Guidelines on Distribution of Mutual Fund Products by NBFCs

Guidelines on Distribution of Mutual Fund Products by NBFCs

NBFCs interested in distributing mutual funds must follow these rules:

Operational Aspects:

They must adhere to SEBI’s guidelines and code of conduct for mutual fund distribution.

They should not force customers to choose any specific mutual fund product, especially if it’s sponsored by the NBFC. Customers should have the freedom to choose.

It should be clear in all promotional materials that choosing mutual funds is entirely voluntary for customers. There must be no direct or indirect pressure linking NBFC’s financial services to mutual fund products.

NBFCs will act as agents, forwarding customer applications and payments to Mutual Funds or their agents. The purchase of units is at the customer’s risk, with no guaranteed returns from the NBFC.

NBFCs cannot buy mutual fund units from the secondary market to sell to customers, nor can they buy back units from customers.

If NBFCs hold mutual fund units for customers, they must keep their investments separate from customer investments.

Other Aspects:

NBFCs need a comprehensive policy approved by their Board for mutual fund distribution. This policy should cover customer suitability, appropriateness, and a grievance redressal mechanism. They must follow SEBI’s code of conduct.

They must adhere to KYC guidelines and the Prevention of Money Laundering Act, 2002.

NBFCs must also comply with any additional terms and conditions that the Reserve Bank may specify in the future.

 Introduction to RBI – NBFC Scale Based Regulation

Regulations applicable for NBFC-BL

Regulations applicable for NBFC-ML

Regulatory Instructions for NBFC-UL

Directions for NBFC – Micro Finance MFIs

Specific Directions for NBFC-Factors and NBFC-ICCs

Specific Directions for Infrastructure Debt Funds IDFs-NBFC

Scoring Methodology for Identification of NBFC as NBFC-UL

Regulatory Guidance on Implementation of Ind AS by NBFCsv

Norms on Restructuring of Advances by NBFCs

Early Recognition of Financial Distress

Flexible Structuring of Long Term Project Loans to Infrastructure and Core Industries

Guidelines on Liquidity Risk Management Framework

Disclosures in Financial Statements – Notes to Accounts of NBFCs

Managing Risks and Code of Conduct in Outsourcing of Financial Services by NBFCs

Guidelines for Credit Default Swaps – NBFCs as Users

Guidelines on Private Placement of NCDs by NBFCs

Guidelines for Entry of NBFCs into Insurance

Guidelines on Issue of Co-Branded Credit Cards

Guidelines on Perpetual Debt Instruments

Guidelines on Liquidity Coverage Ratio (LCR)

Balance Sheet Disclosure Guidelines for NBFCs in Middle Layer and Above

Self-Regulatory Organization (SRO) for NBFC-MFIs – Criteria for Recognition