Compendium of Instructions for Management and Oversight of Subsidiaries
Department ofSubsidiariesandStrategicInvestments
HeadOffice, NABARD
Title Written & Published by
Date of Publishing
DevelopmentBankofthe Nation for Fostering Rural Prosperity
VISION MISSION
Promotesustainableandequitable agriculture and rural development through participative financial and non-financial interventions, innovations, technology and institutional development for securing prosperity
Contact Email Website : : : : Compendium of Instructions for Management and Oversight of Subsidiaries Department of Subsidiaries and Strategic Investment, NABARD Head Office, Mumbai
July 2025
Plot No C-24, ‘G’ Block, Bandra Kurla Complex, Bandra East, Mumbai - 400 051 India Tel : +91 22 26539289 dssi@nabard.org www.nabard.org | : : /nabardonline © 2025 National Bank for Agriculture and Rural Development Unless otherwise stated in this document, on part of this document may be reproduced or transmitted in any form by any means without the written authorization from NABARD Department : Department of Subsidiaries and Strategic Investments Head Office, NABARD Year 2025
Compendium of Instructions for Management and Oversight of Subsidiaries
(Approved in the14meetingofORMCheldon 19 June 2025)
Department of Subsidiaries and Strategic Investments
Head Office, NABARD
Document Title Drafted by
Document Classification
Document no./Version no.
CompendiumofInstructions for Management and Oversight of Subsidiaries Department of Subsidiaries and Strategic Investments 19 June 2025
Internal 1 0
Date of Approval 19 June 2025
Changes/Comments
New Compendium introduced
Changes/Comments
New Compendium of Instructions introduced
Reference Companies Act, 2013 SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015
Reserve Bank of India (Prudential Regulations on Basel III Capital Framework, Exposure Norms, Significant Investments, Classification, Valuation and Operation of Investment Portfolio Norms and Resource Raising Norms for All India Financial Institutions) Directions, 2023
Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023
RPT Policy of NABARD
Formulated/ Changed by DSSI
Approved by ORMC
Operational Risk Management (ORM) Policy –Framework – Revision in the New Product Approval Framework (NPAF)”
Compliance Policy of NABARD
Outsourcing of Information Technology (IT) Services
HRMD policy
New Compendium of Instructions introduced
Reference No.
Act no 18 of 2013 dated 29 August 2013
SEBI/LAD-NRO/GN/2015 -16/013 dated 2 September 2015
RBI/DoR/2023-24/105 dated 21 September 2023
RBI/DoR/2023-24/106dated 19 October 2023
Policy approved in the 250th Meeting of the Board of Directors of NABARD held on March 28, 2023, and revised in 262nd Board Meeting held on May 27, 2025
Circular No 54/RMD-01/2023 dated 24 March 2023
Circular No 60/RMD - 11/2025 dated 21 February 2025
Circular No. 58/ RMD – 09/2025/ 2024-25 dated 21
February 2025
Circular no 11/HRMD/PA-01/2025 dated 15 Jan 2025
ORMC meeting dated 19 June 2025
Foreword
I am pleased to announce the release of the inaugural edition of the Compendium of Instructions for Management and Oversight of Subsidiaries This comprehensive guide provides a structured framework for NABARD’s engagement with, governance of, and oversight of its subsidiary institutions
Our subsidiaries play a vital strategic role in advancing NABARD’s developmental mandate particularly in the areas of financial inclusion, agricultural finance, rural livelihoods, investment management, and advisory services As these entities expand in both scope and impact, ensuring coherence, accountability, and strategic alignment in their operations becomes ever more critical
This compendium reaffirms our commitment to sound governance, institutional integrity, and the creation of long-term value through effective subsidiary management It incorporates the latest regulatory developments and internal best practices, and is intended to serve as a dynamic, evolving resource that adapts to shifting regulatory, business, and developmental landscapes
I would like to acknowledge and commend the Department of Subsidiaries and Strategic Investments (DSSI) for their dedicated efforts in compiling this significant document. I urge all relevant officials and stakeholders to actively use this compendium as a practical and living guide in managing and engaging with our subsidiaries
(Shaji K V) Chairman, NABARD
Formation
Nominee
Demat
Governance
Capital
Board
General
Interconnectedness
Management
Key
Mergers, Acquisition, Demergers and Winding-up Communication and Transparency Review of the Compendium Annexures Template for submission of Proposal for setting up of New
Subsidiary Template for Nomination of Shareholder for Subsidiary Form no SH-4 securities
transfer form MGT-4 MGT-5 MGT-6 Standard Operating Procedure (SOP) for Capital Infusion in Subsidiaries Standard Operating Procedure (SOP) for Appointment of Nominee Director on the Board of Subsidiary
Format for Nomination of Board of Directors
Standard Operating Procedure (SOP) for Nominee Directors
Documents required for DSC & DIN
Format for Board Agenda and Proceedings
Template for Formulation of Rules of Procedure
Guiding Principles for having representation of NABARD in the Committees/SubCommittees/Specialized Committees of the Subsidiaries
Model Dividend Distribution Policy for NBFC Subsidiaries
Model Dividend Distribution Policy for Non-NBFC Subsidiaries
SOP for Engagement of NABARD Officials for NABCONS assignments
MIS I - Format for submitting Important Developments
MIS II- Format for Compliance Certificate
MIS III - Format for Monthly Progress Report (MPR)
Broad
(PLI)
1. Objective
1 1 The objective of this Compendium is to establish guidelines and procedures for formation, monitoring and oversight of subsidiaries of NABARD, encompassing both financial and non-financial sectors This Compendium aims to ensure consistency, transparency, and effective oversight across all subsidiaries, thereby optimizing operational performance and enhancing collaboration with and among the subsidiaries to achieve the NABARD mandate.
2. Scope
2.1 This Compendium shall be applicable to all the subsidiaries and Department of Subsidiaries and Strategic Investments
2 2
This Compendium of Instructions for Management and Oversight of Subsidiaries also serves as a comprehensive reference for users across NABARD who seek to understand the end-to-end operational framework governing the relationship between NABARD and its subsidiaries It offers insights into critical aspects such as governance, strategic alignment, operational coordination, and compliance protocols
3. Definitions (As per Companies Act 2013)
3.1 Subsidiary and Associate Company
3.1.1 Subsidiary - “subsidiary company” or “subsidiary”, in relation to any other company (that is to say the holding company), means a company in which the holding company
a) controls the composition of the Board of Directors; or
b) exercises or controls more than one-half of the total voting power either at its own or together with one or more of its subsidiary companies: Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed
Explanation.
a) a company shall be deemed to be a subsidiary company of the holding company even if the control, as indicated at (a) & (b) above, is of another subsidiary company of the holding company;
b) the composition of a company’s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors; the expression “company” includes any body corporate; c)
d) “layer” in relation to a holding company means its subsidiary or subsidiaries;
3 1 2 Associate Company - “associate company”, in relation to another company, means a company in which that other company has a significant influence, but which is not a subsidiar y company of the company having such influence and includes a joint venture company.
Explanation
a) the expression “significant influence” means control of at least twenty percent of total voting power, or control of or participation in business decisions under an agreement.
b) the expression “joint venture” means a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement;]
3.2 Types of Directors
3.2.1 Residential Director: - As per Section 149(3) of Companies Act,2013, every company shall have at least one director who stays in India for a total period of not less than one hundred and eighty-two days during the fin a n cia l ye a r:
Provided that in case of a newly incorporated company the requirement under this sub-section shall apply propor tionately at the end of the financial year in which it is incorporated.
3.2.2 Independent Director: - As per section 149(6) ) of the Companies Act, 2013, an independent director in relation to a company, means a director other than a Managing Director, Whole Time Director or Nominee Director -
a) who, in the opinion of the Board, is a person of integrity and possesses relevant expertise& experience;
b) who is or was not a promoter of the Company or its holding, subsidiary or associate company;
c) who is not related to promoters or directors in the company, its holding, subsidiary or associate company; who has or had no pecuniary relationship, other than remuneration as such director or having transaction not exceeding ten percent of his total income or such amount as may be prescribed, with the company, its holding, subsidiary or associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year;
d)
none of whose relatives
(i) is holding any security of or interest in the company, its holding, subsidiary or associate company during the two immediately preceding financial years or during the current financial year:
Provided that the relative may hold security or interest in the company of face value not exceeding fifty lakh rupees or two percent of the paid-up capital of the company, its holding, subsidiary or associate company or such higher sum as may be prescribed;
(ii) is indebted to the company, its holding, subsidiary or associate company or their promoters, or directors, in excess of such amount as may be prescribed during the two immediately preceding financial years or during the current financial year;
(iii) has given a guarantee or provided any security in connection with the indebtedness of any third person to the company, its holding, subsidiary or associate company or their promoters, or directors of such holding company, for such amount as may be prescribed during the two immediately preceding financial years or during the current financial year; or
(iv) has any other pecuniary transaction or relationship with the company, or its subsidiary, or its holding or associate company amounting to two percent or more of its gross turnover or total income singly or in combination with the transactions referred to in sub-clause (i), (ii) or (iii);
e) who, neither himself nor any of his relatives
(i) holds or has held the position of a key managerial personnel or is or has been employee of the company or its holding, subsidiary or associate company in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed;
(ii) is or has been an employee or proprietor or a partner, in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed, of
(A) a firm of auditors or company secretaries in practice or cost auditors of the company or its holding, subsidiary or associate company; or
(B) any legal or a consulting firm that has or had any transaction with the company, its holding, subsidiary or associate company amounting to ten percent or more of the gross turnover of such firm;
(iii) holds together with his relatives two percent or more of the total voting power of the company; or
(iv) is a Chief Executive or director, by whatever name called, of any nonprofit organisation that receives twenty-five percent or more of its receipts from the company, any of its promoters, directors or its holding, subsidiary or associate company or that holds two percent or more of the total voting power of the company; or
f) who possesses such other qualifications as may be prescribed (Refer Rule 5 of Companies (Appointment and Qualification of Directors) Rules, 2014.
3.2.3 Small Shareholders Directors: - A listed Company may have one director elected by small shareholders May appoint upon notice of not less than 1000 Shareholders or 1/10th of the total shareholders, whichever is lower have a small shareholder director which elected form small shareholder
3.2.4 Women Director: - As per Section 149 (1) (a) of Companies Act, 2013, second proviso requires certain categories of companies to have at least one-woman director on the board Such companies are every listed company, and every other public company having-
a) Paid Up Share Capital of `100 crore or more, or
b) Turnover of 300 crore or more
3.2.5 Additional Directors: As per Section 161(1) of Companies Act, 2013, the articles of a Company may confer on its Board of Directors the power to appoint any person, other than a person who fails to get appointed as a director in a general meeting, as an additional director at any time who shall hold office up to the date of the next annual general meeting or the last date on which the annual general meeting should have been held, whichever is earlier
3.2.6 Alternate Directors:- As per Section 161(2) of Companies Act, 2013, a Company may, if so authorised by its articles or by a resolution passed by the company in general meeting, appoint a person, not being a person holding any alternate directorship for any other director in the company or holding directorship in the same company, to act as an alternate director for a director during his absence for a period of not less than three months from India Provided that:
a) no person shall be appointed as an alternate director for an independent director unless he is qualified to be appointed as an independent director under the provisions of this Act;
b) an alternate director shall not hold office for a period longer than that permissible to the director in whose place he has been appointed and shall vacate the office if and when the director in whose place he has been appointed returns to India;
c) if the term of office of the original director is determined before he so returns to India, any provision for the automatic re-appointment of retiring directors in default of another appointment shall apply to the original, and not to the alternate director
3.2.7 Nominee Directors: - They can be appointed by certain shareholders, third parties through contracts, lending public financial institutions or banks, or by the Central Government
3.2.8 Managing Director: -means a director who, by virtue of the articles of a company or an agreement with the company or a resolution passed in its general meeting, or by its Board of Directors, is entrusted with substantial powers of management of the affairs of the company and includes a director occupying the position of managing director, by whatever name called.
Explanation. The power to do administrative acts of a routine nature when so authorised by the Board such as the power to affix the common seal of the company to any document or to draw and endorse any cheque on the account of the company in any bank or to draw and endorse any negotiable instrument or to sign any cer tific ate of share or to direct regis tr ation of tr ans fer of any share, shall not be deemed to be included within the substantial powers of management
3.2.9 Whole-time-Director: - includes a director in the whole-time employment of the company.
Difference Between Executive and Non-Executive Director:- An Executive Director can be either a Wholetime Director of the company (i e , one who devotes his whole time of working hours to the company and has a signific ant per sonal interest in the company as his source of income) , or a Managing Director (i e , one who is employed by the company as such and has substantial powers of management over the affairs of the company subject to the superintendence, direction and control of the Board) In contrast, a non-executive Director is a Director who is neither a Whole-time Director nor a Managing Director.
4. Overview of Subsidiaries
4.1 As on 31 March 2025, NABARD has seven Subsidiaries A brief background of these subsidiaries is given hereunder:
4.1.1 NABARD
Consultancy Services
Private Limited (NABCONS): NABCONS is a wholly owned subsidiary of NABARD, incorporated under Companies Act, 1956 on 17 November 2003 The company provides consultancy services for domestic/international clients including Government of India (GoI) and State Governments, in the field of agriculture and rural development The services rendered include preparation of detailed project reports, conducting monitoring studies, capacity building, organizing domestic/ international programs, project management, etc The registered office of the Company is located at New Delhi and the Corporate office at Mumbai
4.1.2 NABFINS Limited: Originally, it was incorporated as Karnataka Agri Finance Development Corporation, Bangalore (KAFDC) on 25 February 1997 as per Companies Act, 1956 In 2008, it applied for and was granted as NBFC licence by RBI and was renamed “NABARD Financial Services Limited” effective from 12 March 2008. On 10 February 2015, NABARD Financial Services Limited was registered as an NBFC MFI Subsequently, it was rechristened to “NABFINS Limited” w e f 27 August 2019 NABFINS is a micro-finance lender and provides other facilities to the needy and disadvantaged sections of society. The Company provides credit facility for promotion, expansion, commercialization and modernization of agriculture and allied activities The Company operates through Business and Development Correspondents (B&DC) and other models for effecting lending and recovery of refinance activities The registered office of the Company is located at Bengaluru, Karnataka
4.1.3 NABKISAN Finance Limited (NABKISAN): Formerly, it was incorporated as Agriculture Development Finance Tamil Nadu Limited (ADFT) on 14 February 1997 under Companies Act, 1956 On 18 April 2008, ADFT was registered with RBI as a non-deposit taking NBFC. In 2014, ADFT was rebranded as NABKISAN Finance Limited,
and the new name was registered with RBI w.e.f. 25 September 2014. It is registered with RBI as NBFCND-SI. NABKISAN provides credit support for livelihood/ income generating activities to Panchayat Level Federations, Trusts, Societies and Section 8 companies/ MFIs for on-lending to its member SHGs/JLGs The present focus of the company is to support FPOs for their term loan and working capital requirements The registered office of the Company is located at Chennai, Tamilnadu and Corporate office at Mumbai, Maharashtra
4 1 4 NABSAMRUDDHI Finance Limited (NABSAMRUDDHI): Formerly, it was incorporated as Agri Business Finance (AP) Limited (ABFL) on 17 February 1997 On 17 January 2017, ABFL, Hyderabad was rebranded as NABSAMRUDDHI Finance Limited It is registered under RBI as NBFC-ND-SI The Company provides credit to facilitate promotion, expansion, commercialization and modernization of enterprises engaged in agriculture and allied activities and off farm activities with primary focus on wholesale/semi-wholesale/ bulk lending to agriculture, allied activities, microfinance, MSME Sectors. The registered office of the Company is located at Hyderabad and Corporate office at Mumbai.
4.1.5 NABVENTURES Limited: NABVENTURES is a wholly owned subsidiary of NABARD, incorporated under the Companies Act, 2013 on April 23, 2018. The subsidiary is established to carry on the business of advising and managing Alternative Investment Funds for government, private investors, trusts; institutional investors, banks, companies, individuals or any other body corporate (whether incorporated in India or abroad) for investments in stocks, shares, finance, debenture bonds, property, depositor y receipts, options, obligations, derivatives or in and all kinds of financial instruments The registered office of the Company is located at Mumbai
4.1.6 NABFOUNDATION: NABFOUNDATION is a wholly owned subsidiary of NABARD, incorporated under Section 8 of the Companies Act, 2013 on August 31, 2019 The main objectives of the NABFOUNDATION, include rural income and livelihood generation, sustainable agriculture and rural development, natural resource management, providing resources support and guidance for various Governmental and Nongovernmental programmes, etc. The registered office of the Company is located at Mumbai.
4.1.7 NABSanrakshan Trustee Private Limited: NABSanrakshan is a wholly owned subsidiary of NABARD, incorporated under the Companies Act, 2013 on 13th November 2020. NABSanrakshan aims to carry out credit guarantees and related activities towards sustainable and equitable agriculture and rural development. Agriculture and allied industry, being a priority for the economy in creating new avenues for development, NABSanrakshan provides, the necessary fillip to the growth of the sector, through access to finance
CIN and GST numbers of each of the subsidiaries is given below:
5. Formation of New Subsidiary
5.1 In terms of Section 38A of NABARD Act, 1981 - NABARD may, in consultation with the Reserve Bank, promote, form or manage or associate itself in promotion, formation or management of companies, subsidiaries, affiliates, societies, trusts or such other association of persons, as it may deem fit, for the pur pose of c ar r ying out its functions under the NABARD Act
The process for forming new subsidiary is outlined in RMD circular on “Operational Risk Management (ORM) Policy – Framework – Revision in the New Product Approval Framework (NPAF)” Circular No. 54/RMD-01/2023 dated 24 March 2023. The same, or any revision thereto, shall be followed. Template for submission of proposal of setting up New Subsidiaries, is furnished in Annexure I
For incorporation of new subsidiary, DSSI may have a Practising Company Secretary as per procurement policy
Post incorporation of the new subsidiary, the next steps to be initiated are indicated below: Compliance
Within 30 days from the date of incorporation
• Timeline: preferably within 60 days of incorporation
Mode: Capital to be credited into the company’s bank account (opened postincorporation) with documentary proof as bank statement
30 days from incorporation
Opening of bank account
Within 7–10 days postreceipt of incorporation documents
Within 60 days of Incorporation
f Filing of INC- 20A (Commencement of Business)
g.
h.
5.5
Statutory Registers and Books
PAN/TAN activation
Within 180 days after paid up capital is received
To be maintained from the date of incorporation
Received with Certificate of Incorporation
Other Considerations: After incorporation of the subsidiary, following actions may be initiated for smooth functioning of the company:
5.5.1 GST Registration (if applicable): Can be filed through Agile form at the time of incorporation or post incorporation, typically processed in 5–7 working days.
5.5.2 Professional Tax/ESIC/EPFO registrations: Auto-registered through Agile (mandatory where applicable).
5 5 3 MSME Registration
5.5.4 Company Letterhead, Statutory Display Boards, and Seal: To be arranged within the first month.
6. Nominee Shareholders and transfers of shares
To ensure compliance with minimum shareholder requirement under Companies Act 2013, NABARD may designate its officers to hold equity shares of subsidiary in the beneficial interest of NABARD These shares may be transferred back to NABARD, if the minimum shareholder requirement of the company has been met by addition of new shareholders
Only those officers who are employed on a permanent basis with NABARD and are positioned in Grade E or F may be nominated for this purpose Fur ther, the nominated officer should preferably have a minimum residual service of 2 years
The Chairman, NABARD shall be the competent authority for nominating the NABARD officers as shareholders, as also, permitting transfer of shares to other officers or back to NABARD.
The initial shareholders of new subsidiary shall be nominated as per Board Memorandum regarding incorporation of the Subsidiary
The letter of nomination for the transfer of shares shall be issued by DSSI to the respective subsidiary, with a copy to the transferee and transferor officers A sample format for letter of nomination is attached as Annexure II
Based on the nomination, the subsidiary shall provide the duly filled Form SH-4 related to the transfer of shares This form must be signed by both the Transferor and the Transferee A sample format of Form SH-4 is attached as Annexure III Filling of Form SH-4 is required if share is held in physical form
O fficer s nominated to hold shares in beneficial interest of NABARD, shall be required to hold active Demat account In case, they don’t have such account, the concerned subsidiary and DSSI shall facilitate opening/ maintaining the Demat account for holding the shares. The cost in this regard shall be borne by NABARD. The Company Secretary of the Subsidiary should ensure the smooth transfer of the share
The physical share certificates of NABARD and its representatives holding shares in beneficial interest of NABARD, shall be kept in custody of DSSI and logbook shall be maintained
6.9 DSSI will ensure that subsidiaries holding physical shares may authorise the transfer by affixing the signature of c o m p ete nt a u th o r i t y (a s a p p r ove d by th e B o a r d of S
6 10 A review of the shareholdings of each subsidiary shall be undertaken by DSSI on quarterly basis, so as to take due approvals for transfer of shares from the superannuating officers holding shares in beneficiary interest of NABARD
6 11 Subsidiaries must monitor the superannuation or cessation of service of their shareholders (holding shares in the beneficial interest of NABARD and apprise DSSI about the need for transfer of shares, well in advance, for taking suitable action
6 12 If a nominated officer retires, resigns, or otherwise ceases to be in service of NABARD, a new nomination shall be made at least one month in advance, and Form No SH – 4 as per companies Act 2013 shall be signed and the equity shares shall be transferred accordingly before the officer’s superannuation or cessation of service The SH -4 form must be submitted by transferee to the company within 60 days of executing the share transfer agreement
6 13 To transfer shares held in beneficial interest
6.13.1 The registered owner (officer holding the shares in beneficial interest of NABARD) and beneficial owner (NABARD) must file declarations in MGT-4 (Annexure IV) and MGT-5 (Annexure V) respectively to the company (subsidiary) Subsidiaries facilitate the same within 15 days of advisce on share transfer from NABARD
6 13 2 The company (Subsidiary) must file a return - MGT-6 ( Annexure VI) with the Registrar of Companies (ROC) within 30 days of receiving the declaration in MGT-4 and MGT-5
6 14 The timeline for the Subsidiary to record the transfer of shares in its register of members and file the necessary forms with the Ministry of Corporate Affairs is as follows:
6.14.1 Register of Members: The company shall update the register of members within 7 days from the date of Board approval of the share transfer
6 14 2 Filing Forms with MCA: The company must file the necessary forms, such as Form PAS-3 (Return of Allotment) and Form SH-4 (Securities Transfer Form), within 30 days of the transfer
6 15 The Subsidiary should provide the confirmation of share transfer to DSSI, within 15 days of its Board Meeting wherein the agenda on share transfer is presented.
7. Demat of Shares
In terms of section 9, 9A & 9B of Companies Act 2013, all Public companies, Public unlisted companies and Private companies are required to hold shares in electronic form only The rule is applicable to every Private company, other than a small company. The rule is not applicable to an unlisted public company which is:
a) b) c) Nidhi; Government company or wholly owned subsidiary
(The rules are subject to amendment by the regulators).
All subsidiaries shall ensure compliance to the directions of Ministry of Corporate Affairs (MCA)
Concerned subsidiaries to ensure that their shares are issued in electronic form and credited to the demat account of NABARD within 60 days of the share issuance
NABVENTURES Ltd and NABFOUNDATION Ltd being wholly owned public unlisted subsidiaries, and NABCONS being registered as Govt company are exempted from holding shares in Demat form.
Detail of Demat Accounts of NABARD:
ICICI Bank Limited (For unlisted securities)
DP Id: IN303028
ICICI Bank Limited (For listed securities)
DP Id: IN300812
AXIS Bank Limited (for AIFs)
DP ID: IN300484
All the accounts are maintained by Treasury Back Office, Finance Department.
8. Governance Practices
8.1 Governance of the subsidiary shall rest with an independent Board of Directors
8.2
NABARD will provide overall direction and oversight for subsidiaries. This includes concurrence in major decisions and monitoring performance. The subsidiaries must consult NABARD on agenda(s) having financial or policy implication to NABARD, before placing it to their respective Board Prior approval from NABARD shall invariably be required for
8.2.1 Capital Structure and Issuance of Capital Instruments: Subsidiaries must obtain NABARD’s approval before submitting any agenda to their board for raising equity or any other capital instruments, including Tier II bonds or subordinated debt, which are intended to be considered as part of regulatory capital for computing Capital to Risk-Weighted Assets Ratio (CRAR) or similar norms. The proposal should include a detailed justification and implications on capital adequacy, business expansion, and leverage The issuance must comply with applicable RBI/SEBI guidelines, Companies Act provisions, and any other regulatory requirement
8.2.2 Increase in Authorized Share Capital: Any proposal for increasing the authorized share capital of a subsidiary shall require prior approval of NABARD before being placed for consideration by the Board, Annual General Meeting (AGM), or Extraordinary General Meeting (EGM) of the subsidiary. Such proposals should be submitted to NABARD well in advance and must include a comprehensive rationale outlining the need for the increase, projected capital requirement, and future funding roadmap
8.2.3 Valuation of Shares for Capital Infusion: For any capital infusion or issuance of fresh equity shares, the subsidiaries shall follow a uniform market-based valuation methodology for pricing of shares The valuation may be carried out by an independent Merchant Banker or Chartered Accountant in accordance with applicable regulatory guidelines The valuation report shall be submitted to NABARD along with the capital raising proposal Any deviation from market valuation norms shall require prior concurrence from NABARD.
8.2.4 Investment by a Subsidiary in Other Subsidiaries or Entities: Subsidiaries of NABARD shall not invest in equity of other subsidiaries or external entities without prior approval of NABARD. Such proposals must also be approved by the Board of the investing subsidiary and comply with all regulatory/statutory requirements A detailed investment rationale, due diligence report, financial impact analysis, and compliance checklist shall be submitted along with the proposal seeking NABARD’s approval
8.2.5 Strategic Plan Approval and ICAAP Linkage: All subsidiaries shall prepare a five-year Strategic Plan aligned with NABARD’s vision, developmental goals, and business strategy. The draft Strategic Plan shall be submitted to NABARD for prior approval before being placed before the Board of the subsidiary Key elements and financial projections from the Strategic Plan for financial subsidiaries must be reflected in the Internal Capital Adequacy Assessment Process (ICAAP) document to ensure coherence in capital planning and business objectives
8.2.6 Borrowings by Financial Subsidiaries: Financial subsidiaries of NABARD may resort to market borrowings up to a limit of one time of their net worth Borrowings from NABARD or concessional funding agencies, Tier II instruments or subordinated debts shall not be counted towards this borrowing limit Subsidiaries shall ensure strict compliance with applicable RBI guidelines and maintain prudent leverage levels Any deviation from this framework will require specific approval from NABARD
8.2.7 MoA and AoA/ Vision & Mission: For any proposed modification in the Memorandum of Association (MoA), Article of Association (AoA), Vision or Mission of the subsidiaries, prior consent of NABARD shall be mandatory.
8.2.8 Appointment of officers on Board of other companies: Subsidiaries shall take prior approval for any appointment of their officers on the Board of other companies.
9. Capital Infusion
9.1 Process for Capital Raising
9 1 1 As the subsidiaries are expanding in business, they may need higher financial resources to boost their capital adequacy and leverage
9.1.2 Any proposal for capital raising must obtain prior consent of NABARD, before placing it as a board agenda.
9.1.3 Detailed SOP for capital infusion may be followed at Subsidiaries l eve l is in dic a te d a t A n n ex u r e V II
9 1 4 After completion of one year from date of capital infusion, respective subsidiary shall submit an impact assessment report of additional capital infusion.
10. Board of Directors of Subsidiar y
10 1 Each subsidiary shall have a qualified board of directors responsible for its operations and governance The Chairman of the subsidiary shall be appointed in accordance with the Articles of Association (AOA) of the subsidiary and in consultation with NABARD.
10 2 Managing Director (MD) / Chief Executive Officer (CEO) of the subsidiary shall be nominated by NABARD and appointed by the Board of subsidiary
10.3 NABARD shall nominate Directors to the Board of subsidiaries. SOP to be followed for such nomination is outlined in Annexure-VIII. The sample nomination letter is attached as Annexure IX.
10.4 The SOP outlining the roles, responsibilities, and expected conduct of Nominee Directors appointed by NABARD on its subsidiaries / investee companies is indicated in Annexure X (issued vide internal circular no 211/ DSSI -01/2024 dated 15 October 2024)
10.5 Subsidiaries may ensure that before the Director assumes the charge of MD, he/she holds a valid DIN (Director Identification Number) and DSC (Digital Signature Certificate) Documents required for DIN & DSC are indicated in Annexure XI
10 6 Subsidiary’s MD / CEO will have the authority to manage day-to-day operations within established guidelines and frameworks.
10 7 Subsidiaries shall ensure compliance to section 197 of the Companies Act, 2013 regarding remuneration of MD/CEO and other directors.
10.8 Every subsidiary shall comply with the requirement of minimum number of Independent Directors and Women Director (wherever applicable) as per the provisions of section 149 of the Companies Act, 2013 and any modification(s)/amendment(s) thereof
10 9 The Chairman NABARD shall be the competent authority to give recommendation whenever sought, for nominating the Independent Directors on the Board of the Subsidiary or as per the provisions of AoA of respective subsidiary
10.10 The sitting fee for attending the meetings paid to Independent Directors by subsidiaries shall not exceed the sitting fee paid by NABARD to its Independent Directors. Any revision in sitting fee of Directors may be done in consultation with NABARD
10 11 Other shareholders of subsidiaries may nominate Directors on the Board of subsidiary as per their terms of investment
10.12 If necessary, the CFO/COO, or any key personnel of the subsidiary may be appointed to the Board of the Subsidiary, in consultation with NABARD
10 13 A representative of DSSI, NABARD shall attend all the Board Meetings of the subsidiaries as an observer/ Special Invitee. MD/CEO of the subsidiaries shall provide requisite information (including Board Agenda) well in advance (at least 14 days) to DSSI’s representative and facilitate their participation in the Board meeting.
11. General instructions for Board Meetings
11 1 Board meetings of the subsidiaries should be convened in accordance with the provisions of the Companies Act
11.2. Every subsidiary should have Rules of Procedure compliant to ICSI standards.
11 3 Subsidiaries shall prepare annual calendar for the Board Meetings and get the same approved by Board for every financial year.
11.5
11.4 The Board Agenda and Board Minutes formats may be standardized. Copy of sample format is attached as Annexure XII Subsidiaries should ensure Board approval of their audited accounts for the financial year on or before 30 April of succeeding FY.
11 6 Review of the progress made under the 5-year Strategic Plan shall be a regular Board agenda in every meeting.
11 7 The contract agreements entered by subsidiaries, with respect to cost, term/ period of engagement, performance so far etc , should be placed before the Board for review on annual basis
11 8 Tours undertaken by the MD/CEO of the Subsidiary should be presented to Board through a permanent Board agenda
12. Various Committees of the Subsidiary:
12 1 The Board of the subsidiaries may constitute Board and Executive level subCommittees, as and when required, for smooth functioning of the company
12 2 The rules of procedure of the Board and its committees shall be put in place at the time of constitution A template for composition of the Rules of Procedure is given in Annexure XIII
12.3 The list of various sub-committees of Board and their respective section in Companies Act 2013, if applicable, are as below:
Audit Committee Sect 177 of the Companies Act, 2013
Nomination and Remuneration Committee
Corporate Social Responsibility Committee
Stakeholders Relationship Committee (SRC)
Section 178 of the Companies Act, 2013
Section 135 of the Companies Act, 2013
Section 178(5) of the Companies Act, 2013
Committees as per RBI Scale-Based Regulations for NBFCs
Risk Management Committee (RMC) RBI’s Scale-Based Regulations for NBFCs RBI/DoR/202324/106 dated 19 October 2023
Other Sub-committees of the Subsidiaries
Risk Management Committee (RMC) for other than NBFCs
IT Committee
Loan Committee
ALCO Committee
HR Committee
POSH Committee
Investment Committee
Business Development Committee
Ethics & Governance Committee
12.4 Committees shall have representation from NABARD, wherever necessary. Guiding principles for having representation of NABARD in the Committees/Sub-Committees/Specialized Committees of the Subsidiaries is indicated at Annexure XIV
12.5 NABARD representation shall be mandatory on the following committees of the subsidiaries:
NABARD representative from the concerned Department
13. Policies to be in place
13 1 Subsidiaries shall have appropriate policies which should be aligned with the organization’s size and nature
13.2 All subsidiaries shall review their policies annually.
13 3 Suggested list of policies which may be formed by the subsidiaries as per their requirements/applicability are given below:
General (for all subsidiaries)
14. General Meeting of Subsidiaries:
14 1 In terms of section 96 of Companies Act, 2013, every subsidiary shall hold an Annual General Meeting (AGM) within a period of six months, from the date of closing of the financial year
14 2 In terms of section 100 of Companies Act, 2013, the Board of subsidiary may, whenever it deems fit or at the requisition by the shareholders, call an Extraordinary General Meeting (EGM)
14.3 In terms of section 113 of the Companies Act, 2013, NABARD can nominate suitable officer to attend AGM/EGM
14 4 CGM, DSSI shall delegate and authorise a suitable officer of NABARD to represent NABARD for the AGM/EGM and vote in the meeting.
15. Strategic Planning
15 1 Subsidiaries are required to align their strategic plans with the overall goals and objectives of NABARD
15.2 Each Subsidiary shall prepare a comprehensive five years Strategic Plan outlining key objectives, initiatives, and growth targets along with timelines
15.3 The Strategic plan shall be approved by the Board of Directors of the subsidiary.
15 4 The Board of the subsidiary shall monitor and review the progress of the 5 years targets as a regular agenda item
