MCA Proposes Regulatory Exemptions for Finance Companies in IFSCs

The Ministry of Corporate Affairs (MCA) has proposed amending Rule 11(2) of the Companies (Meetings of Board and its Powers) Rules, 2014, to extend regulatory exemptions currently available to RBI-registered NBFCs to “Finance Companies” operating in International Financial Services Centres (IFSCs) under the IFSCA.

This move, initiated at the request of the IFSCA, aims to reduce compliance burdens and foster ease of doing business within IFSCs, thereby promoting growth in financial services in these zones. The MCA has consulted the DEA, RBI, and IFSCA before releasing the draft notification and has invited public comments and suggestions via its e-Consultation Module by July 17, 2025, reflecting its commitment to transparent and participatory policymaking.

MCA Proposes Key Amendment: Expanding Exemptions for Finance Companies in IFSCs

The Ministry of Corporate Affairs (MCA) has issued a significant public notice (No. 1/32/2013-CLV (Part)) on June 26, 2025, proposing an amendment to Rule 11(2) of the Companies (Meetings of Board and its Powers) Rules, 2014. This proposed change aims to extend crucial regulatory exemptions, currently enjoyed by certain Non-Banking Financial Companies (NBFCs) registered with the Reserve Bank of India (RBI), to “Finance Companies” operating within International Financial Services Centres (IFSCs) and registered with the International Financial Services Centres Authority (IFSCA).

Current Exemptions for RBI-Registered NBFCs

Under the existing framework, and in accordance with Section 186(11)(a) of the Companies Act, 2013, read with Rule 11(2) of the Companies (Meetings of Board and its Powers) Rules, 2014, NBFCs registered with the RBI are largely exempt from the provisions of Section 186 of the Companies Act, 2013.

This exemption applies specifically to NBFCs whose ordinary course of business involves lending or offering guarantees/security for loan repayments. It is important to note that sub-section (1) of Section 186, which pertains to the investment by a company in shares of other companies, acquisition of securities, and giving of loans or guarantees, remains applicable even to these exempted NBFCs.

IFSCA’s Request and the Rationale for Amendment

The impetus for this proposed amendment comes directly from the International Financial Services Centres Authority (IFSCA). The IFSCA has formally requested the MCA to modify Rule 11(2) to explicitly include “Finance Companies” registered under its purview. The primary objective behind this request is to foster a more conducive environment for doing business within IFSC jurisdictions.

By granting these IFSCA-registered finance companies the same regulatory relief as RBI-registered NBFCs, the government aims to streamline operations and reduce compliance burdens, thereby promoting the growth of financial services in these special economic zones.

Consultation and Next Steps

The proposal for this significant amendment has undergone a thorough review process. The MCA has consulted with key stakeholders, including the Department of Economic Affairs (DEA), the Reserve Bank of India (RBI), and the IFSCA, before moving forward with the draft notification.

The draft notification, which outlines the specifics of the proposed amendment to Rule 11(2), is now publicly available on the Ministry of Corporate Affairs’ official website: www.mca.gov.in.

Call for Public Suggestions and Comments

In line with the government’s commitment to transparent and participative policymaking, the MCA has invited all interested stakeholders to submit their suggestions and comments on the draft amendment. This is a crucial opportunity for businesses, legal professionals, and other relevant parties to provide their input.

Suggestions and comments, accompanied by a brief justification for each, must be submitted by July 17, 2025. Stakeholders are required to utilize the e-Consultation Module available on the MCA website for submitting their feedback. This initiative underscores the government’s effort to ensure that the final amendment comprehensively addresses the needs and concerns of the industry while maintaining regulatory robustness.