Bigger organizations can have a tough time managing multiple subsidiaries. A clear hierarchy and proper controls are what are required to keep things afloat. But as the famous adage says, easier said than done. No matter how diligently a company manages its group companies, things can fall apart and go out of control, leading to mismanagement, poor financial performance, and compromised productivity. That’s where a Core Investment Company, i.e., CIC, comes into play. Regulated by the RBI, Core Investment Company is a holding company that comes with superior oversight, enhanced capital pooling capabilities, and a flexible structure. Let’s explore more about this structure and its legal implications.
What is a Core Investment Company?
A CIC is an NBFC whose “Principal Business” is the acquisition of shares and securities for the purpose of holding a stake in group companies. Unlike a standard Investment Company, a CIC does not trade these securities; it holds them for long-term strategic control.
The “90/60” Rule
To qualify as a CIC under RBI directions, a company must satisfy specific asset-composition criteria:
- The 90% Threshold: At least 90% of its Net Assets must be invested in group companies (in the form of equity, preference shares, bonds, debentures, or loans).
- The 60% Equity Rule: Within that 90%, at least 60% of its Net Assets must be in the form of equity shares (including compulsorily convertible instruments).
- No Trading: It must not trade in these investments, except through block sales for disinvestment or dilution.
- No Other Financial Activity: It cannot carry out other financial activities (like retail lending or insurance) except for limited permitted operations like bank deposits or government securities.
Who Needs to Register? (The 2026 Thresholds)
Not every holding company is required to register with the RBI[1]. The registration requirement is triggered by two main factors: Asset Size and Access to Public Funds.
A: Systemically Important CICs (CIC-SI)
Registration is mandatory if the company:
- Has total assets of ₹100 crore or more (either individually or in aggregate across all CICs in the group).
- Raises or holds public funds (including commercial paper, debentures, or inter-corporate deposits).
B: Exempted Entities
- Small CICs: Entities with an asset size below ₹100 crore are generally exempt from registration.
- No Public Funds: Even if a CIC has assets over ₹100 crore, it is exempt from registration if it does not access any public funds.
The 2026 Regulatory Framework: Key Pillars
Under the updated Scale-Based Regulation, most registered CICs are now classified within the Middle Layer (NBFC-ML) or Upper Layer (NBFC-UL), subjecting them to stricter governance.
The Two-Layer Limit
To prevent “evergreening” of loans and excessive leverage, the RBI has capped the number of layers of CICs within a single group to two. This means a parent CIC cannot invest in more than two layers of subsequent CICs, ensuring a transparent and manageable group structure.
Capital Requirements & Adjusted Net Worth (ANW)
A CIC-SI must maintain a healthy capital buffer. The most critical metric here is the Adjusted Net Worth (ANW):
- Capital Ratio: The ANW must not be less than 30% of its aggregate risk-weighted assets.
- Leverage Ratio: The outside liabilities must not exceed 2.5 times the ANW.
Important 2026 Update: Per the RBI Amendment Directions 2026, companies can now include quarterly profits in their Owned Funds computation, provided those statements have undergone a limited review by statutory auditors.
Group Risk Management Committee (GRMC)
For large groups, the parent CIC (or the one with the largest asset size) is mandated to form a Group Risk Management Committee. This committee must:
- Have at least five members.
- Include at least two independent directors.
- Identify potential intra-group conflicts of interest and assess the leverage of the group as a whole.
Relevance in Today’s Business Environment
Why would a conglomerate choose to form a CIC instead of a standard NBFC?
- Regulatory Exemption: Registered CICs are exempt from the standard NBFC requirements regarding Net Owned Funds (NOF) and Credit Concentration Norms (which limit how much you can invest in a single entity).
- Strategic Consolidation: It allows a promoter to consolidate their holdings under one professional entity, making it easier to raise capital for the entire group via the parent holding company.
- Overseas Investment: A CIC provides a compliant vehicle for Indian groups to invest in the financial sector abroad, provided they maintain a 400% cap on their owned funds for such investments.
Compliance Checklist for 2026
If you are managing a Core Investment Company or planning to register one, ensure you have the following in place:
- Statutory Auditor’s Certificate: An annual certification confirming that the company continues to meet the 90/60 asset criteria.
- Consolidated Financial Statements: Mandatory under the Companies Act and RBI guidelines to provide a “whole of group” view.
- Chief Risk Officer (CRO): Mandatory for CICs with an asset size exceeding ₹5,000 crore.
- Fit and Proper Criteria: Continuous assessment of directors to ensure they meet RBI’s governance standards.
Conclusion
The Core Investment Company remains the most effective vehicle for managing large-scale corporate holdings in India. However, the “light-touch” regulation of the past has been replaced by a risk-centric approach. In 2026, the focus has shifted from mere asset size to inter-connectedness—ensuring that the failure of one layer of a group does not bring down the entire financial ecosystem.
FAQs
1. Can a CIC accept public deposits?
No. By definition, a Core Investment Company is a non-deposit-taking entity. While it can raise “public funds” (like commercial paper or debt instruments), it is strictly prohibited from accepting traditional savings or fixed deposits from retail customers.
2. What happens if a CIC’s investment value drops below 90% due to market volatility?
The 90% criteria is calculated based on the “book value” of the investments, not the current market value. This protects the CIC’s regulatory status from being revoked simply because of a temporary dip in the stock market.
3. Is a CIC allowed to provide guarantees for group companies?
Yes. Providing guarantees or acting as a partial credit enhancer for loans taken by group companies is a permitted activity. However, these guarantees are factored into the “Outside Liabilities” calculation for the 2.5x leverage ratio.
4. Can a CIC invest in a startup that is not yet a “group company”?
A CIC can technically invest in any entity, but if that investment doesn’t meet the “group company” definition (usually requiring at least 26% voting rights), it counts toward the 10% limit of non-conforming assets. Exceeding this 10% risks the company being reclassified as a standard NBFC-Investment and Credit Company (ICC).
5. Are there restrictions on the “Two-Layer” rule for overseas structures?
The restriction on two layers of CICs applies specifically to the Indian dynamic. If a CIC invests in an operating subsidiary abroad that further has its own step-down subsidiaries, those operating layers usually do not count toward the “two-layer” restriction aimed at holding companies.
Also Read: Step-by-Step Guide to RBI License Requirements 2026
