RBI allows NBFCs to market MF products on selective basis

MUMBAI: RBI on Monday allowed non-banking finance companies (NBFCs) and residuary non-banking companies (RNBCs) on a selective basis to market and distribute mutual fund products as agents of mutual funds.

They will be permitted to conduct the business for an initial period of two years, but only with the prior approval of the apex bank. This permission will be subject to a review after the completion of two years, RBI release stated.

The NBFCs will have to, however, have a minimum net-owned fund of Rs 100 crore and should have made a net profit as per its last two years audited balancesheet.

Two other conditions the NBFCs should fulfill are their percentage of net NPAs to net advances, being not more than 3% as per their last audited balancesheet, and that non-deposit-taking NBFCs (NBFCs-ND) should have a CRAR of 10%, while deposit-taking NBFCs should have a CRAR of 12-15%, as applicable to the company.

Other conditions imposed by the apex bank are that the company should not adopt any restrictive practice of forcing its customers to go in for a particular MF product sponsored by it. “The customers should be allowed to exercise their own choice,” the apex bank said.

While the NBFCs should comply with all Sebi regulations and guidelines, there should further be no ‘linkage’, either direct or indirect, between the provisions of financial services offered by the company to its customers and distribution of the MF products.