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Can Non NBFC give Loan???

Lalit (accounts) (195 Points)

03 November 2009

Whether a private company can give loan to another private company without getting registered as NBFC????????

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4 Replies

Lalit (accounts) (195 Points)
Replied 04 November 2009

Non-Banking Financial Companies (Reserve Bank) Directions, 1998 defines NBFC as :

"non-banking financial company" includes only the non-banking institution which is a loan company or an investment company or a hire purchase finance company or an equipment leasing company or a mutual benefit financial company.

Can a company which is not a NBFC give loan to other company????

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Avika, ACS (HR Legal and Management Consultant) (172 Points)
Replied 07 November 2009

Yes a private company can give loan to another private company if it is so authorised by its MOA & AOA.

Regards,

Avika

CA Rajesh Pabari (Chartered Accountant - Advisory & Audit) (247 Points)
Replied 22 July 2011

There are nothing that stops company from giving loans to other companies. However as corrctly mentioned by Avika, the same should be compliant as per MOA and AOA. If its not mentioned, then have to amend it accordingly.

Secondly, to be classified as NBFC as per criteria given by RBI in its press release states that it should earn 50% of its total income from Financial Assets and 50% of its total assets should be financial assets as on balance sheet date. In that case, if the feature is permanant one, then need to get registered with DNBS,RBI.

SkDash (CS (Member) CWA (Final)) (909 Points)
Replied 23 July 2011

Rajeshji-Agree with your 50% income and 50% assets. But is it required to have the clause in MOA and AOA compulsorily ? If the giving of loan is not a business of the company and is purely temporary,Is it need to be in MOA though Act has given the power u/s 372A ? Cant a BR be enough ?