RBI tightens norms for investments in NBFCs from non-FATF nations
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“Investments in non-banking financial companies (NBFCs) from FATF non-compliant jurisdictions shall not be treated at par with that from the compliant jurisdictions," RBI said.
FATF, or the Financial Action Task Force, is the inter-governmental watchdog for global money laundering and terrorist financing. It periodically identifies jurisdictions with weak measures to combat money laundering and terrorist financing in two of its publications: High-risk jurisdictions subject to a Call for Action, and jurisdictions under Increased Monitoring. Put together, they have identified 17 countries at present.
These rules, RBI said, will apply to new investors from or through such non-compliant jurisdictions, whether in existing non-bank lenders on in those seeking registrations.
“New investors from or through non-compliant FATF jurisdictions, whether in existing NBFCs or in companies seeking certification of registration (COR), should not be allowed to directly or indirectly acquire ‘significant influence’ in the investee," it said.
According to the new rules, fresh investors from non-compliant jurisdictions should hold less than the threshold of 20% of the voting power, including potential voting power in an NBFC.
The central bank pointed out that potential voting power could arise from instruments that are convertible into equity, other instruments with contingent voting rights, and contractual arrangements that grant investors voting rights in the future.
However, investors in existing NBFCs holding their investments prior to the classification of the source or intermediate jurisdiction as FATF non-compliant, will be able to continue with the investments or bring in additional investments.
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