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Considering the contribution of NBFCs in development in financial markets in India, RBI has given green signal to NBFC to enter into Insurance companies Business. The Reserve Bank of India has laid down the guidelines for the entry and workings of the NBFCs in the insurance sector. With the participation of NBFC’s in Insurance Sector, the Insurance companies can meet their capital and other ancillary requirements as per IRDAI and carry on its activities smooth
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NBFCs are required to obtain prior approval of the Insurance companies Regulatory and Development Authority of India (IRDAI) and Reserve Bank of India before entering into the insurance business.
Insurance Agency Business:
NBFCs registered with Reserve Bank of India may take up insurance agency business on the fee basis and without risk participation subject to the following conditions:
The provisions of NBFC Directions on Acceptance of Public Deposits exempts the deposits from a relative of a director within the purview of Public Deposits. NBFCs shall take a separate application form from such depositors with suitable notice to their attention that such deposits would be treated as deposits from relatives. NBFCs are vested with the burden to prove that the deposits have been received from the relative of directors. It also requires that the relationship between the depositor and the specific directors of the company would be material on the date of acceptance of such notice.
In case more than one company in the same group of the NBFC wishes to take a stake in the insurance company, the contribution by all Insurance companies in the same group shall be counted for the limit of 50 percent prescribed for the NBFC in an insurance Joint Venture.
Read our article:Major challenges faced by NBFCs & their solutions
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