The master directions have opened the pandora’s box by creating overlap and intersectional complexity in classification of NBFC and Core Investment Company (CIC).
Recently, Reserve Bank of India (RBI) on 28 November 2025 released several master directions consolidating more than 9000 circulars/guidelines. Out of which 35 master directions have been issued for the regulation of non-banking financial companie(s) (NBFCs) for the purpose of robust regulations, removal of ambiguity and support ease of doing business. One of the key master direction was the Reserve Bank of India (Core Investment Companies) Directions, 2025 (CIC Directions) dated 28 November 2025 repealing the Core Investment Companies (Reserve Bank) Directions, 2016 (Repealed Direction).
However, these master directions have opened the pandora’s box by creating overlap and intersectional complexity in classification of NBFC and Core Investment Company (CIC). This article will be analysing the classification norms and primarily the issue whether a company must qualify as NBFC before being classified as a CIC or whether a company can directly be classified as CIC. This question has significant implication for holding company across India, particularly those with substantial intra-group investments.
Classification under the Repealed Direction
Under the Repealed Direction, first a company was required to be registered as a NBFC by fulfilling the principal business criteria (50-50 test)1 discussed below. Upon the satisfaction and registration as a NBFC, the Company was required to satisfy the “90-60 test” to be recognised as a CIC. In addition to above parameters, to be a registered CIC, the CIC shall satisfy several other parameters such as: 1) the Company shall have an assets size of INR 100 crores and above, 2) the Company shall carry the business of acquisition of shares and securities and which satisfies the following conditions as on the date of the last audited balance sheet, 3) shall not engaged in any other business activity other than ones prescribed under Sections 45-I(c) and 45-I(f), Reserve Bank of India Act, 1934 (RBI Act), 4) it accepts public funds, and 5) other parameters as prescribed under Para 2(1).
Additionally, Para 2(1) of the Repealed Directions also states that the Repealed Directions would be applicable on a NBFC carrying on the business of acquisition of shares and securities. Thus, it was clear that a CIC to be registered and recognised was required to satisfy the dual parameters:
1. a company was required to registered as a NBFC by 50-50 test first; and
2. upon the registration of the Company as a NBFC, the Company was required to satisfy the “90-60 test” to be classified as a CIC with more than 100 crores of assets size and other parameters.
Provisions under the CIC Directions
Similar to the Repealed Direction, the CIC Directions defines “CIC” as a Company having total assets of not less than Rs 100 crores either individually or in aggregate along with other CICs in the group and which raises or holds public funds. Further, Para 3 of the CIC Directions prescribes a quantitative threshold popularly known as “90-60 test” for classification, stating that these CIC Directions shall apply to every CIC that is to say a NBFC carrying on the business of acquisition of shares and securities and which satisfies the following “90-60 test” as on the last audited balance sheet:
1. it holds not less than 90 per cent of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies; and
2. investments in equity shares (including instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue) of group companies should not be less than 60 per cent of the net assets.
Additionally, the CIC Directions also states that the Company shall not carry on any other financial activity referred to in Sections 45-I(c) and 45-I(f), RBI Act except investment in bank deposits, money market instruments including money market mutual funds that make investments in debt/money market instruments with a maturity of up to one year, government securities, loans to and investments in debt issuances of group companies or guarantees issued on behalf of group companies.
However, on the contrary to Repealed Direction, the CIC Directions has opened the pandora box by incorporating new provision under Para 17(3) stating that:
CICs need not meet the principal business criteria for NBFCs as specified under Para 38 of Reserve Bank of India (Non-Banking Financial Companies — Registration, Exemptions and Framework for Scale Based Regulation) Directions.
Intersection between CIC and NBFC parameters
While Para 17(3) of the CIC Directions states that CICs are not required to meet the 50-50 test for NBFC. However, it is pertinent to note that the Repealed Direction did not have any similar provision. Additionally, it shall be also noted that in order to be classified as a NBFC under the Reserve Bank of India (Non-Banking Financial Companies — Registration, Exemptions and Framework for Scale Based Regulation) Directions, 2025 (NBFC Directions), a company was required to be classified to satisfy the 50-50 test to be recognised as a NBFC.
Further, the NBFC Directions also provides for a scale-based regulation consisting of four layers: 1) base layer, 2) middle layer which also includes a CIC, 3) upper layer, and 4) top layer. Thus, this layered structured establish that a CIC is a sub-category of NBFC.
Additionally, Section 45-I(c) read with Section 45-I(f), RBI Act states that a NBFC carrying the business of financial institution such as: 1) investment in bank deposits, money market instruments, government securities, bonds or debentures issued by group companies; 2) granting of loans to group companies; and 3) issuing of guarantees on behalf of group companies is required to satisfy the 50-50 test to be recognised as a NBFC. Even, the above discussed provisions are referred in Para 3(4) of the CIC Directions stating that NBFC shall not carry any other business except the ones prescribed under the said provision. Therefore, the intersection of Section 45-I(c) read with Section 45-I(f), RBI Act which clearly refers to its applicability on NBFC is also applicable on a CIC.
Also, the CIC Directions state that it shall only apply to a CIC that is to say a NBFC which carries the business of acquisition of shares and securities and satisfies the “90-60 test”. The above discussed paras created an intersectional overlap, as Para 3 suggest that the CIC Directions is applicable to CIC that is to say a NBFC and on the other hand, Para 17 states that the CIC does not need to meet the 50-50 test, the classification parameter of the NBFC. However, to be recognised as a NBFC, a CIC is required to be fulfil the 50-50 test.
The reading of the above directions, regulations and provision suggest a two-way conclusion that:
1. To be recognised as a CIC is required to first satisfy the 50-50 test to be recognised as a NBFC and upon the classification of the Company as NBFC, the Company shall mandatorily satisfy the “50-50 test” to recognised as a CIC as previously practiced and implemented in consonance with Repealed Direction.
2. To recognised as a CIC, a company is only required to “90-60 test” and is not mandatory that shall fulfil the principal business criteria.
This creates ambiguity in terms of classification, recognition and registration of a company as a CIC, if it is required to satisfy the 50-50 test.
Conclusion
While the directions was released by RBI consolidating the circulars and consolidated rules into master directions to enhance clarity, ease of access, and support the concept of the improving of ease of doing business. However, the CIC Directions and NBFC Directions has created an ambiguity in the classification of the CIC, if a CIC is required to recognised as NBFC first before its classification as CIC. The author is of the view that a company before its classification as a CIC is required to be recognised as a NBFC first and upon the satisfaction of the 50-50 test, later the Company is required to satisfy 90-60 test to be classified as a CIC based on the following, harmonious reading of the abovementioned CIC Directions and NBFC Directions and analysis of the legislative intent of RBI:
1. CIC is recognised as a sub-category of a NBFC as prescribed under the NBFC Directions.
2. Secondly, Para 3 of the CIC Directions prescribes that CIC Directions shall apply to every CIC that is to say a NBFC carrying on the business of acquisition of shares and securities and shall satisfy the 50-50 test.
3. Prior to the release of the NBFC Directions and CIC Directions, in order be to classified as a CIC, a company was required to 50-50 test, 90-60 test and later 50-50 test to be classified as a CIC.
4. The PRAVAAH Portal of the RBI in the application form for grant of certificate of registration (CoR) as CIC states that a company shall submit that in terms of sub-sections (1) and (2) of Section 45-IA, request for the CoR for a CIC and all the necessary documents are furnished with the application. The relevant parts are reproduced below from the application form:
“We make this application in terms of sub-section (2) of Section 45-IA, RBI Act for issue of CoR. The required documents/information as per the instructions are furnished. 2) We are desirous of *commencing/carrying on the business of a CIC. Hence, we hereby request you to kindly issue the necessary CoR under sub-section (1) of Section 45-IA, RBI Act to enable our company to *commence/carry on the business of a CIC.”
It is pertinent to note that sub-sections (1) and (2) of Section 45-IA, mandate that no NBFC can commence or carry on the business of a non-banking financial institution without first obtaining a CoR from RBI and maintaining the prescribed minimum net owned fund, and every such company must apply for registration in the specified form, with existing companies permitted to continue business only until RBI grants or rejects the application. Accordingly, since sub-sections (1) and (2) of Section 45-IA apply specifically to NBFC and prohibit any entity from commencing or carrying on NBFC business without obtaining a CoR and satisfying the prescribed net owned fund requirement, and given that the CIC application on RBI’s PRAVAAH Portal expressly requires a submission under the above provisions, it follows that an applicant seeking registration as a CIC is necessarily required to fall within and seek registration in the capacity of an NBFC. Thus, a company applying for CIC registration is, by statutory design and application structure, required to be registered as an NBFC under Section 45-IA.
In the frequently asked questions (FAQ) released by RBI on the CIC dated 8 May 2025 before the issuance of the CIC Directions, RBI in Clarification Nos. 14 to 17 clarified that a CIC in group companies only is not required to satisfy the 50-50 test applicable to NBFCs for being recognised and registered as a CIC. The FAQ further clarifies that: 1) a company may be registered as a CIC even if it does not meet the 50-50 asset income test; 2) where a holding company does not presently satisfy CIC conditions, it may approach RBI with a time-bound restructuring plan to achieve CIC status; and 3) only where an entity fails CIC conditions and subsequently satisfies the NBFC 50-50 test would NBFC registration become mandatory. These clarifications indicate a regulatory recognition of CIC as a distinct category that may, in appropriate cases, bypass the principal business test otherwise applicable to NBFCs.
*Practising advocate, Bombay High Court. Author can be reached at: ashishptn18@gmail.com.
**Practising advocate, Bombay High Court.
1. The principal business criteria stipulates a dual threshold test popularly known as “50-50 test”:
1. if its financial assets are more than 50 per cent of its total assets (netted off by intangible assets); and
2. income from financial assets is more than 50 per cent of its gross income.
