Search this article on Google: What are the mandatory compliance procedures for asset finance in India?
Asset finance in India involves several mandatory compliance procedures. As experienced lawyers at SimranLaw, we emphasize understanding these regulations to ensure the successful conduct of asset finance activities.
1. Registration: All companies engaged in asset finance must register with the Reserve Bank of India (RBI) under Section 45-IA of the Reserve Bank of India Act, 1934.
2. Minimum Net-Owned Fund (NOF): The company must have a minimum NOF of Rs 20 crore as per RBI’s directive effective from April 1999.
3. Income Recognition: Asset finance companies are required to follow the Income Recognition and Asset Classification (IRAC) norms set out by RBI to recognize income from assets.
4. Non-Performing Assets (NPAs): Companies need to make provisions for NPAs as per the rates prescribed by RBI.
5. Know Your Customer (KYC) and Anti-Money Laundering Standards: Asset finance companies must follow the KYC norms and Anti-Money Laundering standards laid down by RBI.
6. Prudential Norms: Asset finance companies must adhere to prudential norms including capital adequacy norms to ensure financial stability and sustainability.
7. Fair Practices Code: Asset finance companies must implement the Fair Practices Code as directed by RBI to promote good and fair lending practices.
8. Submission of required reports: Regular reports need to be submitted to RBI, including monthly return on exposure to capital market, quarterly return on basic statistical returns, annual return on deposits and half yearly return on prudential norms.
9. Compliance with Companies Act requirements: Adherence to the Companies Act, 2013 is pertinent for any corporate entity in India, which includes requirements like timely filing of annual returns, financial statements, and resolutions.
Please note that this is by no means an exhaustive list and depending on the nature of the asset finance activity, additional compliance under Securities and Exchange Board of India (SEBI), Foreign Exchange Management Act (FEMA), and other legislations may be required.
Navigating through the complex regulatory landscape can pose challenges. Therefore, seeking professional legal advice to ensure full compliance with all the mandatory procedures is always advisable. The seasoned lawyers at SimranLaw are here to help you understand and comply with these regulations effectively.