EVOLUTION OF FOREIGN EXCHANGE REGULATIONS IN INDIA

Historical Background of Law relating to Foreign Exchange

v  Foreign Exchange Regulation Act, 1947 and Foreign Exchange Regulation Act, 1973

Scarcity of Foreign Exchange in India led to its control since the beginning of World War II.  Exchange control was introduced in India under the Defence of India Rules on September 3, 1939 on a temporary basis. The statutory power for exchange control was provided by the Foreign Exchange Regulation Act (FERA) of 1947.

Foreign Exchange Regulation Act, 1947 was enacted initially for a period of ten years in temporary basis. However, 10 years of economic development did not ease the foreign exchange constraint, FERA permanently entered the statue book in the year 1957. Subsequently, Foreign Exchange Regulation Act, 1947 was replaced by the Foreign Exchange Regulation Act, 1973 (FERA, 1973), which came into force with effect from January 1, 1974. FERA, 1973 came into force, for regulating certain payments, dealings in foreign exchange and securities, transactions indirectly affecting foreign exchange and the import and export of currency, for the conservation of the foreign exchange resources of the country and the proper utilization thereof in the interests of the economic development of the country.

v  Foreign Exchange Regulation Act, 1973, ‘The Major Constraints’

·  In the year 1974, FERA was completely overhauled with all violations being considered as criminal offences with mens rea. The Enforcement Directorate was empowered to arrest any person without even an arrest warrant.

·  In 1991 government of India initiated the policy of Economic Liberalization, Privatization and Globalization. Foreign investments in many sectors were permitted. This resulted in increased flow of foreign exchange in India and foreign exchange reserves increased substantially, hence the government engaged itself in framing a law containing a comprehensive framework for dealing and regulating the foreign exchange inflow and outflow in India.

·  In 1997, the Tarapore Committee on Capital Account Convertibility (CAC) constituted by the Reserve Bank, which recommended change in the legislative framework governing foreign exchange transactions.

·  Keeping in view the changed environment, the Foreign Exchange Management Act (FEMA) was enacted in 1999 to replace FERA. FEMA became effective from June 1, 2000. The philosophical approach was shifted from that of conservation of foreign exchange to the management of foreign exchange,  facilitating trade and payments as well as developing orderly foreign exchange market.

Authorities governing the enforcement of FEMA

·      Foreign Exchange Department of Reserve Bank of India (RBI) – fema.rbi.org.in

· Directorate of Enforcement, Department of Revenue, Ministry of Finance- http://directorateofenforcement. gov.in

· Capital Markets Division, Department of Economic Affairs, Ministry of Finance – http:// finmin.nic.in/the ministry/dept eco affairs/

· Investment Division, Department of Economic Affairs, Ministry of Finance - https://dea.gov.in/divisionbranch/investment-division#IT

· Foreign Trade Division, Department of Economic Affairs, Ministry of Finance – http:// finmin.nic.in/theministry/dept eco affairs/

Machinery responsible for various aspects of FEMA

·      Enforcement Directorate

·      Adjudicating Authority

·      Special Director (Appeals)

·      Appellate Tribunal 

·      Foreign Exchange Department of RBI

·      Foreign Investment Promotion Board*

·      Department for Promotion of Industry and Internal Trade (DIPP)**

*Erstwhile FIPB was mandated to play an important role in the administration and implementation of the Government’s FDI policy. The Central Government has since abolished the Foreign Investment Promotion Board, and the work of granting of approval for foreign investment has been entrusted to the concerned Administrative Ministry/Department vide office Memorandum issued by Ministry of Finance F.No. 01/01/FC12017 –FIPB dated 5^th June, 2017.

**The Department for Promotion of Industry and Internal Trade (DIPP) was established in 1995 and has been reconstituted in the year 2000 with the merger of the Department of Industrial Development. DIPP is responsible for formulation and implementation of promotional and developmental measures for growth of the industrial sector, keeping in view the national priorities and socio-economic objectives. The government has notified changed the name of the Department of Industrial Policy & Promotion (DIPP) to the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry. The DPIIT shall also be responsible for (a) the promotion of internal trade (including retail trade); (b) the welfare of traders and their employees;(c) matters relating to facilitating Ease of Doing Business; and (d) matters relating to start-ups.

Type of transactions under FEMA

v  Capital account transaction (CAT) -These transactions are of capital nature. It alters assets or liabilities including contingent liabilities, outside India of persons resident in India or assets or liabilities in India of persons resident outside India,. CAT are regulated by Foreign Exchange Management (Permissible Capital Account Transactions) regulations, 2000 and covers, among others, the following transactions:

·      Foreign Direct Investment (FDI);

·      Overseas Direct Investment (ODI);

·      External Commercial Borrowings (ECBs);

·      Sale and purchase of Immovable property either in or Outside India;

·      Investment in firms or proprietary concerns in India.

v  Current account transaction (CuAT)-These transactions  other than capital account transactions. CuAT are regulated by Foreign Exchange Management (Current Account Transaction) rules, 2000. Most of the current account transactions do not require the Reserve Bank’s prior approval. Approval of the Reserve Bank is required for those transactions listed in Schedule–III to the Foreign Exchange Management (Current Account Transactions) Rules, 2000, where the remittance to be made is beyond the stipulated limit.

Important change under FEMA regulating governing CAT

The Finance Act,  amended Section 6 (Capital Account Transaction), Section 46 (Power of Central Government to make rules) and section 47 (Power of RBI to make rules) of the Foreign Exchange Management Act, 1999 (FEMA, 1999). These amendments has the effect of  altering the powers of the Central Government and Reserve Bank of India (RBI).

 In terms of  amended prosions of FEMA, the Central Government has made Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 ("NDI Rules") on October 17, 2019 superseding the erstwhile Foreign Exchange Management (Transfer of Issue of Security by a Person Resident outside India) Regulations, 2017 ("TISPRO") and the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2018, whereas RBI has notified Foreign Exchange Management (Debt Instruments) Regulations, 2019 superseding TISPRO, and the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019, which provides for reporting requirements in relation to any investment made under the NDI Rules.

v  Non-Debt Instruments:

·      All investments in equity in incorporated entities (public, private, listed, unlisted)

·      Capital participation in LLPs

·      Instruments of investment as in FDI policy

·      investment in units of Alternative Investment Funds, Real Estate Investment Trust and Infrastructure Investment Trusts;

·      investment in units of mutual funds and Exchange-Traded Fund which invest more than fifty per cent in equity;

·      Juniormost layer (e.g. equity tranche) of securitization structure

·      Acquisition, sale or dealing directly in immovable property

·      Contribution to trusts

·      Depository receipts issued against equity instruments

v  Debt Instruments

Debt  Instruments means all instruments other than non-debt instruments enumerated above.

v  Hybrid  Securities: A definition of “hybrid securities ” has been included in the Non-Debt Rules.

v  Hybrid securities means s instruments such as optionally or partially convertible preference shares or debentures and other such instruments as specified by the Central Government from time to time, which can be issued by an Indian company or trust to a person resident outside India.

However, the Non Debt Rules, as notified by the Central Government do not contain any provision regarding FDI in the hybrid securities. For the reason not apparently clear Reserve Bank of India have yet frame directions regarding the Non Debt incorporated Rules and Debt Regulations

Key Changes in Reporting Machanism of Foreign Direct Investment in India since 1973 till March 2020

v  Physical Form

From the time of introduction of the FERA and FEMA, 1999 and till 2016, reporting was to be made in physical form.

v  e-Biz platform

Later, with a view to promote the ease of reporting of transactions related to Foreign Direct Investment (FDI), RBI has enabled online filing of the returns through the e-Biz portal. On 1st February 2016, RBI vide AP (DIR) Series Circular No. 40 (Ref Notification No. RBI/2015-16/303) introduced the concept of online filing/ reporting through e-Biz platform (http://www.ebiz.gov.in). which was made effective from 8th February 2016.

v  FIRMS (Foreign Investment Reporting and Management System)

With the objective of integrating the extant reporting structures of various types of foreign investment in India, RBI vide A.P (DIR) Circular No. 30 dated 7th June 2018 (Ref Notification No. RBI/2017-18/194) introduced Single Master Form (SMF), which shall be filed online. This form provides facility for reporting of total foreign investment in an Indian entity as per FEMA FDI Regulations, 2017. SMF is a master form containing 9 reports. They are FC-GPR, FC-TRS, LLP-I, LLP-II, CN, ESOP, DRR, DI and InVi. which was made effective from 1st September 2018.

Upcoming Mandatory Compliance by Listed Companies towards "Good Corporate Governance"

1.   An Introduction

The Market Regulator, Securities and Exchange Board of India (SEBI) issued amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015 vide its circular dated 09^th and 10^th May 2018 taking into consideration the recommendations issued by Kotak Committee under the chairmanship of Mr. Uday Kotak in the field of Good Corporate Governance. Most of the amendments were effective w.e.f. 1st April, 2019, while other amendments applicable on listed entities w.e.f. 1st April, 2020. This article will acquaint readers about those amendments which are decided to be effective from 01.04.2020.

Explanation for reader: The top 500 and 1000 entities shall be determined on the basis of market capitalisation, as at the end of the immediate previous financial year.

2.   Amendments to be effective from 01^st April 2020

  v  Composition of Board

A proviso to Regulation 17 (1)(a) has been inserted which reads as:

“Provided that the Board of directors of the top 500 listed entities shall have at least one independent woman director by April 1, 2019 and the Board of directors of the top 1000 listed entities shall have at least one independent woman director by April 1, 2020; “

Commentary: The women director is now proposed to be independent for top 1000 Listed entities. At present, most of the women directors are either from the family of the promoters or the wife/daughter of the directors. Therefore, in order to increase gender diversity on the Board and reduce the biasness to make the board effective.  the SEBI took such initiative.

  v  Minimum no. of directors in listed entities

  

       New sub-clause to regulation 17(1)(c) as appended below:

“the board of directors of the top 1000 listed entities (with effect from April 1, 2019) and the top 2000 listed entities (with effect from April 1, 2020) shall comprise of not less than six directors.”

Commentary: The proposed amendment mandates the minimum no. of directors to be not less than six, which is double the requirement for public companies as prescribed under Companies Act 2013, for the top 2000 listed entities.

 v Separation of role of Non-Executive Chairman and Managing Director/Chief Executive Office (MD/CEO)

  

       New sub-clause to regulation 17(1B) as appended below:

“(1B). With effect from April 1, 2020, the top 500 listed entities shall ensure that the Chairperson of the board of such listed entity shall -

(a) be a non-executive director;

(b) not be related to the Managing Director or the Chief Executive Officer as per the definition of the term “relative” defined under the Companies Act, 2013”

Commentary: In order to ensure working of the board in best interest of the Company and all stakeholder, the Chairman of 500 listed would required to be a non-executive director and not related to MD or the CEO in light of definition of relative provided under the Companies Act, 2013.

However, the SEBI as on January 10, 2020 vide notification No. SEBI/ LAD-NRO/GN/2020/02. notified Securities and Exchange Board Of India (Listing Obligations And Disclosure Requirements) (Amendment) Regulations, 2020, hence in the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, in regulation 17 (1B), the number “2020” shall be substituted by the number “2022”, which means the amended regulation 17(IB) shall be effective from 01.04.2022. 

v  Quorum of BM

New regulation 17(2A) as appended below:

“(2A) The quorum for every meeting of the board of directors of the top 1000 listed entities with effect from April 1, 2019 and of the top 2000 listed entities with effect from April 1, 2020 shall be one-third of its total strength or three directors, whichever is higher, including at least one independent director”

Commentary: The proposed regulation requires 1/3rd of the total strength or 3 directors, whichever is higher, including at least one independent director, w.e.f. 01.04.2020 for top 2000 listed entities. As this is more stringent than provisions as specified in Companies Act 2013, which requires the presence of 1/3rd of the total strength or 2 directors, whichever is higher, for a valid meeting , this amendment was inserted  so that strength of board increased would be enhance along with presence of at least one independent director to ensure the working of board in best interest of all stakeholders especially minority shareholders.

  v  Number of directorship

 New regulation 17A as appended below:

“(1) A person shall not be a director in more than eight listed entities with effect from April 1, 2019 and in not more than seven listed entities with effect from April 1, 2020:

Provided that a person shall not serve as an independent director in more than seven listed entities.”

(2) Notwithstanding the   above, any person   who is serving   as a whole time director / managing director in any listed entity shall serve as an independent director in not more than three listed entities”

Commentary: The regulations have been stricter because the Committee believes that multiple directorships beyond a reasonable limit may lead to a director not being able to allocate sufficient time. Hence, w.e.f. 01.04.2020, number of listed entities in which a person can hold directorship is restricted to 8 from 01.04.2019 and to 7 from 01.04.2020. Further, a person who has been appointed as a whole time director or as a managing director in any listed company would not be able to serve as an independent director in more than three listed company.

Views expressed are personal and do not necessarily reflect the views of the Firm.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

OVERVIEW OF THE PERSONAL DATA PROTECTION BILL

INTRODUCTION

With a growing online footprint, one is at a higher risk of privacy breach than ever before. Also, at this juncture employees and customers are increasingly becoming sensitive about their privacy rights. So, legal framework was required to include policies that support innovation, but which, simultaneously protects individuals and entities from risks associated with data. Thus, data privacy measures are both critical and can provide companies a real business advantage if handled well.

The Ministry of IT, Govt. of India (“MeitY”) constituted a committee of experts chaired by Justice Sri Krishna for issues related to data protection in India on July 31, 2017 (the “Sri Krishna Committee”). It submitted its report titled “Free and Fair Digital Economy, Protecting Privacy and Empowering Indians” (“Report”) and also the Personal Data Protection Bill, 2018 (“PDPB 2018”) on July 27, 2018.

The Report says that legal regime must aspire to the common public good of both a ‘free’ and ‘fair’ digital economy. The Free implies autonomy of the individual with regard to their personal data. And the Fairness pertains to developing a regulatory framework where the existing inequalities in bargaining power between individual and the entities that process such personal data is mitigated.

In August 2017, the Supreme Court in K. S. Puttaswamy v. Union of India (the “Judgement”) recognised right to privacy as a Fundamental Right. The court stated that every person should have the right to control commercial use of their identity. The Judgement, therefore, established that people (citizens and non-citizens) could assert their individual rights against unlawful government invasions to their privacy and it also imposed an obligation on the state to protect the individual’s right to privacy by private entities.

Globally, the enactment of the EU General Data Protection Regulation (“GDPR”) in 2016 which came into force in May, 2018 established a global norm in personal data protection. The PDPB 2018 reflects principles contained in the GDPR, while simultaneously attempting to bespoke the law to Indian needs.

Now, finally, the Government has tabled a modified Personal Data Protection Bill, 2019 (the “PDPB 2019”) in the parliament on December 11, 2019. It has been sent to 20 members Joint Parliamentary Committee for further deliberations. The Committee is expected to submit its Report in the budget session (i.e., February, 2019).

FEMA guidelines for FDI in e-commerce entities

FEMA guidelines for FDI in e-commerce entities

‘E-commerce’ means buying and selling of goods and services including digital products over digital & electronic network.

‘E-commerce entities’ are the following entities conducting the e-commerce business:

•    a company incorporated under the Companies Act, 1956 or the Companies Act, 2013.

•   a foreign company covered under section 2 (42) of the Companies Act, 2013.

•   an office, branch or agency in India owned or controlled by a person resident outside India.

There are three models in which e-commerce entities conduct their business activities which are as mentioned below:

                                       

a.     B2B E-commerce: The entities conducting B2B e-commerce would engage only in Business to Business (B2B) e-commerce and not in retail trading, inter alia implying that existing restrictions on FDI in domestic trading would be applicable to e-commerce as well. Guidelines on cash and carry wholesale trading apply to B2B e-commerce activities also.

b.  ‘Inventory based model of e-commerce’ means an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly.

    It is noteworthy that foreign investment is not permitted in Inventory based model of e-commerce.

c.     ‘Market place model of e-commerce’ means providing of an information technology platform by an e-commerce entity on a digital & electronic network to act as a facilitator between buyer and seller.

    It is pertinent to mention here that 100% foreign investment under automatic route is  permitted in ‘Market place model of e-commerce’.

    Further there are certain other conditions which need to be complied by ‘Market place model of e-commerce’ which are as follows:

(i)     Digital & electronic network mentioned above will include network of computers, television channels and any other internet application used in automated manner such as web pages, extranets, mobiles etc.

(ii)    Marketplace e-commerce entity is permitted to enter into transactions with sellers registered on its platform on B2B basis.

(iii)    Marketplace e-commerce entity is permitted to provide support services to sellers in respect of warehousing, logistics, order fulfilment, call centre, payment collection and other services. Order fulfilment services relate to receiving, processing and delivering orders to end customers.

(iv)      Marketplace e-commerce entity cannot exercise ownership or control over the inventory i.e. goods purported to be sold.

            Explanation: Inventory of a vendor will be deemed to be controlled by marketplace e-commerce entity if more than 25% of purchases of such vendor are from the marketplace e-commerce entity or its group companies which will render the business of marketplace e-commerce entity into inventory based model, in which FDI is not permitted.

(v)      An entity having equity participation by e-commerce marketplace entity or its group companies or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity.  

It means that the market place e-commerce entity will not sell the products of any vendor on its platform where (i) the marketplace entity or its group companies has contributed in the share capital of such vendor company or (ii) where more than 25% of purchases of such vendor are from the marketplace e-commerce entity or its group companies.

In this connection it may pertinent to point out that prior to amendment to FDI regulations on 31 January, 2019, which came into force from 1 February, 2019, as per earlier FDI regulations, E-commerce entity providing a marketplace could not exercise ownership over the inventory i.e. goods purported to be sold. Such an ownership over the inventory was to render the business of the marketplace entity into inventory based model. Further, an e-commerce entity was not to permit more than 25 percent of the sales value on financial year basis affected through its marketplace from one vendor or their group companies.

In other words, as per amended regulations, the marketplace e-commerce entity is not permitted to own any shares of the vendor company. Earlier there was no concept of control of the vendor company by the marketplace e-commerce entity. As per amended regulations the marketplace e-commerce entity which the owns (in part or full) the vendor company or controls the inventory of the vendor company, is not allowed to sell the products a such a vendor on the platform run by such marketplace entity.

(vi)     For the goods/ services that are made available for sale electronically on website, marketplace e-commerce entity is required to clearly provide name, address and other contact details of the seller. Post sales, delivery of goods to the customers and customer satisfaction is the responsibility of the seller.

(vii)   Payments for sale may be facilitated by the marketplace e-commerce entity in conformity with the guidelines issued by the Reserve Bank in this regard.

(viii)     Any warranty/ guarantee of goods and services sold is also the responsibility of the seller.

(ix)         E-commerce entities providing marketplace will not, directly or indirectly, influence the sale price of any goods or services and shall maintain level playing field. Services should be provided by e-commerce marketplace entity or other entities in which e-commerce marketplace entity has direct or indirect equity participation or common control, to vendors on the platform at arm’s length and in a fair and non discriminatory manner.

Explanation: Such services will include but not limited to fulfilment, logistics, warehousing, advertisement/marketing, payments, financing etc. Cash back provided by group companies of marketplace entity to buyers shall be fair and non-discriminatory. For the purposes of this clause, provision of services to any vendor on such terms which are not made available to other vendors in similar circumstances will be deemed unfair and discriminatory.

Prior to amendment the relevant regulation read as under: E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field.

It did not talk of the provisions of services to the vendors in fair and non-discriminate manner.

(x)         No e-commerce marketplace entity can mandate any seller to sell any of their product exclusively on its platform.

(xi)      All existing investments are mandated to be in compliance with the above conditions with effect from 1 February, 2019.

Annual Compliances under FEMA:

The e-commerce entity is now required to annually furnish a certificate along with a report of statutory auditor to the Reserve Bank of India, confirming compliance of the e-commerce guidelines.

While the e-commerce sector in India has seen tremendous growth in the past few years, it will be interesting to see how much impact these policy measures will have in the long run and how the e-commerce giants will comply with these norms.

Core Investment Company

Core Investment Companies, (CIC) are those non-banking financial companies which have their assets primarily as investments in shares of group companies but not for trading, and also do not carry on any other financial activity.

The RBI directions applicable to the Core Investment Companies are contained in the Master Direction - Core Investment Companies (Reserve Bank) Directions, 2016 dated August 25, 2016 (as updated on June 07, 2018).As per the above referred Master Direction, Core Investment Company (CIC) means:

Core Investment Company (CIC) is a non-banking financial company carrying on the business of acquisition of shares and securities and which satisfies the following conditions as on the date of the last audited balance sheet:-

i. it holds not less than 90% of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies;

ii. its investments in the equity shares (including instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue) in group companies and units of Infrastructure Investment Trust only as sponsor constitute not less than 60% of its net assets as mentioned in clause (i) above;

Provided that the exposure of such CICs towards InvITs shall be limited to their holdings as sponsors and shall not, at any point in time, exceed the minimum holding of units and tenor prescribed in this regard by SEBI (Infrastructure Investment Trusts) Regulations, 2014, as amended from time to time.

iii. it does not trade in its investments in shares, bonds, debentures, debt or loans in group companies except through block sale for the purpose of dilution or disinvestment;

iv. it does not carry on any other financial activity referred to in Section 45I(c) and 45I (f) of the Reserve Bank of India Act, 1934 except

(a) investment in

(i) bank deposits,

(ii) money market instruments, including money market mutual funds and liquid mutual funds

(iii) government securities, and

(iv) bonds or debentures issued by group companies,

(b) granting of loans to group companies and

(c) issuing guarantees on behalf of group companies.

As per the above referred Master Direction:

1. Core Investment Companies (CIC) with an asset size of less than Rs. 100 Crore will not be required to register themselves with Reserve Bank of India.
2. Core Investment Companies (CIC) having total asset size of 100 Crore or more either individually or in aggregate along with other CICs in the Group and which raises or hold public funds will be regarded as Systemically Important Core Investment Companies (CICs-ND-SI) and shall be required to get themselves registered with Reserve Bank of India .

Besides registration, there are also certain other provisions which are only applicable on Systematically Important Core Investment Companies (CICs-ND-SI).

One such provision applicable only to CICs-ND-SI is contained in Paragraph 27 of the above Master Directions which provides that a systemically important CIC shall require prior written permission of the Reserve Bank of India for any change in the management of the CICs which results in change in more than 30 per cent of the directors, excluding independent directors. There is some ambiguity regarding the calculation of the percentage prescribed by the Reserve Bank of India in the above direction. For example, a CIC was having three directors. A new director had to join the CIC. The management of the CIC did not seek prior approval of Reserve Bank of India, because as per their understanding, addition on one director to the existing three directors in the company would amount to 25% change and therefore did not require prior approval of the Reserve Bank of India. But when the company subsequently intimated the Bank regarding the change in their directors, Reserve Bank of India advised them the addition of fourth director amounted to change in more than 30 per cent of the directors of the company and as such they should have taken prior written permission of the Reserve Bank of India for that change.

In this connection, paragraph 46 of the above Regulations provides that ‘the interpretation of any provision of these Directions given by the Bank shall be final and binding on all the parties’. 

Thus, the company was required to explain to the RBI the reason for their not seeking prior permission of the RBI for the change in the number of directors of the company, as also to seek post facto approval of the Reserve Bank of India for change their number of directors from three to four.

Another point that baffles the NBFCs relates to the compliance and reporting requirements.It is pertinent to mention here that though the directions applicable to Core Investment Companies are contained in Master Direction - Core Investment Companies (Reserve Bank) Directions, 2016 dated August 25, 2016 (as updated on June 07, 2018). In addition to these directions, there are certain other directions which are applicable to Core Investment Companies as are mentioned in other Master Directions issued by Reserve Bank of India from time to time which are equally important and should be adhered to.Further, sometimes the NBFCs are asked to comply with the directions and report to RBI which as per their understanding, are not related to their NBFC. The NBFCs are however obliged to comply with the RBI directions, as per the provisions of Section 45M of the Reserve Bank of India Act, 1934, they are duty-bound to follow RBI comply with the directions given to them by RBI.

Section 45M is reproduced below for perusal:

45M. Duty of non-banking institutions to furnish statements, etc., required by Bank.

It shall be the duty of every non-banking institution to furnish the statements, information or particulars called for, and to comply with any direction given to it, under the provisions of this Chapter. 

Accordingly, Core investment companies should not only comply with the directions contained in the Master Direction - Core Investment Companies (Reserve Bank) Directions, 2016 dated August 25, 2016 (as updated on June 07, 2018), they should not miss out on other relevant directions as applicable to them contained in other NBFC Directions issued by Reserve Bank of India from time to time.

GD Chugh

Associate Partner