The Credit Information (Regulation) Act 2005, (CIRA) has
laid down the legal framework within which credit information
bureaus can collect, process and share credit information on
borrowers of banks and foreign investments.
In recent times the credit information market has grown
tremendously inviting a number of credit rating agencies and
investors who see it as a lucrative sector.
As per CIRA Credit Information means any
information relating to—
the amounts and the nature of loans or advances, amounts
outstanding under credit cards and other credit facilities
granted or to be granted, by a credit institution to any
the nature of security taken or proposed to be taken by a
credit institution from any borrower for credit facilities
granted or proposed to be granted to him;
the guarantee furnished or any other non-fund based
facility granted or proposed to be granted by a credit
institution for any of its borrowers;
the creditworthiness of any borrower of a credit
any other matter which the Reserve Bank may, consider
necessary for inclusion in the credit information to be
collected and maintained by credit information companies,
and, specify, by notification, in this behalf.
Credit Information Company means a company formed
and registered under the Companies Act, 1956 (1 of 1956) and
which has been granted a certificate of registration under
sub-section (2) of Section 5 of CIRA.
The Government of India by issuing Press Note No. 1(2008)
has capped the Foreign Direct Investment (FDI) limit in Credit
Information Companies (CIC) at 49%, bringing it down from
existing 100%. The above-mentioned ceiling of FDI in CIC is
subject to the approval of the Government, regulatory clearance
from Reserve Bank of India (RBI) and legal purview of CIRA.
The Government has permitted 24% of Foreign Institutional
Investment (FII) in CIC, which are listed at the Stock
Exchanges within the overall limit of 49% for foreign
investment. The foreign investors have to take prior approval
of Foreign Investment Promotion Board (FIPB).
The Government is planning to make it mandatory for foreign
investors to report to RBI whenever they acquire more than 1%
in a credit information company. Also, no single entity would
be allowed to hold, directly or indirectly, more than 10% in
such a company.
Hence subject to the latest guidelines released by the
Ministry of Commerce & Industry FIIs will be on the line of
the following conditions:
No single entity should directly or indirectly hold more
than 10% equity
Any acquisition in excess of 1% will have to be reported
to RBI as a reporting requirement; and
FIIs investing in CICs shall not seek a representation on
the Board of Directors based upon their shareholding.
With the policy on foreign investment in CIC the regulatory
will ensure that the investors adhere accordingly.
The content of this article is intended to provide a
general guide to the subject matter. Specialist advice should
be sought about your specific circumstances.
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The Ministry of Corporate Affairs notified on June 5, 2015 that certain provisions of the Companies Act, 2013 shall not apply to private limited companies or shall apply with such exceptions or modifications as directed in the notification.
Whilst trade and barter have existed since early times, the modern practice of forming business relationships through the means of contract has come into existence only since the industrial revolution in the West.
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