The Reserve Bank of India (RBI) on Thursday relaxed norms for non-banking finance companies (NBFCs) in insurance joint ventures by allowing them to hold more than 50 per cent in such companies.
“On a review, it has been decided that in cases where IRDA issues calls for capital infusion into the insurance JV company, RBI may, on a case-to-case basis, consider need-based relaxation of the 50 per cent group limit,” RBI said in a notification.
The relaxation is subject to compliance by the NBFC with all regulatory conditions, it said.
IRDA often requires an insurance company to expand its capital, taking into account stipulations of the Insurance Act and its solvency requirements, RBI said.
The limit on NBFC holdings may act as a constraint for the insurer in meeting the IRDA requirement, it added.
As per existing norms, an NBFC cannot hold more than 50 per cent of the paid-up capital of an insurance joint venture.
A subsidiary or company in the same group of an NBFC or of another NBFC engaged in the business of a non-banking financial institution or banking is not allowed to join the insurance company on a risk participation basis.