NBFC Allied Activities: Corporate Insurance Agency and Mutual Fund Distribution

– Harshil Matalia, Executive, Vinod Kothari Consultants Pvt Ltd



Non-Banking Financial Companies (NBFCs) are companies that are principally engaged in financial activities. Financial activities include the activities that result into creation of financial assets in the books of the company or generation of financial income for the company undertaking such activity. NBFCs can engage in non-financial activities as well, as long as such non-financial activity doesn’t become the principal business of such NBFC.[1]

Apart from the financial activities, there are certain other allied activities that NBFCs are allowed to do, subject to certain guidelines prescribed by the Reserve Bank of India (RBI). The RBI Master Directions[2] for NBFCs permit an NBFC to undertake following allied activities:

  1. Insurance Business
  2. Issue of Credit cards
  3. Issue of Co-branded Credit cards
  4. Distribution of Mutual Fund Products.

This article intends to give a brief introduction to Insurance Business and Mutual Fund Distribution activities along with the associated guidelines. With regards to the issue of credit cards, the same is covered under separate article.[3]

Corporate Agent


According to Section 2(f) of IRDAI (Registration of Corporate Agents) Regulations, 2015[4]  (‘the Regulations’), “Corporate Agent” means any applicant who holds a valid certificate of registration issued by the IRDAI under these regulations for solicitation and servicing of insurance business for any of the specified category of life, general and health.

As per Chapter IV of the Insurance Laws (Amendment) Act, 2015[5], the definition of intermediary or insurance intermediary as specified under Section 2(1)(f) of IRDA Act, 1999 was amended and pursuant to such amendment, ‘Corporate Agent’ had been included in the definition. Therefore, Corporate Agents is considered as an Insurance Intermediary under IRDA Regulations.

Registration requirement

In compliance with Regulation 4(4) of the regulations, NBFC being registered with RBI, is required to obtain NOC from RBI before filing application of becoming Corporate Agent. On receiving NOC, the applicant can ascertain the eligibility norms and directly apply for registration as Corporate Agent with IRDA under any one of the following categories and under each category the company can have an arrangement with a maximum of three insurers to solicit, procure and service their insurance products.

  • Corporate Agent (Life)
  • Corporate Agent (General);
  • Corporate Agent (Health)
  • Corporate Agent (Composite)

Corporate Agent can hold a valid certificate to act as an agent of either life insurers or health insurers or general insurers or combination of any two or all of three in case of composite category.

Corporate Agent is required to appoint a principal officer exclusively for supervising the activities of the Corporate Agent. All the employees of the Corporate Agent who are   proposed to be engaged in soliciting and procuring insurance business are known as ‘specified persons’ and such specified persons and principal officer are required to  fulfil the requirements of qualification, training, passing of examination as specified in the regulations by IRDA from time to time.

RBI guidelines on Corporate Agents activity

NBFC can undertake the insurance agency business without taking approval of RBI by merely complying with following conditions:

  1. An NBFC should not force its customers to purchase insurance products of any specific company of whose assets are financed by such NBFCs.
  2. The publicity material distributed by the NBFC should clarify that participation by the customers in insurance products is on a voluntary basis.
  3. The premium payment cannot be routed  through the NBFC.
  4. Any  risk involved in Insurance business cannot be transferred to NBFC business.

Requirements under FEMA

Para F.8 of Schedule I to Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (NDI Rules) provides as under:

F.8 Insurance
Sl. No Sector/ Activity Sectoral Cap Entry Route
F.8.1 a)      Insurance Company

b)      Insurance Brokers

c)      Third Party Administrators

d)     Surveyors and Loss Assessors

e)      Other Insurance Intermediaries appointed under the provisions of Insurance Regulatory and Development Authority Act, 1999 (41 of 1999).

 49% Automatic
F.8.2 Other Conditions

(a)    Foreign investment in this sector shall be subject to compliance with the provisions of the Insurance Act, 1938 and subject to necessary license or approval from the Insurance Regulatory and Development Authority of India for undertaking insurance and related activities.


(c) Where an entity like a bank, whose primary business is outside the insurance area, is allowed by the Insurance Regulatory and Development Authority of India to function as an insurance intermediary, the foreign equity investment caps applicable in that sector shall continue to apply, subject to the condition that the revenues of such entities from their primary (i.e., non-insurance related) business must remain above 50 percent of their total revenues in any financial year.

Accordingly, the NBFC shall additionally comply with IRDA guidelines in relation to extent and conditions for foreign investment in Indian Insurance Companies.

Mutual Fund Distribution


Mutual Fund Distributor (MFD) facilitates buying and selling of mutual fund units by investors. MFDs act as a link between MFs and investors. They help investors by guiding them to carry out investment transactions and also provide relevant information related to performance of their investment. They earn upfront commission from empanelled asset management companies for bringing investors into the mutual fund schemes.

Association of Mutual Funds in India (AMFI) is a nodal association of mutual funds across India. It is non-profit organisation established with the purpose of developing Indian Mutual Fund industry. It provides useful knowledge and insights regarding mutual funds and investments. Any person who wants to become a MFD should approach AMFI for registration.

Registration requirement

The applicant for MFD must comply with procedural guidelines[6] provided by AMFI. The applicant must obtain AMFI Registration Number (ARN) and its employees that would be engaged in selling and distribution of mutual fund units are required to pass requisite NISM certification and obtain Employee Unique Identification Number (EUIN) from AMFI.

RBI guidelines on MFD activity

In order to become an MFD, an NBFC must comply with the RBI directions along with AMFI procedural guidelines. As per RBI Master Directions[7], NBFCs are required to adhere to the following:

  1. Compliance with SEBI guidelines / regulations, including its code of conduct, if any;
  2. Abstain from forcing its customers to trade in specific mutual fund product sponsored by it;
  3. Clarify in the publicity material distributed by the NBFC that participation by the customers in MF products is on a voluntary basis.
  4.  Act as a link between customer and MF by forwarding application for purchase or sale of units and payment instruments.
  5. Abstain from acquiring units of MFs from the secondary market for sale to its customers and from buying back MF units from its customers;
  6. Ensure distinction between its own investment and investment of customer in cases where NBFC is holding custody of units on behalf of customer.
  7. Frame a Board approved policy regarding undertaking MF distribution and adhere to Know Your Customer (KYC) Guidelines.

Requirements under FEMA

As per Para F.10.1 of Schedule I to NDI Rules, ‘Other Financial Service’ means financial services activities regulated by financial sector regulators, viz., Reserve Bank, Securities and Exchange Board of India, Insurance Regulatory and Development Authority, Pension Fund Regulatory and Development Authority, National Housing Bank or any other financial sector regulator as may be notified by the Government of India. Foreign investment in ‘Other Financial Services’ activities is subject to conditionalities, including minimum capitalization norms, as specified by the concerned Regulator/Government Agency.

‘Other Financial Services’ activities need to be regulated by one of the Financial Sector Regulators. In all such financial services activity which are not regulated by any Financial Sector Regulator or where only part of the financial services activity is regulated or where there is doubt regarding the regulatory oversight, foreign investment up to 100 percent will be allowed under Government approval route subject to conditions including minimum capitalization requirement, as may be decided by the Government.


While RBI has permitted NBFCs to undertake several allied acitivites, there is a need to comply with the specific guidelines provided in relation to each of the activity as well as RBI specific directions/ conditions in this regard.


[1] Our presentation that deals with principal business criteria- http://vinodkothari.com/wp-content/uploads/2018/09/Non-Banking-Financial-Companies-An-Overview.pdf

[2] https://rbidocs.rbi.org.in/rdocs/notification/PDFs/MD44NSIND2E910DD1FBBB471D8CB2E6F4F424F8FF.PDF

[3] http://vinodkothari.com/2018/07/credit-cards-and-emi-cards-from-an-nbfc-viewpoint/

[4] http://dhc.co.in/uploadedfile/1/2/-1/IRDAI%20(Registration%20of%20Corporate%20Agents)%20Regulations%202015.pdf




[6] https://www.amfiindia.com/distributor-corner/become-mutual-fund-distributor

[7] https://rbidocs.rbi.org.in/rdocs/notification/PDFs/MD44NSIND2E910DD1FBBB471D8CB2E6F4F424F8FF.PDF

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