MC Explains: What are core investment companies?

CICs with an asset size above Rs 100 crore are regulated by central bank laws. CICs that have an asset size below Rs 100 crore are exempted from registration and regulation from the Reserve Bank

On November 4, TVS Holdings applied for the registration of a core investment company (CIC) with the Reserve Bank of India (RBI). This was conveyed in an exchange notification. Earlier, on November 21, Jio Financial Services applied with the central bank to convert to a CIC from a non-banking financial company (NBFC).

But what does this entail? And what are the central bank’s regulations? Here’s an explainer.

What is CIC?

A CIC is a specialised NBFC with an asset size of above Rs 100 crore. According to an RBI circular dated December 20, 2016, a CIC's main business is the acquisition of shares and securities with certain conditions. One of the conditions stipulated by the central bank is that the CIC holds not less than 90 percent of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies.

Also read: TVS Holding applies for CIC registration to RBI

Another condition said that the respective CIC does not trade in its investments in shares, bonds, debentures, debt or loans in group companies except through block sale for dilution or disinvestment.

What are the recent changes proposed for CICs?

The RBI on April 10, 2023, simplified the application process for the registration of CICs, undertaking a comprehensive review of the system of processing of applications for registration as CICs to make the process smoother and hassle-free.

Accordingly, the application form has been revamped to make it structured and aligned with the extant CIC regulations. Additionally, the number of documents to be furnished along with the application form has been reduced to 18 from the earlier 52

Are all CICs regulated by the RBI?

CICs with an asset size above Rs 100 crore are regulated by central bank laws. CICs that have an asset size below Rs 100 crore are exempted from registration and regulation from the Reserve Bank, except the CICs that have overseas investments in the financial sector.

Which companies have applied for registration as a CIC?

Recently, on November 4, TVS Holdings applied for the registration of a CIC. Earlier, on November 21, Jio Financial Services applied to switch from an NBFC to a CIC. The company notified bourses that it applied to change its shareholding pattern and control after demerger from Reliance Industries, as per the RBI mandate.

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