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Applicability of caro

Amber Jain (Article Assistant) (206 Points)

16 August 2012

Hi,

I wanted to know that is CARO applicable to NBFC.

Thanks & regards

Amber Jain

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8 Replies

Deepak Gupta (CA Student) (15922 Points)
Replied 16 August 2012

Originally posted by : Amber Jain
	Hi, I wanted to know that is CARO applicable to NBFC. Thanks & regards Amber Jain

NBFCs are not exempt. Hence, CARO is applicable.

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Akshay (CA-Final) (105 Points)
Replied 16 August 2012

I think not on NBFC.. May be

praveen (Chartered Accountant) (6971 Points)
Replied 17 August 2012

If the company falls in the eligibility criteria of CARO 2003, reporting has to be done. There is nothing specifically said for NBFC

Amber Jain (Article Assistant) (206 Points)
Replied 17 August 2012

But CARO also says that as on Balance Sheet date if its a Banking Co. then NBFC is exempt from the applicability of order.

S Jananikrishna (Learner) (219 Points)
Replied 17 August 2012

For NBFC .. CARO Is applicable...but those 3 condition as to turnover, capital should be satisfied..

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AMARJEET SINGH (ACCOUNTS EXECUTIVE) (25 Points)
Replied 17 August 2012

the Order would not apply in case of non-banking finance

company, which converts into a banking company and as on the balance sheet date is a banking

company.

satish (CA FINAL) (171 Points)
Replied 18 August 2012

CARO APPLICABLE TO NBFC, bcz no exemtpion.

SIDDHARTH KOTHARI (N.A) (280 Points)
Replied 18 August 2012

hi......Amber

BANKING COMPANY AS DEFINED UNDER CLAUSE (c) OF SECTION 5 OF BANKING REGULATION ACT 1949 ARE EXEMPTED FROM CARO APPLICABLITY.

NOW,(c) " banking company" means any company which transacts the business of banking 1[ in India]; Explanation.-- Any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause;

MEANING OF NON BANKING FINANCE COMPANY:A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by Government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property. A non-banking institution which is a company and which has its principal business of receiving deposits under any scheme or arrangement or any other manner, or lending in any manner is also a non-banking financial company (Residuary non-banking company).

SO,CARO IS NOT APPLICABLE TO NBFCs AS THEY ARE IN DIFFERENCE ONLY IN FOLLOWING ASPECTS FROM OTHER BANKS:

NBFCs are doing functions akin to that of banks; however there are a few differences:

(i) an NBFC cannot accept demand deposits;

(ii) an NBFC is not a part of the payment and settlement system and as such an NBFC cannot issue cheques drawn on itself; and

(iii) deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available for NBFC depositors unlike in case of banks.

AS PER ABOVE ANALYSIS I THINK THAT CARO SHOULD NOT BE APPLICABLE TO NBFCs AS THEY ARE IN THE BUSINESS OF FINANCE........