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Definitions

2. (1) For the purpose of these directions, unless the context otherwise requires, -

(ia) "Asset Finance Company" means any company which is a financial institution carrying on as its principal business the financing of physical assets supporting productive / economic activity, such as automobiles, tractors, lathe machines, generator sets, earth moving and material handling equipments, moving on own power and general purpose industrial machines.

(i) "depositor" means any person who has made a deposit with a company; or a heir, legal representative, administrator or assignee of the depositor;

(ii) Deleted

(iii) "free reserves" means the aggregate of the balance in the share premium account, capital and debenture redemption reserves and any other reserve shown or published in the balance sheet of a company and created through an allocation of profits not being a reserve created for repayment of any future liability or for depreciation in assets or for bad debts or a reserve created by revaluation of the assets of the company;

(iv) Deleted

(v) "insurance company" means any company registered under section 3 of the Insurance Act, 1938 (4 of 1938);

(vi) "investment company" means any company which is a financial institution carrying on as its principal business the acquisition of securities;

(vii) "lending public financial institution" means -

(a) a public financial institution specified in or under section 4A of the Companies Act, 1956 (1 of 1956); or

(b) a State Financial, Industrial or Investment Corporation; or

(d) the General Insurance Corporation of India established in pursuance of the provisions of section 9 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972); or

(e) any other Institution which the Reserve Bank of India may, by notification, specify in this behalf;

(viii) "loan company" means any company which is a financial institution carrying on as its principal business the providing of finance whether by making loans or advances or otherwise for any activity other than its own but does not include an Asset Finance Company4.

(ix)"mutual benefit financial company" means any company which is a financial institution notified by the Central Government under section 620A of the Companies Act, 1956 (1 of 1956);

(ixa) "mutual benefit company" means a company not notified under section 620A of the Companies Act, 1956 (1 of 1956) and carrying on the business of a non-banking financial institution,

(a) on 9th January 1997; and

(b) having the aggregate of net owned funds and preferential share capital of not less than ten lakhs of rupees; and

(d) is complying with the requirements contained in the relevant provisions of the Directions issued under Section 637A of the Companies Act, 1956 to Nidhi Companies by the Central Government;

(x)`net owned fund’ means net owned fund as defined under section 45-IA of the Reserve Bank of India Act, 1934 (2 of 1934) including the paid up preference shares which are compulsorily convertible into equity;

(xi)"non-banking financial company" means only the non-banking institution which is a loan company or an investment company or an asset finance company6 or a mutual benefit financial company;

(xii)`public deposit’, means a deposit as defined under section 45 I(bb) of the Reserve Bank of India Act, 1934 (2 of 1934) excluding the following :

(a) any amount received from the Central Government or a State Government or any amount received from any other source and whose repayment is guaranteed by the Central Government or a State Government or any amount received from a local authority or a foreign Government or any other foreign citizen, authority or person;

(b) any amount received from the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964), or the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), or the General Insurance Corporation of India and its subsidiaries established in pursuance of the provisions of section 9 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972), or the Small Industries Development Bank of India established under the Small Industries Development Bank of India Act, 1989 (39 of 1989), or the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), or National Bank for Agriculture and Rural Development established under the National Bank for Agriculture and Rural Development Act, 1982, or an Electricity Board constituted under the Electricity (Supply) Act, 1948, or the Tamil Nadu Industrial Investment Corporation Ltd., or the National Industrial Development Corporation of India Ltd., or the Rehabilitation Industries Corporation of India Ltd., or the Industrial Credit & Investment Corporation of India Ltd., or the Industrial Finance Corporation of India Ltd., or the Industrial Investment Bank of India Ltd., or the State Trading Corporation of India Ltd., or the Rural Electrification Corporation Ltd., or the Minerals and Metals Trading Corporation of India Ltd., or the Agricultural Finance Corporation Ltd., or the State Industrial and Investment Corporation of Maharashtra Ltd., or the Gujarat Industrial Investment Corporation Ltd., or Asian Development Bank or International Finance Corporation or any other institution that may be specified by the Reserve Bank of India in this behalf ;

(d) any amount received by way of subscriptions to any shares, stock, bonds or debentures pending the allotment of the said shares, stock, bonds or debentures and any amount received by way of calls-in-advance on shares, in accordance with the Articles of Association of the company so long as such amount is not repayable to the members under the Articles of Association of the company;

(e) any amount received from a person who at the time of receipt of the amount was a director of the company or any amount received from its shareholders by a private company or by a private company which has become a public company under section 43A of the Companies Act, 1956 and continues to include in its Articles of Association provisions relating to the matters specified in clause (iii) of sub-section (1) of section 3 of the Companies Act, 1956 (1 of 1956):

Provided that the director or shareholder, as the case may be, from whom the money is received furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting from others;

provided further, that in the case of joint shareholders of a private company, monies received from or in the name of the joint shareholders except the first named shareholder shall not be eligible to be treated as the receipt of money from the shareholder of the company ;

(f) any amount raised by the issue of bonds or debentures secured by the mortgage of any immovable property of the company; or by any other asset or with an option to convert them into shares in the company provided that in the case of such bonds or debentures secured by the mortgage of any immovable property or secured by other assets, the amount of such bonds or debentures shall not exceed the market value of such immovable property/other assets;

(g) any amount brought in by the promoters by way of unsecured loan in pursuance of stipulations of lending institutions subject to the fulfilment of the following conditions, namely:-

(i) the loan is brought in pursuance of the stipulation imposed by the lending public financial institution in fulfilment of the obligation of the promoters to contribute such finance,

(ii) the loan is provided by the promoters themselves and/or by their relatives, and not from their friends and business associates, and

(iii) the exemption under this sub-clause shall be available only till the loan of financial institution is repaid and not thereafter;

(h) any amount received from a Mutual Fund which is governed by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996;

(i) any amount received as hybrid debt or subordinated debt the minimum maturity period of which is not less than sixty months;

(j) any amount received from a relative of a director of an NBFC

Note: The deposit shall be accepted only on an application made by the depositor containing therein that as on the date of deposit, he is related to the specific director in the capacity of a relative as defined under Companies Act, 1956 (1 of 1956).

(k) any amount received by issuance of commercial paper, in accordance with the guidelines issued by the Bank, vide Circular No. IECD.3/08.15.01/2000-2001 dated October 10, 2000;

(l) any amount received by a Systemically important non-deposit taking non-banking financial company by issuance of 'perpetual debt instruments' in accordance with Company Circular DNBS (PD) CC. No.131 /03.05.002 /2008-2009 dated October 29, 2008 as amended from time to time ;

(xiii) "securities" means securities as defined in section 2(h) of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);

(xiv) "stock broking company" means a company doing the business of a stock-broker or sub-broker holding a valid certificate of registration obtained under section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992); and

(xv) "stock exchange" means a company recognised as a stock exchange under section 4 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956).

(2) Words or expressions used but not defined herein and defined in the Reserve Bank of India Act, 1934 (2 of 1934) or in the Companies Act, 1956 (Act No.1 of 1956) or Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 or the Residuary Non-Banking Companies (Reserve Bank) Directions, 1987 shall have the same meaning as assigned to them in those Acts.

(3) (i) If any question arises as to whether a company is a financial institution or not, such question shall be decided by the Reserve Bank of India in consultation with the Central Government and such decision shall be final and be binding on all the parties concerned.

(ii) If any question arises as to whether a company which is a financial institution is a loan company or an investment company or an asset finance company such question shall be decided by the Reserve Bank of India, having regard to the principal business of the company and other relevant factors and such decision shall be final and be binding on all the parties concerned.