Page 308 - CA Final PARAM Digital Book.

QNO CIC CARO Reporting Old Course – (N22E)
525.520 TITANIUM CNO -- Unique
What is a Core Investment Company (CIC) under the Reserve Bank of India regulations? What are the
specific reporting requirements to be considered by an auditor in respect of CIC under CARO 2020?
Answer Core Investment Companies: As per RBI Master Direction – Core Investment Companies (Reserve Bank)
Directions, 2016, (Reference may be made to aforesaid Master Direction), these directions shall apply to
every Core Investment Company (CIC), that is to say, a nonbanking financial company carrying on the
business of acquisition of shares and securities and which satisfies the following conditions as on the date
of the last audited balance sheet:-

(i) it holds not less than 90% of its net assets in the form of investment in equity shares,
preference shares, bonds, debentures, debt or loans in group companies;
(ii) its investments in the equity shares (including instruments compulsorily convertible into equity
shares within a period not exceeding 10 years from the date of issue) in group companies and
units of Infrastructure Investment Trust only as sponsor constitute not less than 60% of its net
assets as mentioned in clause (i) above;

Provided; that the exposure of such CICs towards InvITs shall be limited to their holdings as
sponsors and shall not, at any point in time, exceed the minimum holding of units and tenor
prescribed in this regard by SEBI (Infrastructure Investment Trusts) Regulations, 2014, as
amended from time to time.

(iii) it does not trade in its investments in shares, bonds, debentures, debt or loans in group
companies except through block sale for the purpose of dilution or disinvestment;

(iv) it does not carry on any other financial activity referred to in Section 45I(c) and 45I(f) of the
Reserve Bank of India Act, 1934 except

a. investment in
(i) bank deposits,
(ii) money market instruments, including money market mutual funds and liquid mutual funds
(iii) government securities, and
(iv) bonds or debentures issued by group companies,

b. granting of loans to group companies and

c. Issuing guarantees on behalf of group companies.

As per CARO 2020, the auditor is required to report that –
(i) Whether the company is a Core Investment Company (CIC) as defined in the regulations made
by the Reserve Bank of India, if so, whether it continues to fulfil the criteria of a CIC, and in case
the company is an exempted or unregistered CIC, whether it continues to fulfil such criteria;
[Paragraph 3(xvi) (c)]
(ii) Whether the Group has more than one CIC as part of the Group, if yes, indicate the number of
CICs which are part of the Group; [Paragraph 3(xvi) (d)]

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