On February 12, the Reserve Bank of India (RBI) placed restrictions on new investments in NBFCs from countries red-flagged through the Financial Action Task Force (FATF).
The statement published by RBI authorities, on the banking regulator’s official website, that features the list of FATF on high-risk countries or whose name does not appear in the two aforementioned lists, shall be referred to as a FATF compliant jurisdiction. Investments in NBFCs from FATF non-compliant jurisdictions shall not be treated at par with that from the compliant jurisdictions.
The RBI also added investments in Non-banking financial companies from FATF non-compliant authorities shall not be treated at par with that from the compliant authorities.
The RBI announced, new investors from these authorities shouldn’t be allowed to directly or indirectly get “significant influence”, the regulator said. Fresh investors from these authorities, in aggregate, should be less than the threshold of 20% of the voting control in the Non-Banking Financial Companies.
Financial Action Task Force is the inter-governmental official for terrorist funding and money laundering and across the globe. FATF erratically identifies authorities with weak actions to conflict money laundering and terrorist funding in two of its publications: High-risk authorities subject to a Call for Action, and authorities under Increased Observing. Put together, at present, they have identified in 17 countries.
The existing investors in NBFCs who are already invested in their respective authorities were added to the Financial Action Task Force lists, only those can continue their investment and additional investments as per existing regulation to support the stability of Indian business.
