Checklist on NBFC - Micro Finance Institutions

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

An NBFC-MFI is defined as a non-deposit taking NBFC (other than a company licensed under Section 25 of the Indian Companies Act, 1956)

1.      Net Owned Funds: There should be a Minimum Net Owned Funds of Rs.5 crore. (For NBFC-MFIs registered in the North Eastern Region of the country, the minimum NOF requirement shall be Rs.2 crore).

2.      Not less than 85% of its net assets are in the nature of “QUALIFYING ASSETS.”

“Qualifying asset” shall mean a loan which satisfies the following criteria:-

a.      loan disbursed by an NBFC-MFI to a borrower with a rural household annual income not exceeding Rs. 1,00,000 or urban and semi-urban household income not exceeding Rs. 1,60,000 ;

b.      loan amount does not exceed Rs. 60,000 in the first cycle and Rs. 1,00,000 in subsequent cycles;

c.       total indebtedness of the borrower does not exceed Rs.1,00,000 provided that loan, if any availed towards meeting education and medical expenses shall be excluded while arriving at the total indebtedness of a borrower;

d.      tenure of the loan not to be less than 24 months for loan amount in excess of Rs. 30,000 with prepayment without penalty;

e.      loan to be extended without collateral;

f.        aggregate amount of loans, given for income generation, is not less than 50 per cent of the total loans given by the MFIs g. loan is repayable on weekly, fortnightly or monthly installments at the choice of the borrower

3.      An NBFC which does not qualify as an NBFC-MFI shall not extend loans to micro finance sector, which in aggregate exceed 10% of its total assets.

4.      Maintenance of minimum CRAR: All new NBFC-MFIs shall maintain a Capital Adequacy Ratio consisting of Tier I and Tier II Capital which shall not be less than 15 % of its aggregate risk weighted assets.

5.      Components in pricing of loan: 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 thereof).

6.      There will be no penalty charged on delayed payment.

7.      No provision of Security Deposit: NBFC-MFIs shall not collect any Security Deposit/ Margin from the borrower.

8.      There should be a standard form of loan agreement.

9.      Contents of Loan Card: 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 instalments received and the final discharge;

(v)                All entries in the Loan Card should be in the vernacular language.

10.  Display of ROI: 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.

11.  Pricing of ROI: NBFC-MFIs will ensure that the average interest rate on loans during a financial year does not exceed the average borrowing cost during that financial year plus the margin, within the prescribed cap. Moreover, while the rate of interest on individual loans may exceed 26%, the maximum variance permitted for individual loans between the minimum and maximum interest rate cannot exceed 4 per cent.

12.  Not more than two NBFC-MFIs should lend to the same borrower.

13.  Applicability of Corporate Governance Norms: The Master Circular issued for NBFCs on Corporate Governance dated July 01, 2015 shall be applicable to NBFC-MFIs also.

14.  Submission of Statutory Auditor Certificate: All NBFCs are required to submit Statutory Auditors Certificate with reference to the position of the company as at end of the financial year ended March 31 every year.

15.  Applicability of Fair Practice Code: All elements of the Fair Practices Code issued by the Bank vide its Master Circular in this regard dated July 1, 2015 will need to be adhered to by the NBFCMFIs.

16.  Online Returns to be submitted:

S.No.	Return	Due Date	Period
ONLINE RBI RETURNS
1.	NBS-7	Within 15 days of end of Quarter	Quarterly
2.	NDSI – 500cr.	Within 15 days of end of Quarter	Quarterly
3.	ALM – 1	Within 15 days of end of Quarter	Quarterly
4.	Branch Info	Within 15 days of end of Quarter	Quarterly
5.	ALM 2 & 3	Within 30 days of the end of half year	Half Yearly
6.	ALM – Yearly	Within 15 days of end of year	Yearly
FRAUD RETURNS
1.	FMR – 1	Within 3 weeks from detection	-
2.	FMR – 2	Within 15 days of end of Quarter	Quarterly
3.	FMR – 3	Within 15 days of end of Quarter	Quarterly
4.	FMR - 4	Within 15 days of end of Quarter	Quarterly

References:

RBI - Master Circular - MFI

Contact:

CS Divyanshu Bansal

Email ID: divyanshubansal401@gmail.com

Ph: +91-9958381905   

Chapter 5 of LODR Regulations, 2015 : Obligations of Listed Entity which has listed its Non – Convertible Debt Securities or Non – Convertible Redeemable Preference Shares or both

Applicability: On Listed Entity which has listed its Non – Convertible Debt Securities or Non – Convertible Redeemable Preference Shares or both without listing its Equity Shares.

S.No.	Particulars	Regulation	Detail
1.	Intimation to Stock Exchanges	Regulation 50	Intimation regarding payment of interest: The listed entity shall give at least 11 working days prior notice to stock exchanges before the date on which interest on bonds / debentures shall be payable.
			Intimation regarding intention to raise funds, prior to the Board Meeting: The listed entity shall intimate the stock exchanges regarding the intention to raise funds through new non convertible debt securities or non convertible redeemable preference shares it proposes to list either through public issue or private placement, and also its proposal to list the same on the stock exchanges, before the Board Meeting where the proposal to raise funds is to be considered.
			Intimation regarding Board Meeting where recommendation or declaration of issue of non – convertible debt securities is to be considered: The listed entity shall give 2 working days clear notice regarding the Board Meeting where recommendation or declaration of issue of non – convertible debt securities / non convertible redeemable preference shares or any other matter affecting the rights or interests of holders of such securities is proposed to be considered.
2.	Disclosure on performance and price sensitive information	Regulation 51	All the information which have bearing on the performance of the operation of the listed entity and price sensitive information that shall have an effect on payment of interest or dividend or on the redemption of the non convertible debt securities or non convertible redeemable preference shares shall be promptly (as practically possible without any delay) informed to the stock exchanges. The disclosure shall be as per Par B of Schedule III of the Regulations.
3.	Financial Results	Regulation 52	Every listed entity shall submit on half yearly basis its unaudited or audited financial results within 45 days from the end of each half year to the stock exchange where the securities of the entity are listed. Where the results are unaudited, the same shall be accompanied by a limited auditor report from the statutory auditor. In case of PSU, the LRR shall be signed by a PCA.
			Signing of Results: The half yearly results shall be taken on record by the Board of Directors and must be signed by Managing Director or Executive Director.
			Additional attachment: The entity shall along with the half yearly results, submit to the stock exchange a statement indicating the material deviations, if any, in the use of proceeds of issue of non – convertible debt securities & non convertible redeemable preference shares from the objects stated in the offer document.
			Advance intimation regarding submission of Audited Financial Results: In case the listed entity intimates to the stock exchange in advance that it will submit audited results within 60 days from the end of financial year, un-audited results along with limited review report need not be submitted in that case.
			Where the company submits its unaudited results for the last half quarter, it shall submit is audited results for the entire year as soon as it is approved by the Board of Directors. The auditor report shall be accompanied by Form A for unqualified audit report or in Form B for qualified audit report.
			Additional disclosure along with financial results (non convertible debenture listed companies): 1.Credit rating and change in credit rating (if any); 2.Asset cover available in case of non convertible debt securities; 3.Debt – equity ratio; 4.Previous due date of payment of interest / dividend / repayment of principal. 5.Next due date of payment of interest / dividend / principal. 6.Debt service coverage ratio; 7.Interest service coverage ratio; 8.Outstanding redeemable preference shares (quantity and value); 9.CRR / DRR; 10.Net worth; 11.Net Profit after tax; 12.Earning per share. Requirement of disclosure of debt service coverage ratio, asset cover and interest service coverage ratio is not applicable on banks and NBFC. Along with the above information, the entity shall submit to the stock exchange a certificate signed by the debenture trustee that it has taken note of the contents.
			Publication of results: The entity shall within 2 calendar days of the conclusion of the meeting of the Board, must publish the financial results along with the additional statement, in at least one English national daily newspaper circulating in the whole or substantially the whole of India.
4.	Annual Report	Regulation 53	Disclosures in Annual Report: 1.Audited financials (B/s, p&l); 2.CFS under indirect method as mandated under Section 133 of Companies Act, 2013. 3.Auditor’s report; 4.Director’s report; 5.Debenture trustees with full contact details; 6.Related party transactions as specified in Para A of Schedule V.
5.	Asset Cover	Regulation 54	The entity which has listed its debt securities alone shall maintain 100% security cover to discharge its principal amount, and disclose to the stock exchange in its quarterly, half yearly and annual financial statements, the nature of security created and maintained with regard to its secured listed non – convertible debt securities.
6.	Credit Rating	Regulation 55	The credit rating obtained shall be reviewed at least once a year by a credit rating agency registered with SEBI.
7.	Documents and Intimation to Debenture Trustees	Regulation 56	1.A copy of annual report at the time it is issued along with the certificate from the auditor in respect of utilization of funds raised. Where the funds have been raised for financing of working capital or for general corporate or capital raising purpose, the auditor certificate may be submitted at the end of each financial year till the funds have been fully utilized or the purpose of raising the funds is achieved. 2.A copy of notices, resolutions, or circulars relating to new issue of non convertible debt securities, at the same time when they are send to the shareholders. 3.A copy of circulars, resolutions, or notices relating to the meeting of holders of non – convertible debt securities. 4.Intimation regarding revision in credit rating, default in timely payment of interest / redemption, or failure to create charge on asset. 5.A half yearly certificate regarding maintenance of 100% asset cover, by PCA or PCS along with half yearly financial statements. (Not applicable on banks and NBFC) 6.Information sought or provide access to relevant books or accounts as required by debenture trustee.
8.	Other submissions to Stock Exchange	Regulation 57	The listed entity shall submit a certificate to the stock exchange within 2 days of the interest or principal becoming due, that it has made timely payment of the interest / principal. The entity shall even provide an undertaking to the stock exchange on annual basis that all documents and intimations required to be submitted to debenture trustees in terms of TDSEBI Regulations 2008 have been complied with. Any other information as may be required.
9.	Documents and information to the holders of non – convertible debt securities and non convertible preference shares	Regulation 58	1)Soft copies of full annual reports to all the holders of non convertible preference shares who have registered their email address for the purpose. 2)Hard copy of statement containing the salient features of all the documents, as specified in Section 136 of Companies Act, 2013 to the holders of non convertible preference shares who have not registered their email address. 3)Hard copies of full annual reports to those holders or non convertible debt securities and non convertible preference shares, who request for the same. 4)Half yearly communication of Regulation 52 to the holders or non convertible debt securities and non convertible preference shares 5)The listed entity shall send the notice of all the meetings of holders of non convertible debt securities and non convertible preference shares stating specifically that the provision of proxy shall be applicable for the meeting. 6)The proxy form shall be sent to the  holders or non convertible debt securities and non convertible preference shares stating the manner of voting for or against the resolution.
10.	Structure of non convertible debt securities and non convertible redeemable preference shares	Regulation 59	The listed entity shall not make any modification to the structure of debentures in terms of coupon rate, conversion period, redemption period, or to the structure of non convertible debt securities and non convertible redeemable preference shares in terms of dividend payable, conversion period, redemption period except with the prior approval of stock exchange. The stock exchange approval shall be only given after the approval of board and the debenture trustee in case of non convertible debt securities and consent of majority of holders of non convertible preference shares is taken.
11.	Record Date	Regulation 60	A record date shall be fixed for the purpose of payment of dividend, interest or for the purpose of payment of redemption amount, and at least 7 working days notice shall be given to the stock exchange. The date of intimation and the record date shall be excluded for this purpose.
12.	Terms of non – convertible debt securities and non convertible preference shares	Regulation 61	The listed entity shall at all times ensure timely payment of interest on non convertible debt securities or dividend on non convertible redeemable preference shares, and must not declare dividend on equity shares in case it has defaulted in payment of interest on debt securities or dividend on preference shares. The Unclaimed Dividend & Interest shall not be forfeited and must be transferred to IEPF Fund set as per Section 125 of Companies Act, 2013. The redemption of its listed securities shall be only on pro-rata basis or by lot, except provided otherwise, and the entity shall comply with requirement specified under Regulation 40 & procedure laid under Schedule VII of the regulations.
13.	Website	Regulation 62	The listed entity shall maintain a functional website containing details as specified under Regulation 62(1). The entity may also issue a press release with respect to all the events specified under Regulation 62(1). It shall also be ensured that the information disclosed on the website is correct and updated at all times.

References:

Listing Regulations and Disclosure Requirement Regulations, 2015

Contact:

CS Divyanshu Bansal

Email ID: divyanshubansal401@gmail.com

Ph: +91-9958381905