Reserve Bank of India tightens corporate governance norms for core investment companies

A CIC is a non-banking financial company (NBFC), which carries on the business of acquisition of shares and securities and holds not less than 90 pc of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies. Its investments in equity shares in group companies constitute a minimum of 60 pc of its net assets, the RBI said on Thursday.

Among the parameters, a CIC will be expected to disclose are details of its investment in other CICs, its off-balance sheet exposures and the maturity pattern of its assets and liabilities. To address the complexity in group structures and the existence of multiple CICs within a group, the RBI has restricted the number of layers of CICs within a group to two. “If a CIC makes any direct/ indirect equity investment in another CIC, it will be deemed as a layer for the investing CIC,” the central bank said in a notification.

The parent CIC in the group or the CIC with the largest asset size shall constitute a group risk management committee(GRMC). The GRMC shall report to the board of the CIC that constitutes it and shall meet at least once in a quarter.

The GRMC shall consist of a minimum of five members, including executive members. At least two members shall be independent directors, one of whom shall be the chairperson of the GRMC. Members will be required to have adequate and commensurate experience in risk management practices.

All CICs with asset size of more than Rs 5,000 crore shall appoint a chief risk officer (CRO) with clearly specified roles and responsibilities.