RBI relaxed the norms for participation of NBFCs in Insurance Joint Ventures

Reserve Bank of India (RBI) on 28 November 2013 relaxed norms for participation of Non-Banking Finance Companies (NBFCs) in the insurance joint ventures by allowing them to hold more than 50 percent in such companies.

The notification of Reserve Bank of India has stated that - it has been decided that in cases where IRDA issues calls for capital infusion into the Insurance joint venture company, the RBI may, on a case to case basis, consider need based relaxation of the 50 percent group limit.

The relaxation will be subject to compliance by the NBFC with all regulatory conditions.

In the operation of Insurance Company, the IRDA often requires an insurance company to expand its capital taking into account the stipulations of the Insurance Act and the solvency requirements of the insurance company.

The restriction of a group limit of the NBFC to 50 percent of the equity of the insurance joint venture company prescribed in the above mentioned circular may act as a constraint for the insurance company in meeting the requirement of IRDA.