What is core investment company?

Core Investment companies are companies holding shares, bonds debentures and is categorized as NBFCs by the RBI. They can’t engage in trading of the instruments they holds.

Core Investment Company (CIC) is a non-banking financial company carrying on the business of acquisition of shares and securities and which (a) holds not less than 90 per cent of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies and (b) its investments in the equity shares in group companies constitutes not less than 60 per cent of its net assets as on the date of the last audited balance sheet.

CICs were not required to obtain Certificate of Registration (CoR) from Reserve Bank. Practically, it is very difficult to determine what type of share transaction the CIC is engaging with.

Considering the many associate issues, the RBI has enacted a revised regulatory framework for CICs from 2010 onwards. The salient features of the framework are as follows:

i) Core Investment Companies (CIC) with an asset size of less than Rs100 crore will be exempted from the requirements of registration with RBI. For this purpose all CICs belonging to a Group will be aggregated.

ii) CICs with asset size above Rs. 100 crore but not accessing public funds are also exempted from the requirement of registration with RBI.

iii) Due to systemic implications on account of access to public funds (such as funds raised through Commercial Paper, debentures, inter-corporate deposits and borrowings from banks/FIs), CICs having asset size of 100 crore or above are categorised as Systemically Important Core Investment Companies (CICs-ND-SI) and are required to obtain Certificate of Registration from the Reserve Bank.