Core Investment Company

Why Core Investment Company in the News

The Reserve Bank of India (RBI) organised a working group that proposed steps to improve Core Investment Companies (CIC). Tapan Ray, the former Corporate Affairs Secretary, leads the organisation.

Core Investment Company

Core Investment Company (CICs) are a subset of Non-Banking Financial Institutions (NBFCs).
A Core Investment Company registered with the RBI has more than Rs 100 crore in assets.
Their primary activity is the purchase of shares and securities under particular conditions.
- For example, these should not invest less than 90% of their net assets in group firms in the form of equity shares, preference shares, bonds, debentures, debt, or loans.
- A group company is an arrangement involving two or more entities that are related to each other through one or more of the following relationships: subsidiary, joint venture, associate, promoter-promotee for listed companies, a related party, common brand name, and investment in equity shares of 20% or more.

Key Recommendations

Registration: The present asset size limitation of Rs 100 crore and access to public money for CIC registration should be maintained.

Concerning Group Companies:
- Every CIC group should have a Group Risk Management Committee.
- The number of CIC levels in a group should be limited to two. As a result, each CIC within a group may not invest via more than two tiers of CICs, including itself.
- The term “layer” refers to a holding company's subsidiary or subsidiaries.

For Better Governance:
- Independent directors must be appointed, internal audits must be performed, and consolidated financial statements must be prepared.
- There is a need to ring-fence CIC boards by barring employees/executive directors from group enterprises.
- Core investment company should form board-level committees.