{"id":2566,"date":"2017-07-15T15:16:53","date_gmt":"2017-07-15T09:46:53","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=2566"},"modified":"2020-11-03T16:24:31","modified_gmt":"2020-11-03T10:54:31","slug":"nbfcs-insurance-business","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/nbfcs-insurance-business\/","title":{"rendered":"NBFCs in Insurance Business"},"content":{"rendered":"

The Non-Banking Financial Companies (NBFCs) are considered almost similar to the conventional banks except a few differences which make them their counterparts. As per latest developments in the financial markets, the NBFCs are entering into the insurance sector also. The Reserve Bank of India has laid down the guidelines for NBFC<\/a> Registration in India<\/strong><\/a> in the Insurance sector. In this article we will look at NBFCs in Insurance Business.<\/p>\n\n\n\n

The Basic Requirement for Entry of NBFCs in Insurance<\/h2>\n\n\n\n

Any Non-Banking Financial Company (NBFC) which has obtained NBFC registration with RBI for carrying out its operations and having a net owned fund (NOF) of Rs. 500 lakhs as per the last audited balance sheet shall be permitted to undertake insurance business as an agent of insurance companies on a fee basis<\/a>, without any risk participation.<\/p>\n\n\n\n

Prior to this, the concerned NBFCs shall also take approval from Insurance Regulatory and Development Authority (IRDA)<\/strong>[1]<\/a><\/sup>.<\/p>\n\n\n\n

Few Exceptions<\/h2>\n\n\n\n

Under the following conditions, the approval of RBI<\/strong> is not required and the NBFCs can straightaway take the entry into the insurance business:<\/p>\n\n\n\n

  1. Requisite permission by the concerned NBFCs shall be obtained from IRDA and the IRDA regulations shall also be compiled with or acting as ‘composite corporate agent’ with insurance companies.<\/li>
  2. Any restrictive policies shall not be adopted by NBFCs which forces its customers to only prefer a particular insurance company. Customer’s choice shall be given priority.<\/li>
  3. All the public disclosure material distributed by the concerned NBFC shall state very clearly that the subject of participation by an NBFC’s customer in insurance products is purely on a voluntary basis. The NBFCs shall not link, either directly or indirectly, the provision of the financial services provided by it and the use of the insurance products offered by it.<\/li>
  4. The premium to be payable on the insurance shall be made directly to the insurance company without taking the NBFC into the picture.<\/li>
  5. The risks associated with the business of insurance conducted by the NBFC shall not be transferred into the business of NBFC.<\/li><\/ol>\n\n\n\n

    NBFCs in Insurance Business: Application for Approval<\/h2>\n\n\n\n

    The desired NBFC shall make an application to the Reserve Bank of India along with the necessary documents and particulars duly certified by their statutory auditors to the Regional Office of Department of Non-Banking Supervision under whose jurisdiction the registered office of the NBFCs is situated.<\/p>\n\n\n\n

    NBFCs in Insurance Business: Requirements of Equity Contribution<\/h2>\n\n\n\n

    The NBFCs planning to step into the business of insurance sector is required to hold the maximum equity contribution of 50 % of the paid-up equity capital of the Insurance Company with whom it has entered into the joint venture. In some cases, the Reserve Bank can allow a higher equity contribution by a promoter NBFC.<\/p>\n\n\n\n

    Eligibility Criteria for NBFCs getting into the Joint Venture<\/h2>\n\n\n\n
    \"Eligibility<\/figure>\n\n\n\n