Reserve Bank of India, vide Notification released on 07/04/2014, has informed the concerned Financial Institutions that Non-Operative Financial Holding Companies (NOFHCs) will be a separate category of NBFCs.
The word NOFHCs became popular after it was mentioned by RBI in the ‘Guidelines for Licensing of New Banks in the Private Sector’ dated February 22, 2013.
The Guidelines inter alia, state that promoter / promoter groups will be permitted to set up a new bank only through a wholly-owned Non-Operative Financial Holding Company (NOFHC) which will hold the bank as well as all other financial services companies regulated by RBI or other financial sector regulators, to the extent permissible under the applicable regulatory prescriptions.
The NOFHC will be registered as a non-deposit taking non-banking financial company (NBFC) with the Department of Non-Banking Supervision (DNBS) of the Reserve Bank. However, the regulatory and supervisory framework of NOFHC including prudential norms and submission of returns will be governed by the instructions issued by DBOD from time to time.
Hence, it was necessary to create a separate category of NBFCs, viz., Non-Operative Financial Holding Company (NOFHC).
Only on receipt of the in-principle approval for setting up a commercial bank from the Reserve Bank, the respective company can proceed to get itself registered as NOFHC.