on different norms to bring down the level of emission fixed for their companies and factories. India, China and some other Asian countries have the advantage because they are developing countries. Any company, factories or farm owner in India can get linked to United Nations Framework Convention on Climate Change and know the ‘standard’ level of carbon emission allowed for its outfit or activity. The extent to which I am emitting less carbon (as per standard fixed by UNFCCC) I get credited in a developing country. This is called carbon credit. A carbon credit is a tradable certificate or permit representing the right to emit one ton of carbon dioxide or carbon dioxide equivalent (CO2-e).

Three Flexibility Mechanisms:

 As part of the agreement, three flexibility mechanisms were developed to help developed countries meet their emission reduction targets namely, Clean Development Mechanism (CDM), Joint Implementation (JI) and International Emission Trading (IET). Of these, JI and IET are executable amongst developed countries while CDM is between developed and developing countries. It is a mechanism allowing industrialized countries with a greenhouse gas reduction commitment to invest in emission-reducing projects in developing countries.[1]

Clean Development Mechanism Explained:

The Clean Development Mechanism (CDM), defined in Article 12 of the Protocol, allows a country with an emission-reduction or emission-limitation commitment under the Kyoto Protocol (Annex B Party) to implement an emission-reduction project in developing countries.

Carbon Trading in India:

Indian industries were able to cash in on the sudden boom in the carbon market making it a preferred location for carbon credit buyers. It is expected that India will gain at least $5 billion to $10 billion from carbon trading (Rs 22,500 crore to Rs 45,000 crore) over a period of time. Also India is one of the largest beneficiaries of the total world carbon trade through the Clean Development Mechanism claiming about 31 per cent (CDM).

India’s carbon market is one of the fastest growing markets in the world and has already generated approximately 30 million carbon credits, the second highest transacted volumes in the world. The carbon trading market in India is growing faster than even information technology, bio technology and BPO sectors. Nearly 850 projects with an investment of Rs 650,000 million are in the pipeline. Carbon is also now being traded on India’s Multi Commodity Exchange. It is the first exchange in Asia to trade carbon credits. India being a developing country has no emission targets to be followed. However, she can enter into CDM projects.[2] The Indian government has not fixed any norms nor has it made it compulsory to reduce carbon emissions to a certain level. So, people who are coming to buy from Indians are actually financial investors. They are thinking that if the Europeans are unable to meet their target of reducing the emission levels by 2009 or 2010 or 2012, then the demand for the carbon will increase and then they may make more money.[3]

Legal aspect of Carbon Trading in India:

The Multi Commodity exchange started future trading on January 2008 after Government of India recognized carbon credit as commodities on 4th January. The National Commodity and Derivative Exchange by a notification and with due approval from Forward Market Commission (FMC) launched Carbon Credit future contact whose aim was to provide transparency to markets and help the producers to earn remuneration out of the environment projects.

Carbon credit in India is traded on NCDEX only as a future contract. Futures contract is a standardized contract between two parties to buy or sell a specified asset of standardized quantity and quality at a specified future date at a price agreed today (the futures price). The contracts are traded on a future exchange. These types of contracts are only applicable to goods which are in the form of movable property other than actionable claims, money and securities. . Forward contracts in India are governed by the Indian Contract Act, 1872.

Under the present provision of the Forward Contracts Regulation Act, the trading of forward contracts will be considered as void as no physical delivery is issued against these contracts. To rectify this The Forward Contracts (Regulation) Amendment Bill 2006 was introduced in the Indian Parliament. The Union Cabinet on January 25, 2008 approved the ordinance for amending the Forward Contracts (Regulation) Act, 1952. This ordinance has to be passed by the Parliament and is expected to come up for consideration this year. This Bill also amends the definition of ‘forward contract’ to include ‘commodity derivatives’. Currently the definition only covers ‘goods’ that are physically deliverable. However a government notification on January 4th paved the way for future trading in CER by bringing carbon credit under the tradable commodities.

Value Added Tax:

The government of Delhi in a recent notification has declared that the Certified Emission Reductions (or 'Carbon Credits' as we know) are to be considered as goods and thus their sale is liable to value added tax in the State. The Commissioner of Trade and Taxes has declared that the nature and aspects of Carbon credits have to be examined and tested against the definition of goods to arrive at the conclusion that carbon credit are no different from ordinary commodities bought and sold in the market and thus a sale transaction of carbon credit would attract value added tax on sale.

Trading of CERS:

 As a welcome scenario, India now has two Commodity exchanges trading in Carbon Credits. This means that Indian Companies can now get a better trading platform and price for CERs generated.

• Multi Commodity Exchange (MCX), India’s largest commodity exchange, has launched futures trading in carbon credits. The initiative makes it Asia's first-ever commodity exchange and among the select few along with the Chicago Climate Exchange (CCE) and the European Climate Exchange to offer trades in carbon credits. The Indian exchange also expects its tie-up with CCX which will enable Indian firms to get better prices for their carbon credits and better integrate the Indian market with the global markets to foster best practices in emissions trading. 
• On 11th April 2008, National Commodity and Derivatives Exchange (NCDEX) also has started futures contract in Carbon Trading for delivery in December 2008.
• MCX is the futures exchange. People here are getting price signals for the carbon for the delivery in next five years. The exchange is only for Indians and Indian companies. Every year, in the month of December, the contract expires and at that time people who have bought or sold carbon will have to give or take delivery. They can fulfill the deal prior to December too, but most people will wait until December because that is the time to meet the norms in Europe. If the Indian buyer thinks that the current price is low for him he will wait before selling his credits. The Indian government has not fixed any norms nor has it made it compulsory to reduce carbon emissions to a certain level. So, people who are coming to buy from Indians who are actually financial investors. They are thinking that if the Europeans are unable to meet their target of reducing the emission levels by 2009, 2010 or 2012, then the demand for the carbon will increase and then they may make more money. So investors are willing to buy now to sell later. There is a huge requirement of carbon credits in Europe before 2012. Only those Indian companies that meet the UNFCCC norms and take up new technologies will be entitled to sell carbon credits. There are parameters set and detailed audit is done before you get the entitlement to sell the credit. 

How does MCX trade carbon credits?[4]

Many companies did not apply to get credit even though they had new technologies. Some companies used management consultancies to make their plan greener to emit less GHG. These management consultancies then scouted for buyers to sell carbon credits. It was a bilateral deal.

However, the price to sell carbon credits at was not available on a public platform. The price range people were getting used to was about Euro 15 or maybe less per tonne of carbon. Today, one tonne of carbon credit fetches around Euro 22. It is traded on the European Climate Exchange. Therefore, you emit one tonne less and you get Euro 22. Emit less and increase/add to your profit.

We at the MCX decided to trade carbon credits because we are in to futures trading. Let people judge if they want to hold on to their accumulated carbon credits or sell them now.MCX is the futures exchange. People here are getting price signals for the carbon for the delivery in next five years. Our exchange is only for Indians and Indian companies. Every year, in the month of December, the contract expires and at that time people who have bought or sold carbon will have to give or take delivery. They can fulfill the deal prior to December too, but most people will wait until December because that is the time to meet the norms in Europe. Say, if the Indian buyer thinks that the current price is low for him he will wait before selling his credits. The Indian government has not fixed any norms nor has it made it compulsory to reduce carbon emissions to a certain level. So, people who are coming to buy from Indians are actually financial investors. They are thinking that if the Europeans are unable to meet their target of reducing the emission levels by 2009 or 2010 or 2012, then the demand for the carbon will increase and then they may make more money. So investors are willing to buy now to sell later. There is a huge requirement of carbon credits in Europe before 2012. Only those Indian companies that meet the UNFCCC norms and take up new technologies will be entitled to sell carbon credits. There are parameters set and detailed audit is done before you get the entitlement to sell the credit. In India, already 300 to 400 companies have carbon credits after meeting UNFCCC norms. Till MCX came along, these companies were not getting best-suited price. Some were getting Euro 15 and some were getting Euro 18 through bilateral agreements. When the contract expires in December, it is expected that prices will be firm up then.

On MCX we already have power, energy and metal companies who are trading. These companies are high-energy consuming companies. They need better technology to emit less carbon.

Financing Support in India:

• Carbon Credits projects requires huge capital investment. Realizing the importance of carbon credits in India,
• The World Bank has entered into an agreement with Infrastructure Development Finance Company (IDFC), wherein IDFC will handle carbon finance operations in the country for various carbon finance facilities.
• The agreement initially earmarks a $10-million aid in World Bank-managed carbon finance to IDFC-financed projects that meet all the required eligibility and due diligence standards.
• IDBI has set up a dedicated Carbon Credit desk, which provides all the services in the area of Clean Development Mechanism/Carbon Credit (CDM).
• In order to achieve this objective, IDBI has entered into formal arrangements with multi-lateral agencies and buyers of carbon credits like IFC, Washington, KfW, Germany and Sumitomo Corporation, Japan and reputed domestic technical experts like MITCON.
• HDFC Bank has signed an agreement with Cantor CO2E India Pvt Ltd and MITCON Consultancy Services Limited (MITCON) for providing carbon credit services. As part of the agreement, HDFC Bank will work with the two companies on awareness building, identifying and registering Clean Development Mechanism (CDM) and facilitating the buy or sell of carbon credits in the global market.

Conclusion
Even though India is the largest beneficiary of carbon trading and carbon credits are traded on the MCX, it still does not have a proper policy for trading of carbons in the market. As a result the Centre has been asked by The National Commodity and Derivatives Exchange Limited (NCDEX) to put in place a proper policy framework for allowing trading of certified emission reductions (CERs), carbon credit, in the market. Also, India has huge number of carbon credits sellers but under the present Indian law, the buyers based in European market are not permitted to enter the market. To increase the market for carbon trading Forward Contracts (Regulation) Amendment Bill has been introduced in the Parliament. This amendment would also help the traders and farmers to utilize NCDEX as a platform for trading of carbon credits. However, to unleash the true potential of carbon trading in India, it is important that a special statue be created for this purpose as the Indian Contracts Act is not enough to govern the contractual issues relating to carbon credits. The carbon credits market will grow to as much as $5 trillion if major countries such as the United States sign up for binding cap emissions. India should be ready to take advantage of this growing global market.

Post-2012 policies are expected to open many new gates for India to leverage the growing carbon market. The government bodies are also planning for a domestic energy efficiency cap-and-trade scheme.

The Indian economy strictly needs a regulator for the carbon market. The forward Contracts (Regulation) Amendment Bill, which would define the regulation on carbon credits trading and introduce options based on them, is the need of the hour. This will build confidence in the market, and trade volumes will be back on track for the Indian commodity exchanges.

Examples of Carbon trading in India:

Jindal Vijaynagar Steel:

The Jindal Vijaynagar Steel has recently declared that by the next ten years it will be ready to sell $225 million worth of saved carbon. This was made possible since their steel plant uses the Corex furnace technology which prevents 15 million tonnes of carbon from being discharged into the atmosphere.

Powerguda in Andhra Pradesh:

The village in Andhra Pradesh was selling 147 tonnes equivalent of saved carbon dioxide credits. The company has made a claim of having saved 147 MT of CO2. This was done by extracting bio-diesel from 4500 Pongamia trees in their village.

Handia Forest in Madhya Pradesh:

In Madhya Pradesh, it is estimated that 95 very poor rural villages would jointly earn at least US$300,000 every year from carbon payments by restoring 10,000 hectares of degraded community forests.

Delhi Metro Rail Corporation (Dmrc):

A must mention project is The Delhi Metro Rail Corporation (DMRC): It has become the first rail project in the world to earn carbon credits because of using regenerative braking system in its rolling stock. DMRC has earned the carbon credits by using regenerative braking system in its trains that reduces 30% electricity consumption. 
Whenever a train applies regenerative braking system, the released kinetic energy starts a machine known as converter-inverter that acts as an electricity generator, which supplies electrical energy back to the Over Head Electricity (OHE) lines. This regenerated electrical energy that is supplied back to the OHE that is used by other accelerating trains in the same service line. DMRC can now claim 400,000 CERs for a 10-year crediting period beginning December 2007 when the project was registered by the UNFCCC. This translates to Rs 1.2 crore per year for 10 years. India has the highest number of CDM projects registered and supplies the second highest number of Certified Emission Reduction units. Hence, India is already a strong supplier of Carbon Credits and can improve on it. 

The Union government has approved 550 projects complying the Kyoto Protocol to earn carbon credits, and 330 more are awaiting the government's approval, according to Det Norske Veritas (DNV) AS sources. The Designated National Authority (DNA) has registered the approved projects with the United Nations Framework Convention on Climate Change (UNFCC). The other 330 projects are at the design document stage. DNV is an Oslo-based consultancy firm, accredited to the UNFCCC for conducting the third party verification of projects, which have adopted the clean development mechanism (CDM) to comply with the Kyoto Protocol.[5]

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[1] http://entrepreneurindia.in/notch-up-those-carbon-credits/6205

[2] http://www.onlinecarbonfinance.com/india-and-carbon-credits.htm

[3] http://www.rediff.com/money/2008/feb/05inter1.htm

[4] http://www.rediff.com/money/2008/feb/05inter1.htm

[5] http://www.financialexpress.com/news/550-projects-for-carbon-credit-get-govt-nod/194714/0

Compliance For NBFCs-Updated till July 2012

 Uniformity in Risk weight for assets covering PPP and post COD projects

Notification DNBS.PD.CC.No. 276 /03.02.089/2011-12 dated May 30,2012

Under	Particular	Frequency	Applicability
Para 1	Computing Capital adequacy: For the purpose of computing capital adequacy, Infrastructure Debt Fund (IDF)-NBFCs are permitted to assign a risk weight of 50 percent on bonds covering Public Private Partnerships (PPP) and post commercial operations date (COD) projects in existence over a year of commercial operation.	Directions	All Non Banking Financial Companies / Residuary Non Banking Companies

 Guidelines on Fair Practices Code for NBFCs:

Notification DNBS.CC.PD.No.266 /03.10.01/2011-12 dated March 26, 2012

Under	Particular	Frequency	Applicability
Part A (i)	Applications for loans and their processing : # All communications to the borrower shall be in the vernacular language or a language as understood by the borrower. # Loan application forms should include necessary information which affects the interest of the borrower. # The loan application form may indicate the documents required to be submitted with the application form. # The NBFCs should devise a system of giving acknowledgement for receipt of all loan applications.	Directions	All NBFCs & MFIs
Part A (ii)	Loan appraisal and terms/conditions: NBFCs shall mention the penal interest charged for late repayment in bold in the loan agreement. NBFCs should provide all terms and conditions very clearyly in loan agreement. Not furnishing a copy of the loan agreement or enclosures quoted in the loan agreement is an unfair practice.	Directions	All NBFCs & MFIs
Part A (iii)	Disbursement of loans including changes in terms and conditions: The NBFCs should give notice to the borrower any change in the terms and conditions including disbursement schedule, interest rates, service charges, prepayment charges etc. NBFCs should also ensure that changes in interest rates and charges are effected only prospectively. A suitable condition in this regard should be incorporated in the loan agreement.	Directions Directions	All NBFCs & MFIs
Part A (iii) C	Release all securities: NBFCs should release all securities on repayment of all dues or on realisation of the outstanding amount of loan subject to any legitimate right or lien for any other claim	Directions	All NBFCs & MFIs
Part A (iv)A & B	General: NBFCs should refrain from interference in the affairs of the borrower except as per loan agreement. In case of receipt of request from the borrower for transfer of borrowal account, the consent or otherwise should be conveyed within 21 days from the date of receipt of request.	Directions	All NBFCs & MFIs
Part A (iv) C	Harassment of  borrowers: In the matter of recovery of loans, the NBFCs should not resort to undue harassment viz. persistently bothering the borrowers at odd hours, use of muscle power for recovery of loans etc. NBFCs shall ensure that the staff are adequately trained to deal with the customers in an appropriate manner	Directions	All NBFCs & MFIs
Part A (v)	Grievance redressal mechanism: The Board of Directors of NBFCs should also lay down the appropriate grievance redressal mechanism within the organization to resolve disputes regarding harassment of borrowers.	Directions	All NBFCs & MFIs
Part A (v)	Periodic Review: The Board of Directors should also provide for periodical review of the compliance of the Fair Practices Code and the functioning of the grievances redressal mechanism at various levels of management.	Directions	All NBFCs & MFIs
Part A (vii)	Interest Rates: Boards of NBFCs are, therefore, advised to lay out appropriate internal principles and procedures in determining interest rates and processing and other charges. The Board of each NBFC shall adopt an interest rate model taking into account relevant factors such as, cost of funds, margin and risk premium, etc and determine the rate of interest to be charged for loans and advances.	Directions	All NBFCs & MFIs
Part A (viii)	Availability on website: The rates of interest and the approach for gradation of risks shall also be made available on the web-site of the companies or published in the relevant newspapers.	Directions	All NBFCs & MFIs
Part A (ix)	Repossession of vehicles financed by NBFCs NBFCs must have a built in re-possession clause in the contract/loan agreement with the borrower which must be legally enforceable.	Directions	All NBFCs & MFIs

 Implementation of Section 51-A of UAPA, 1967 -Updates of the UNSCR 1267 (1999) /2989( 2011) Committee's Al Qaida Sanctions List

Notification DNBS(PD).CC. No 267 /03.10.42 /2011-12 dated March 26, 2012

Under	Particular	Frequency	Applicability
Para 2	Opening of accounts: It should be ensured that name/s of the proposed customer does not on the list(“Al-Qaida Sanctions List”) circulated by RBI.	Once verification	All Non Banking Financial Companies / Residuary Non Banking Companies
Para 2	Existing accounts: All existing accounts should be scaned to ensure that no account is held by or linked to any of the entities or individuals included in the list.	Once verification	All Non Banking Financial Companies / Residuary Non Banking Companies

 Assessment and Monitoring of Risk( Know Your Customer (KYC) norms/Anti-Money Laundering (AML) standards/Combating of Financing of Terrorism (CFT)/Obligation of banks under Prevention of Money Laundering Act (PMLA),

Notification DNBS(PD).CC. No 264/03.10.42/2011-12 dated March 21,2012.

Under	Particular	Frequency	Applicability
Para 2	Profile of Customers: NBFCs are required to prepare a risk profile of each customer and apply enhanced due diligence measures on higher risk customers.	Directions	All Non Banking Financial Companies / Residuary Non Banking Companies
Para 4	Identification & assessment of Risks: NBFCs should take steps to identify and assess their Money Laundering (ML)/ Financing of Terrorism(FT) risk for customers, countries and geographical areas as also for products/ services/ transactions/delivery channels.	Directions	All Non Banking Financial Companies / Residuary Non Banking Companies
Para 5	Guidance from Indian Banks' Association (IBA): The IBA guidance provides an indicative list of high risk customers, products, services and geographies. NBFCs may use the same as guidance in their own risk assessment.	Directions	All Non Banking Financial Companies / Residuary Non Banking Companies

 Lending Against Security of Single Product – Gold Jewellery

Notification  DNBS.CC.PD.No.265/03.10.01/2011-12 dated March 21,2012

Under	Particular	Frequency	Applicability
Para 2	Limitations on collateral : Maintain a Loan-to-Value (LTV) ratio not exceeding 60 percent for loans granted against the collateral of gold jewellery.	Directions	All NBFCs
Para 2	Disclosure on balance sheets: Disclose in their balance sheet the percentage of such loans to their total assets.	Directions & requirement for auditing	All NBFCs
Para 3	Maintaince of Tier I capital: NBFCs primarily engaged in lending against gold jewellery (such loans comprising 50 percent or more of their financial assets) shall maintain a minimum Tier l capital of 12 percent by April 01, 2014.	Applicable from April 1,2014	All NBFCs
Para 4	Advance against bullion / primary gold and gold coins: NBFCs should not grant any advance	Directions	All NBFCs

 Non- Reckoning Fixed Deposits with Banks as Financial Assets

 Notification DNBS (PD)CC.No.259 /03.02.59/2011-12 dated March 15 2012

Under	Particular	Frequency	Applicability
Para 3	Classification of Financial assets: Investments in fixed deposits cannot be treated as financial assets and interest income on fixed deposits with banks cannot be treated as income from financial assets. Bank deposits constitute near money and can be used only for temporary parking of idle funds, and/or in the above cases, till commencement of NBFI business.	Guidelines	(All Non Banking Financial Companies (excluding Residuary Non Banking Companies)
Para 4	Commencement of Business: NBFC which is in receipt of a certificate of registration  (CoR) from the Bank must necessarily commence NBFC business within six months of obtaining CoR, in case of default CoR stand withdrawn.	Once	(All Non Banking Financial Companies (excluding Residuary Non Banking Companies)
Para 4	Change of ownership: There can be no change in ownership of the NBFC prior to commencement of business and regularization of its CoR.	Directions	(All Non Banking Financial Companies (excluding Residuary Non Banking Companies)

Monitoring of Frauds:

Notification DNBS.PD.CC. No. 256 /03.10.042 / 2011-12 dated March 02 2012

Under	Particular	Frequency	Applicability
Para 2	Classification & monitoring of Frauds: Cases of frauds involving amount less than Rs. 25 lakhs shall be reported to the respective Regional Offices(ROs) of DNBS in jurisdiction of registered office. In case of 25 lakhs and more; may be reported to Frauds Monitoring Cell, Reserve Bank of India, Central Office	When required	All Non-Deposit taking NBFCs with asset size of Rs.100 crore and above and Deposit taking NBFCs

Revised Capital Adequacy Framework for Off-Balance Sheet Items for NBFCs-Clarification

Notification DNBS.CC.PD.No.254/03.10.01/2011-12 dated December 30 2011

Under	Particular	Frequency	Applicability
Part E	Credit conversion factors for Credit Default Swaps(CDS): NBFCs are only permitted to buy credit protection to hedge their credit risk on corporate bonds they hold. (Both current and permanent category)  # Need to maintain capital charge for the corporate bond to the extent of 20% of the applicable capital charge.	Guidelines	To all NBFC-MFIs excluding RNBCs

Non-Banking Financial Company -Micro Finance Institutions (Reserve Bank) Directions, 2011

Notification DNBS. PD.No.234 / CGM(US)-2011 dated December 02, 2011

Under	Particular	Frequency	Applicability
Part I Para 4 (A)	Entry Point Norm Registration amount(minimum) for New NBFC-MFIs : Net Owned Funds(NoF) =Rs 5 Crore; Located in the North eastern region: Rs. 2 Crore The existing NBFCs to be classified as NBFC-MFIs required to comply with this norm (w.e.f April 01, 2012.)	Once	To all NBFC-MFIs
Part I Para 4 (B) (a)	Capital Requirement # Capital adequacy ratio consisting of Tier I and Tier II Capital which shall not be less than 15 percent of its aggregate risk weighted assets. #The total of Tier II Capital at any point of time, shall not exceed 100 percent of Tier I Capital.	Ongoing	NBFC-MFI
Part I Para 4 (B) (b)	Asset Classification and Provisioning Norms: Shall adopt the following norms (till then they shall follow the asset classification and provisioning norms as given in the Non-Banking Financial (Non-Deposit accepting or holding) Companies Prudential Norms (Reserve Bank) Directions, 2007). Asset Classification Norms:         i.            Standard asset means the asset in respect of which, no default in repayment of principal or payment of interest is perceived and which does not disclose any problem nor carry more than normal risk attached to the business;       ii.            Nonperforming asset means an asset for which, interest/principal payment has remained overdue for a period of 90 days or more. Provisioning Norms: The aggregate loan provision to be maintained by NBFC-MFIs at any point of time shall not be less than  the higher of a)  1% of the outstanding loan portfolio or b) 50% of the aggregate loan instalments which are overdue for more than 90 days and less than 180 days and 100% of the aggregate loan installments which are overdue for 180 days or more.	Applicable w.e.f April 01, 2012	NBFC-MFI
Para 4 (C) (a)	Pricing of Credit         i.            All NBFC-MFIs shall maintain an aggregate margin cap of not more than 12%.       ii.            Interest on individual loans will not exceed 26% per annum and calculated on a reducing balance basis.     iii.            Processing charges shall not be more than 1 % of gross loan amount. Processing charges need not be included in the margin cap or the interest cap.     iv.            NBFC-MFIs shall recover only the actual cost of insurance for group, or livestock, life, health for borrower and spouse.  Administrative charges where recovered, shall be as per IRDA guidelines.	Once	NBFC-MFI
Para 4 (C) (b) (I)	Fair Practices in Lending I. Transparency in Interest Rates a.       There shall be only three components in the pricing of the loan viz., the interest charge, the processing charge and the insurance premium (which includes the administrative charges in respect there of). b.      There will be no penalty charged on delayed payment. c.       NBFC-MFIs shall not collect any Security Deposit/ Margin from the borrower. d.      There should be a standard form of loan agreement. e.       Every NBFC-MFI should provide to the borrower a loan card reflecting  (i) The effective rate of interest charged (ii) all other terms and conditions attached to the loan  (iii) information which adequately identifies the borrower and  (iv) acknowledgements by the NBFC-MFI of all repayments including  installments received and the final discharge (v) All entries in the Loan Card should be in the vernacular language. f.       The effective rate of interest charged by the NBFC-MFI should be prominently displayed in all its offices and in the literature issued by it and on its website.	Once	NBFC-MFI
Para 4 (C) (b) (II)	Multiple-lending, Over-borrowing and Ghost-borrowers a.       NBFC-MFIs can lend to individual borrowers who are not member of Joint Liability Group(JLG)/Self Help Group(SHG) or to borrowers that are members of JLG/SHG. b.      a borrower cannot be a member of more than one SHG/JLG. c.       not more than two NBFC-MFIs should lend to the same borrower. d.      there must be a minimum period of moratorium between the grant of the loan and the due date of the  repayment of the first installment.  The moratorium shall not be less than the frequency of repayment. e.       Recovery of loan given in violation of the regulations should be deferred till all prior existing loans are fully repaid. f.       All sanctioning and disbursement of loans should be done only at a central location and more than one individual should be involved in this function. In addition, there should be close supervision of the disbursement function.	Once	NBFC-MFI
Para 4 (C) (b) (III)	·      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 borrower fails to appear at central designated place on 2 or more successive occasions.   ·	Once	NBFC-MFI
Para 4 (C) (c)	Corporate Governance The Master Circular issued for NBFCs on Corporate Governance vide CC No. 187 dated July 01, 2011 shall be applicable.		NBFC-MFI
Para 4 (C) (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.		NBFC-MFI

Returns to be submitted by NBFCs

Notification DNBS.PD.CC. No.227/ 03.10.042/ 2011-12 dated July 1,2012

Part A

Returns to be sun\bmitted by deposit taking NBFCs: Details of Assets And Liabilities (NBS1) Capital Funds, Risk Assets, Asset Classification (NBS2) Statutory Liquid Assets (NBS3) Details of Public Deposits, Other Liabilities (NBS4)   Components of Assets, Liabilities, Interest Rates, Cash Inflow/Outflow etc. (NBS5) Details of Capital Market Exposure (NBS6) Capital Funds, Risk Assets, Risk Weighted off-balance sheet items (Non-Funded Exposures), Asset Classification etc. (NBS7) Structural Liquidity, Short-term dynamic liquidity, Interest Rate sensitivity etc. (ALM) Sources and Application of Funds, Profit and Loss Account, Asset Classification, Bank's/FIs exposure on the company, Details of Capital Market Exposure, Foreign Sources etc. Basic information like name of the company, address. NOF, profit / loss during the last three years Name of the WOS/JV, Country and date of incorporation, Date of NoC from DNBS, Business undertaken

Annually ( 31st March ) Half Yearly( 31st March / 30th Sept ) Quarterly ( 31st March/ 30th June/ 30th Sept/ 31st Dec) Annually ( 31st March ) Quarterly 31st March/ 30th June/ 30th Sept/ 31st Dec Monthly (At the end of each month) Annually ( 31st March ) Half yearly 31st March/ 30th Sept Monthly Quarterly. (31st March/ 30th June/ 30th Sept/ 31st Dec) Quarterly. (31st March/ 30th June/ 30th Sept/ 31st Dec)

Deposit taking NBFCs Deposit taking NBFCs NBFCs-D having public deposit of Rs 20 crore   All NBFCs All NBFCs All NBFCs

Future approach towards monitoring of frauds in NBFCs

Notification DNBS.PD.CC. No.229 / 03.10.042 / 2011-12 dated July 1,2011

Part 3.1	Reporting of Fraud to RBI: Fraud reports should be submitted in all cases of fraud of Rs. 1 lakh and above. Fraud reports should also be submitted in cases where central investigating agencies have initiated criminal proceedings suo moto or by the direction from RBI. NBFCs may also report frauds perpetrated in their subsidiaries and affiliates/joint ventures. Such frauds should, however, not be included in the report on outstanding frauds.	When required	All Deposit taking NBFCs (including RNBCs)
Part 4.1	Report on Frauds Outstanding: NBFCs should submit a copy of the Quarterly Report on Frauds Outstanding in the format given in FMR – 2 to the Regional Office of the RBI, within 15 days of the end of the quarter to which it relates NBFCs should furnish a certificate; All individual fraud cases of Rs. 1 lakh and above- reported to the Reserve Bank in FMR – 1 Quarterly progress reports on frauds involving Rs. 1 lakh and above in the format given in FMR – 3 NBFCs should conduct an annual review of the frauds and place a note before the Board of Directors for information.	Quarterly Quarterly Annually

Reserve Bank of India Act, 1934
Section 45-IA	NBFC have to Register with RBI and shall not commence or carry on business as a non-banking financial institution without: # Obtaining a certificate of registration RBI and maintaining NOF. # NOF requirement for NBFC registered Before 21/04/1999          = Rs.25 lacs On or after 21/04/1999    = Rs.200 lacs	One time	All NBFC
Section 45-IC	Reserve Fund Every NBFC shall create a reserve fund and transfer therein a sum not less than 20% of its net profit every year as disclosed in the profit and loss account and before any dividend is declared.	Yearly	All NBFC
Section 45-M	Duty of NBFC to furnish statements etc., required by Bank It shall be the duty of every non-banking institution to furnish the statements, information or particulars called for, and to comply with any direction given to it,	When asked for	All NBFC
Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 Notification No. DFC.118/DG(SPT)-98, Dated January 31, 1998
Part II Para 4	Minimum Credit Rating No non-banking financial company having Net Owned Fund) of twenty five lakh of rupees and above shall accept public deposit unless it has obtained minimum investment grade or other specified credit rating for fixed deposits from any one of the approved credit rating agencies. and a copy is sent to the RBI along with return on prudential norms.	At least once a year		All NBFCs
Part III Para 5	Information to be included in the Board's report (1) In every report under  sub-section  (1)  of section 217 of the Companies Act, 1956 (1 of 1956), there shall be included in the case of a non-banking financial company, the following particulars or information, namely :- (i) the total number of accounts of public deposit of the company which have not been claimed by the depositors or not paid by the company after the date on which the deposit became due for repayment; and (ii) The total amounts due under such accounts remaining  unclaimed or unpaid beyond the dates referred to in clause (i) as aforesaid. (2)  The said particulars or information shall be furnished with reference to the position as on the last day of the financial year to which the report relates and if the amounts remaining unclaimed or undisbursed as referred to in clause (ii) of the preceding sub-paragraph exceed in the aggregate a sum of rupees five lakhs, there shall also be included in the report a statement on the steps taken or proposed to be taken by the Board of Directors for the repayment of the amounts due to the depositors remaining unclaimed or undisbursed.	Once and should be updated from time to time		All NBFCs
Part III Para 6	Safe custody of approved securities Every non-banking financial company shall: (i) open a Constituent's Subsidiary General Ledger (CSGL) account with a scheduled commercial bank, or the Stock Holding Corporation of India Ltd. (SHCIL) or a dematerialized account with a depository through a depository participant registered with the SEBI and keep the unencumbered approved securities required to be maintained by it in pursuance of Section 45-IB of the Reserve Bank of India Act, 1934 (2 of 1934) and the Notification No. DFC.121/ ED(G)-98 dated January 31, 1998 in such CSGL account or dematerialised account; (ii) Designate one of the scheduled commercial banks, in the place where the registered office of the non-banking financial company is situated, as its designated banker and entrust, in physical form, to such bank or the SHCIL the unencumbered term deposits in any scheduled commercial bank maintained by it in pursuance of Notification No. DFC.121/ED(G)-98 dated January 31, 1998 and such unencumbered approved securities which have not been dematerialised; and intimate the name and address of such scheduled commercial bank where it has opened its CSGL account or has held the securities in physical form, or the location of the SHCIL where it has opened its CSGL account or has held the securities in physical form or the depository (and the depository participant) where it has held its dematerialised account, in writing, to the Regional Office of the Reserve Bank of India under whose jurisdiction the registered office of the company is situated, as specified in Second Schedule.	Once		All NBFCs
Part III Para 7	Employees Security Deposit A non-banking financial company receiving any amount in the ordinary course of its business as security deposit from any of its employees for due performance of his duties shall keep such amount in an account with a scheduled commercial bank or in a post office in the joint names of the employee and the company on the conditions that - (1) it shall not withdraw the amount without the consent in writing of the employee; and (2) the amount shall be repayable to the employee along with interest payable on such deposit account unless such amount or any part thereof is liable to be appropriated by the company for the failure on the part of the employee for due performance of his duties.	Once		All NBFCs
Part III Para 8(1)	Copies of balance sheet and accounts together with the Directors' report, auditors’ report,  notes on accounts and returns  to be furnished to the Reserve Bank An audited balance sheet as on the last date of each financial year and an audited profit and loss account in respect of that year as passed by the company in general meeting together with a copy of the report of the Board of Directors laid before the company in such meeting in terms of section 217(1) of the Companies Act, 1956 (1 of 1956) also a copy of the report and the notes on accounts furnished by its Auditor.	Yearly within fifteen days of meeting		All NBFCs accepting/holding public deposit
Part III Para 8(2)	Provision for submitting Auditor's Certificate Shall furnish to the  RBI along with : # a copy of the audited balance # a copy of the Auditor’s report to the Board of Directors and  # a certificate from its auditor, to the effect that the full amount of liabilities to the depositors of the company, including interest payable thereon, are properly reflected in the balance sheet, and that the company is in a position to meet the amount of such liabilities to the depositors.			All NBFCs accepting/holding public deposit
Part III Para 8(3) and (4)	Returns to be submitted to the Reserve Bank  of  India (3)  Shall submit to the RBI a  return furnishing the information specified in the First Schedule hereto, with reference to its financial position. (4) Every non-banking financial company shall intimate to the Reserve Bank of India in case of any change of the following: (i) the complete postal address, telephone number/s and fax number/s of the registered/corporate office; (ii) the names and residential addresses of the directors of the company; (iii) the names and the official designations of its  principal officers; (iv)  the specimen signatures of the officers  authorised to sign on behalf of the company;  and (v)  the names and office address of the auditors of the company.	As on the date specified in the said Schedule Within one month of any change		All NBFCs accepting/holding public deposit
Part III Para 8(5)	Balance sheet, returns, etc. to be submitted to the Department of Non-Banking Supervision Any balance sheets, returns or information or intimation or statement required to  be submitted or furnished to the Reserve Bank of India in pursuance of these directions shall be submitted  or furnished to the Regional Office of the Department of Non-Banking  Supervision of the Reserve Bank of India within whose jurisdiction the registered office of the company is situated, as specified in the Second Schedule hereto.			All NBFCs
Part III Para 9	Non-applicability of Direction to certain types of NBFC a)    Insurance company b)   Loan company, an investment company, an assets Finance company, not holding or accepting public deposits and pass a resolution to the effect within 30 days of the commencement of the financial year c)    An investment company (investing only in group companies not less than 90% of its assets) and pass a resolution that has not accepted and would not accept Public Deposit and would not trade in such shares/ securities within 30 days of the commencement of the financial year.	Every year within 30 days from the commencement of financial year		All NBFC, which wants to claim exemptions
Non-Banking Financial Companies (non-Deposit Accepting or Holding) Companies Prudential Norms( Reserve Bank) Directions, 2007 Notification No. DNBS/(VL)2007, Dated 22.02.2007
Para 3, 4, 5, 6	Income recognition Income from NPA shall be recognized only when actually realised. All unrealised income on NPA shall be reversed.	Ongoing	All NBFC
	Income from investment Dividend income on shares and units of Mutual Funds shall be taken on cash basis. Income from Bonds and Debentures from Govt. Securities may be taken on accrual basis. Income from securities (guaranteed by Central Govt. or State Govt.) may be taken on accrual basis.
	Accounting Standards Accounting standards and guidance notes issued by ICAI shall be followed
	Accounting of investment 1. Board of Directors shall frame Investment Policy and implement the same. 2.  Classify the investments into Current and Long Term Investment 3.   No inter-class transfer on ad hoc basis 4.   Inter-class transfer, if warranted, shall be effected only on April 1 or October 1, with the approval of Board of Directors 5.   Investment shall be transferred scrip wise, from Current Investment to long term investment or vice versa at book value or market value, whichever is lower. 6.    Quoted Current Investment shall, for the purpose of valuation, shall be valued at cost or market value, whichever is lower. 7.  Unquoted equity shares in the nature of current investment shall be valued at cost or break-up value, whichever is lower. 8.   Long term Investment shall be valued in accordance with Accounting Standard issued by ICAI.
Para 7	Need for Policy on Demand / Call Loans Policy for demand / call loan shall be framed	Ongoing	All NBFC giving loan etc.
Para 8, 9 and 10	Asset classification Assets shall be classified as Standard, Sub-standard, Doubtful and Loss assets.	Ongoing	All NBFC
	Provisioning requirements Provision for assets (i.e. loans, advances or other credit facilities including bills purchased & discounted, Leased and hire purchased assets) shall be made	Ongoing
	Disclosure in the Balance Sheet Separately disclosure the provisions made as per para 9,  without netting them from the income or against the value of assets.	Yearly
Para 11	Constitution of Audit Committee Company having assets of Rs.50 crore and above shall constitute an Audit Committee.	Ongoing	NBFC having assets of Rs.50 crore and above
Para 12 and 13	Accounting Year Every NBFC shall prepare its B/S and P/L as on 31st March	Yearly	All NBFC
	Schedule to the Balance Sheet Every NBFC shall append to its B/S particulars in the format as set in schedule
Para 14	Transaction in Government Securities NBFC shall hold investment in approved securities in a dematerialised form only.	Ongoing	All NBFC
Para 15	Submission of Auditors Certificate - That the Company is engaged in the business of NBFI requiring it to hold a Certificate of Registration u/s 45IA of RBI Act indicating income and assets pattern of the company making it eligible for classification as Asset Finance, loan or Investment Company.	Latest by 30th June every year.	All NBFC
Para 16	Requirement as to Capital adequacy Company shall maintain w.e.f. 01.04.2007, a minimum capital ratio   (consisting of Tier I and Tier II capital) which shall not be less than 10% of its weighted asset and the risk adjusted value of off-balance sheet items.	Ongoing.	Systemically important –ND taking NBFC
Para 17	Loan against NBFC’s own shares prohibited No loan against own shares shall be given	Ongoing	All NBFC
Para 18	Concentration of credit / investment Restriction has been specified (Lend or invest to single person 15% and group 25%) (Both lend and invest 25% and 40% respectively)	Ongoing	Systemically important –ND taking NBFC
Para 19	Information in regard to change of address, directors, auditors, Principal officer, etc. Information to be submitted by every NBFC company within 30 days from the date of occurrence of any change	Within 30 days of occurrence of  any  change	All NBFC
Para 20	Norms relating to Infrastructure Loan Restructuring of Infrastructure Loan.		All NBFC giving Infrastructure Loan
Under various Notification / Press release issued by Reserve Bank
	Notification No. DNBS.192/DG(VL)-2007 dated 22.02.2007 Monthly return on important financial parameters on NBFC not accepting / holding public deposits and having assets size of Rs.100 crores and above	Monthly	Systemically important –ND taking NBFC
	Notification No. DNBS(PD)CC. No. 93/03.05.002/2006-07 dated 27.04.2007 Annual Statement of capital funds, risk assets/exposures and risk etc.	Annual (30th June) Form NBS-7	Systemically important –ND taking NBFC
	Notification No. DNBS(PD)CC. No. 106/03.10.042/2005-06 dated 04.09.2007 Frauds – Future approach towards monitoring of frauds in NBFC. -where the amount invlolved in the fraud is Rs. 25 lacs and above -Quarterly Return on frauds of Rs. l lakh and above.	Form FMR-1 Form FMR-3	All NBFC
	Circular No. DNBS(PD) CC No. 48/10.42/2004-05 dated 21.02.2005 NBFC is required to formulate a policy on  Know your customer(KYC) and Anti Money Laundering measures and put in place with the approval of Board of Directors within 3 months of the date of circular.		All NBFC
	Circular No. DNBS(PD) CC No. 64/03.10.42/2005-06 dated 05.04.2006 -Appointment of Principal officer -Maintenance of record under rule 3 of Money Laundering Act (PMLA), 2002 (cash/suspicious transactions) -Report information relating to cash and suspicious transactions to the Director  Financial Intelligence Unit , New Delhi		All NBFC
	Circular No. DNBS(PD) CC No. 80/03.10.42/2005-06 dated 28.09.2006 Fair Practice Code to be framed and approval of the same by the Board of Directors of the Company within one month from the date of circular.		All NBFC
	Circular No. DNBS(PD) CC No. 95/03.05.002/2006-07 dated 24.05.2007 Board of Directors of NBFC to lay out appropriate internal principles and procedures in determining interest rates, processing and other charges on the guidelines indicated in fair practice code. To ensure that excessive interest, beyond a certain level are not charged ( interest rates are not regulated by RBI)		All NBFC
	Notification No. DNBS(PD)CC. No. 94/03.05.002/2006-07 dated 08.05.2007 Guidelines on Corporate Governance 1. Constitution of Audit Committee 2. Constitution of Nomination Committee 3. Constitution of Risk Management Committee		Assets Size of Rs. 50 crore and above Systemically important –ND taking NBFC
	Information to be placed before the Board at regular interval, prescribed by the Board: -     progress made in putting in place a progressive risk management system, and risk management policy and strategy followed -     conformity with corporate governance standards, viz, in the composition of various committees, their role and functions, periodicity of the meeting and compliance with coverage and review functions etc.		Systemically important –ND taking NBFC Assets Size of Rs. 50 crore and above
	Connected Lending The NBFC should comply with the instructions on connected lending relationship, as detained in Annexure. Note:  These directions are put on hold) o		Systemically important –ND taking NBFC

	GUIDELINES FOR ASSET –LIABILITY MANAGEMENT(ALM) Circular No. DNBS (DD) CC. No. 15/02.01/2000-01 dated 27/06/2001
	Half-yearly Return for the period ended 31st March and 30th September, in three parts: (i)           Statement of structural liquidity (ii)         Statement of Short term dynamic liquidity (iii)       Statement of Interest Rate Sensitivity	Within one month of ending of half-year	Systemically important –ND taking NBFC
	A system of half yearly reporting is being put in place in this regard and the first Asset Liability Management return may be submitted to RBI by only those NBFCs which are holding public deposits within a month of close of the relevant half year i.e., before 31 October 2002 and continue thereafter in similar manner. The half yearly returns would comprise of three parts : (i) Statement of structural liquidity in format ALM - Annexure - I; (ii) Statement of short term dynamic liquidity in format ALM - Annexure - II; and (iii) Statement of Interest Rate Sensitivity in format ALM - Annexure - III.	As on 30 September 2002
	NBFCs holding public deposits are required to invest up to a prescribed percentage (15% as on date) of their public deposits in approved securities in terms of liquid asset requirement of Scetion 45-IB of the RBI Act, 1934
	Alternatively, the NBFCs may also follow the concept of Trading Book which is as follows: i) The composition and volume are clearly defined; ii) Maximum maturity/duration of the portfolio is restricted; iii) The holding period not to exceed 90 days; iv) Cut-loss limit prescribed; v) Defeasance periods (product-wise) i.e. time taken to liquidate the position on the basis of liquidity in the secondary market are prescribed;	"1 day to 30/31 days (One month)", Over one month and upto 2 months" and "Over two months and upto 3 months" buckets on the basis of the defeasance periods.
	Constitution of Asset Liability Management Committee (ALCO)		Systemically important –ND taking NBFC
	Board of Directors should oversee the implementation of the system and review its functioning periodically.		Systemically important –ND taking NBFC

	DNBS (PD) C.C.No.45 dated November 13, 2004
	all such companies are required to submit a quarterly return in the format provided	Quarterly	NBFCs not accepting / holding public deposits and having assets size of Rs.500 crore and above