IFSC Finance Company: Section 186 Compliance Not Required for Routine Financial Activities

– Clarification provided in line with exemptions available to NBFCs

– Payal Agarwal, Partner | payal@vinodkothari.com

Section 186 of the Companies Act, 2013 specifies compliance requirements to be followed by a company in granting of loans, making investments, providing guarantee or security to any person or body corporate. For entities engaged in such activities in its “ordinary course of its business”, exemptions are provided through sub-regulation (11) of section 186.

Clause (a) of section 186(11) provides exemption for:

to any loan made, any guarantee given or any security provided or any investment made by a banking company, or an insurance company, or a housing finance company in the ordinary course of its business, or a company established with the object of and engaged in the business of financing industrial enterprises, or of providing infrastructural facilities;

The use of the expression “business of financing industrial enterprises” is explained to include:

• NBFC which is in the business of giving of any loan to a person or providing any guarantee or security for due repayment of any loan availed by any person in the ordinary course of its business. [existing provision] 
• Finance Companies registered with IFSCA engaged in eligible permissible activities in its ordinary course of business (read more on Finance Companies here). [inserted vide the Companies (Meetings of Board and its Powers) (Amendment) Rules, 2025 notified on 6th November, 2025 (date of publication in Official Gazette)]

This brief snapshot provides an overview of the amendment:

Our other resources on Section 186 include:

• Two’s cute, three’s a crowd?
• Companies (Amendment) Act, 2017 brings relief under sections 185 and 186

See our Resource Centre on IFSCA here – https://vinodkothari.com/resources-on-ifsca/