Jio Financial Services seeks RBI approval to convert from NBFC to CIC; here’s what it means
Reliance Industries Ltd (RIL), has asked for the Reserve Bank of India’s (RBI) approval for conversion into a core investment company (CIC). Jio Financial on November 21 announced that it has submitted an application with the RBI for converting to a CIC from a non-banking financial company (NBFC) after a regulatory mandate.
“This is to inform that as mandated by the Reserve Bank of India (while granting its approval for change in the shareholding pattern and control of the Company pursuant to the demerger of the Financial Services Business from Reliance Industries Limited into the Company), the Company has submitted the application for conversion of the Company from NBFC to CIC," Jio Financial Services said in a regulatory filing. Also Read: Jio Financial Services considering maiden bond issue, plans to raise ₹5,000-10,000 crore: Report CICs are NBFCs that invest in the equity shares, preference shares or convertible bonds or loans of their group companies.
They hold control over their group companies and do not trade in their shares except for the purpose of dilution or disinvestment. CICs are passive holding companies and do not engage in any other financial activity.
As per RBI guidelines, CICs are NBFCs carrying on the business of acquisition of shares and securities on several conditions and must hold at least 90% of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies. “This move necessitates JFS to invest at least 90% of its net assets within its group companies, focusing on equity shares, preference shares, bonds, and debentures," said Sonam Chandwani, Managing Partner KS Legal & Associates.
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