Finance Current Affairs - 2019

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RBI suspended licence of seven non-banking finance companies (NBFCs)

On 17 August the Reserve Bank of India (RBI) suspends licence of seven non-banking finance companies (NBFCs).

The seven NBFCs whose licences were suspended are – Religare Finance, Artisans Micro Finance, Eden Trade & Commerce, RCS Parivar Finance, Nott Investments, Dewra Stocks & Securities, Swetasree Finance.

Being a dormant entity, Religare Finance licence was suspended by RBI as it did not conducted lending operation for long period of time.

RBI role in issuing licence to NBFCs:

  • A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956, whose principal business is lending, investments and receiving deposits. At present there are around 12,000 NBFCs in India.
  • NBFC does not include any institution whose principal business is agricultural activity, trading activity, industrial activity or sale/purchase/construction of immovable property.
  • RBI has power under RBI Act 1934 to register, regulate, lay down policy, inspect, issue directions, supervise and exercise surveillance over NBFCs that meet the 50-50 criteria of principal business.
  • Any NBFCs that does not carry out its principal business according to the directions or orders issued by RBI under RBI Act is eligible for penal action that can also result in cancelling the Certificate of Registration issued to the NBFC.

Pramerica Mutual Fund has acquired Deutsche MF business in India

Mutual Fund sector witnessed fifth exit of foreign fund house in two years from India on 7 August, as Pramerica Mutual Fund (MF) a company affiliated to US based Prudential Financial Inc. buys out German Deutsche Bank Group’s MF business in India for 400 crore rupees.

Deutsche MF with 20,720 crore rupees assets under management (AUM) is the second largest foreign fund house in India after Franklin Templeton, Whereas Pramerica MF has 2,125 crore rupees AMU and after acquisition it will rise to 23,000 crore rupees making it among the top 15 Assets Management Companies in India.

Earlier ING MF, Morgan Stanley MF, Daiwa MF and Pinebridge Investments had exited from India’s fund management business. They all were bought by Birla Sun Life MF, HDFC MF, SBI MF and Kotak MF respectively.

Recently Pramerica tied up with Dewan Housing Finance Corporation Limited (DHFL) to start up new joint venture under name DHFL Pramerica Asset Managers.

Note: There are over 40 MF entities in India that is managing assets worth Rs 13.17 lakh crore.