## CARO Clause: Section 45-IA of the RBI Act, 1934 (NBFC and CIC Compliance)
### Four Sub-Questions the Auditor Must Address
| Point | What to Verify |
|---|---|
| (a) | Whether the company is required to be registered as an NBFC under Section 45-IA of the RBI Act, 1934 — and if so, whether registration has been obtained |
| (b) | Whether the company has conducted Non-Banking Financial (NBF) or Housing Finance activities without a valid certificate of registration |
| (c) | Whether the company is a Core Investment Company (CIC) as defined by RBI — if so, whether it continues to fulfil the qualifying criteria (or exemption criteria if exempted) |
| (d) | Whether the group has more than one CIC — if yes, the number of CICs in the group |
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### Core Investment Company (CIC) — Definition
A CIC is a Non-Banking Financial Company that satisfies both of the following conditions:
1. Holds ≥ 90% of its net assets in the form of investments in group companies (equity shares, preference shares, bonds, debentures, debt, or loans)
2. Its investments in the equity shares of group companies constitute ≥ 60% of its net assets (as per the last audited balance sheet)
> Memory hook — the 90/60 Rule: 90% net assets must be in group investments; of those, at least 60% must be in equity shares of group companies.
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### Auditor's Procedure
1. Determine if the company's activities trigger NBFC registration requirements.
2. If registered: verify the certificate of registration is valid and current.
3. If not registered: verify whether unregistered NBF/housing finance activities have been conducted.
4. Apply the 90/60 test to assess CIC status using the latest audited balance sheet.
5. If CIC: verify ongoing compliance with RBI criteria (or exemption criteria, as applicable).
6. Identify and count all CICs in the group.