|Type of Service Provider||Individual Consultant|
|Type of Industry||Manufacturing|
|Type of Service Contract||Retainer Based|
In recent times, RBI compliances are getting tougher for NBFCs as compared to before. There were times when Non-Banking Financial Companies had privileges over banks. In comparison to banks, compliance laid down by RBI for NBFCs were far more lenient but after the Sahara case, RBI has made new compliances for NBFCs and now it is under RBI’s continuous screening. Some of the important guidelines are Securitization of Standard Assets and Guidelines for Private Placement of NBFCs. RBI is keeping making efforts for preventing speculation in NBFCs.
RBI releases notifications for the additional compliance requirement for NBFCs.Submission of Annual Statements and Returns
NBFC-ND-SI (Non-Deposit category) are required to submit an annual statement of capital funds, risk assets ratio etc. It can be submitted electronically as well as physically.
Further Capital Adequacy, Liquidity, and other disclosure norms have been incorporated in Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007.
It is a financial institution which primarily engages itself in underwriting & business loans, catering to the needs of large-scale enterprises & high net worth individuals. It can also be called as Investment Banking.
They are experts in international trade which makes them specialists in dealing with various multinational entities & forming strategic alliances. It generally provides finances to large organizations that do oversee the business. Merchant's Banks even help corporation issue securities through private placements.
It also provides corporate advisory services to the firms they invest in.What is Function of Merchant bankers?
To explain the role of a Merchant Bank, suppose a multinational corporation XYZ is considering the purchase of a smaller company in another country. Company XYZ will likely solicit the services of a merchant bank for advice on how to best approach the acquisition process. In addition, the merchant bank may also assist in the financing of the acquisition, providing underwriting or loan services.EXAMPLE of Merchant Bankers in India?
Canara Bank, Karur Vysya Bank, ICICI Securities Ltd, IFCI Financial Services Ltd etc.LEGISLATIONS
SEBI (Merchant Bankers) Regulations, 1992
SEBI (Payment of Fees) (Amendment) Regulations, 2014FEES
For registration as a Merchant Banker, an applicant is required to pay a non-refundable application fee of Rs. 50000/- by way of demand draft drawn in favor of 'SEBI', payable at Mumbai.
Initial Registration – 20 Lacs (5 years validity)
Permanent Registration – 9 LacsCAPITAL ADEQUACY NORMS
A merchant banker is required to have a minimum net worth of not less than 5 Crore. Only a Body Corporate other than an NBFC is eligible to act as a Merchant Banker.
Categories of a Merchant Banker
As per section 9A, Merchant Bankers shall obtain prior approval of SEBI before effecting any change in control of management. It shall also affect the obligation to obtain fresh registration under section 12 within a period of 6 months from affecting the change.RBI MANDATE
As per RBI's Master Circular on Para-Banking activities, banks are allowed to undertake merchant banking activities through a separate subsidiary which would be required to comply with SEBI regulations issued in this behalf. Banking Institutions performing merchant banking activities are also required to follow the requirements laid down in the prudential exposure norms prescribed by RBI, as well as the statutory limits contained in Section 19(2) & (3) of the Banking Regulation Act, 1949.ELIGIBILITY
|Insurance Policy Duration ( In Years)||On term|
|Types||Auditing consulting, Sales Tax Consultancy, Service Tax consultancy, Accounting consulting, Income Tax consulting|
|Type Of Non-Guaranteed Return Investement||Commodity|
|Financial Services||Post Office saving schemes, Postal Life Insurance, Forex Services, Mutual Funds, Money Remittance Services|
|Additional Services||Due Diligence, APO Transaction, Pre-auditing, Financial Reporting, Mergers|
|Finanacial Investement||Guaranteed Return Investement|
|Financial Functions||Investement decision|
RBI has simplified the NBFC takeover can process and a takeover deal can be executed in 45 to 60 working days. Takeover of NBFC is easier than Fresh registration of NBFC.
Acquirer of NBFC should first conduct due diligence and overview the financials of the target company. Once The target NBFC is go to go and to execute acquisition of the said NBFC, MOU to be signed with some advance money.
What is Takeovers in the financial terms, means the purchase of one business entity by another. This can be either friendly takeover, wherein the seller entity consents to sell its assets to the acquirer entity. Or on the other hand, this can take form of hostile takeovers, where the acquirer entity deliberately and secretly acquires the control of the other entity. In both the conditions, the balance sheet of the seller entity stands null after all its assets and liabilities are transferred to the acquirer.
The concept of mergers and takeovers is not new to the economic world. Many business houses have experienced either a remarkable success or disheartening breakdown after such arrangements. NBFCs, being considered as near substitute to the conventional banks, have also not been left untouched by the takeover and acquisition drives. The Reserve Bank of India laid down the procedure for the Takeover of NBFCs so as to prescribe a systematic system eliminating every bias and ambiguity.
In case of the friendly takeovers of the NBFCs, the first step in the process is to sign the MOU with the proposed company after the decision for NBFC takeover is been approved by the Board of both the companies. Once the Board has consented for the aforesaid takeover, the next step in the process is to seek RBI’s approval for the subject.What is NBFC Takeover Procedure / NBFC for Sale Procedure
When we are talking about the RBI’s approval for NBFCs arrangements and takeovers, the minor changes in the management of NBFCs or minor acquisition of control of NBFCs is kept outside the meaning of the takeovers.
Prior approval from the Reserve Bank of India is taken in the following conditions of NBFCs arrangements, failing which the whole process shall be considered null and void:
|Type of Industry||Manufacturing|
|Frequency of Service||Yearly|