Notification No.DNBS(PD).255/CGM (CRS) 2013 dated June 11 , 2013

The Reserve Bank of India, having considered it necessary in public interest and being satisfied that, for the purpose of enabling the Bank to regulate the credit system to the advantage of the country, it is essential to amend the Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 (hereinafter referred to as the said Directions), contained in Notification No. DNBS.192/DG(VL)-2007 dated February 22, 2007, in exercise of the powers conferred by Section 45JA and Section 45L of the Reserve Bank of India Act, 1934 (2 of 1934) and of all the powers enabling it in this behalf, and hereby directs that the said Directions shall be amended with immediate effect.

In para 19A, of the said Directions under the title, “NBFCs not to be partners in partnership firms", after sub-para(2) the following sub-para shall be inserted, namely:-“(3) In this connection it is further clarified that;

  1. Partnership firms mentioned above will also include Limited Liability Partnerships (LLPs).
  2. Further, the aforesaid prohibition will also be applicable with respect to Association of persons; these being similar in nature to partnership firms.”

NBFCs which had already contributed to the capital of a LLP/Association of persons or were a partner of a LLP/Association of persons are advised to seek early retirement from the LLP/Association of persons. This direction of the RBI has come in the backdrop of RBI having coming across some NBFCs which have large investments in / contributed capital in partnership firms.