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It is very common for any Non-Banking Financial Company (NBFC) to change its management or to experience such change on account of resignation, death, retirement, or takeovers. Therefore, the Reserve Bank of India considered it necessary, in the public interest, to regulate the credit system for the advantage of the financial structure of the country. In this article, we will discuss how to Change in Management of NBFCs?
The Reserve Bank specifies the following conditions, in which the prior approval of the bank is required:
Moreover, the RBI also states that, notwithstanding, anything written in the points above, all the Non-Banking Financial Companies (NBFCs) shall continue to inform the Reserve Bank regarding any change in their directors/ management as required under the following laws:
After affecting any such change, the NBFC is required to apply to the Reserve Bank of India by submitting an application on the letterhead of the Company, along with the following listed documents:
All the applications for obtaining the prior approval may be submitted to the Regional Office of the Department of Non-Banking Supervision in whose jurisdiction the Registered Office of the NBFC is located.
In the situation of any sale, transfer of ownership, or control, or any such change in management as enumerated above, a prior public notice of at least 30 days shall be given. Such notice shall be given by the concerned NBFC as well as the other party in the transaction or jointly by both the parties after being allowed by the Reserve Bank in this regard.
Any such public notice shall be published in one leading English language newspaper and one leading local vernacular newspaper. The notice must also contain the intention of such change in management or acquisition of the control.
The RBI has prescribed various Annexures in its notifications entailing the information about the directors/ promoters/shareholders of the company. The NBFCs are required to fill in the requisite details and then only apply to the Reserve Bank for approval. Any incomplete application will not be entertained by the bank and the approval will be delayed.
The Reserve Bank of India, being the regulator of the financial system in the country including the NBFCs, strives to attain maximum transparency and efficiency in the workings of the financial market. The NBFCs are the rising stars in the area of financial and credit lending parties. Therefore, RBI assures that their workings are uninterrupted. At the same time, it should also be noted that any privilege given to such entities shall not be misused.
Click Here for more details regarding NBFC Registration and Change in Management of NBFCs.