Prohibition on NBFCs to be partners in Partnership Firms

The Reserve Bank of India (RBI) vide Notification RBI/2010-11/453 dated March 30, 2011 has prohibited Non-Banking Financial Companies (NBFCs) from contributing capital to any partnership firm or being partners in partnership firms. In cases of existing partnerships, NBFCs may seek early retirement from the partnership firms. Pursuant to the amendment, RBI has inserted Paragraph 19A in the Non Banking Financial (DepositAccepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 and Paragraph 20A in the Non Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms(Reserve Bank) Directions, 2007 which state the following:

(a) No non-banking financial company shall contribute to the capital of a partnership firm orbecome a partner of such firm.

(b) A non-banking financial company, which had already contributed to the capital of a partnership firm, shall seek early retirement from the partnership firm.The aforementioned amendments will come into force with immediate effect from 31st March, 2011.


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