Exempting IFSCA-registered Finance Companies from section 186

Ayush Kumar – Executive | corplaw@vinodkothari.com

Background:

With a view to promoting ease of doing business for Finance Companies (FCs) operating in the IFSC jurisdiction, the MCA, upon the request of the IFSCA, has vide its notification dated November 3, 2025, extended the exemptions available under section 186 of the Companies Act, 2013, to FCs registered with the IFSCA – similar to those already available to NBFCs registered with the RBI.

Exempted companies – existing exemption list 

Under the existing framework, the following companies were exempted from section 186 (except sub section (1)), if loan given, guarantee made, security in connection with loan given, investment in securities done was in the ordinary course of business of:

• Banking company
• Insurance company
• Housing finance company
• Registered NBFCs
  • which is in the business of giving loans or providing any guaranty or security for due repayment of any loan 
• Company established with the object of and engaged in the business of providing infrastructural facilities

Finance Companies registered with IFSCA – added in the exemption list 

Finance Companies are defined under Rule 2(1)(e) of IFSCA (Finance Company) Regulations, 2021. 

• FCs should be separately incorporated 
• It is not a Banking Unit registered with IFSCA
• It deals in permitted activities under Reg 5(1)
• It cannot accept public deposit from residents / non-residents 

FCs engaged in the following permitted activities (Eligible FCs) are exempted from the applicability of sec 186:

• Lend in the form of loans, commitments and guarantees, credit enhancement, securitisation, financial lease, and sale and purchase of portfolios
• Global/Regional Corporate Treasury Centres

The condition for availing the exemption remains the same as that for NBFCs and other companies i.e the loan / guarantee / security in connection with loan should be extended in the ordinary course of its business.

Related articles:

1. IFSC Finance Company: Section 186 Compliance Not Required for Routine Financial Activities
2. Two’s cute, three’s a crowd?
3. Companies (Amendment) Act, 2017 brings relief under sections 185 and 186

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