CURRENT UPDATE : RBI EASES INVESTMENT NORMS FOR NBFCS IN INSURANCE VENTURES

RBI EASES INVESTMENT NORMS FOR NBFCS IN INSURANCE VENTURES

The Reserve Bank on Thursday relaxed norms for non-banking finance companies (NBFCs) in insurance joint ventures by allowing them to hold more than 50 percent in such companies. 

"On a review, it has been decided that in cases where IRDA issues calls for capital infusion into the insurance JV company, the bank (RBI) may, on a case-to-case basis, consider need-based relaxation of the 50 percent group limit," the Reserve Bank of India said in a notification. 

The relaxation is subject to compliance by the NBFC with all regulatory conditions, it said. The Insurance Regulatory and Development Authority (IRDA) often requires an insurance company to expand its capital, taking into account stipulations of the Insurance Act and its solvency requirements, the RBI said. 

The limit on NBFC holdings may act as a constraint for the insurer in meeting the IRDA requirement, it added.

As per existing norms, an NBFC cannot hold more than 50 per cent of the paid-up capital of an insurance joint venture. 

A subsidiary or company in the same group of an NBFC or of another NBFC engaged in the business of a non-banking financial institution or banking is not allowed to join the insurance company on a risk participation basis.