The Ministry of Corporate Affairs (MCA), Government of India, has issued a public notice dated June 26, 2025, proposing a significant regulatory change aimed at enhancing the ease of doing business for financial entities operating in the International Financial Services Centre (IFSC). This change is centered around the exemption granted under Section 186 of the Companies Act, 2013, which deals with loans, investments, guarantees, and securities made by companies.
Background: Section 186 Exemption for NBFCs
Section 186 of the Companies Act, 2013 mandates strict oversight on inter-corporate loans and investments. However, an important exemption exists under Section 186(11)(a) read with Rule 11(2) of the Companies (Meetings of Board and its Powers) Rules, 2014. This exemption allows Non-Banking Financial Companies (NBFCs) registered with the Reserve Bank of India (RBI), and engaged in the business of providing loans or guarantees in their normal course of business, to bypass most of the requirements of Section 186—except for subsection (1), which pertains to compliance with prescribed limits and approvals.
IFSCA’s Request for Parity
Recognizing the increasing role of Finance Companies operating under the regulatory ambit of the International Financial Services Centres Authority (IFSCA), the authority formally requested the MCA to extend this exemption to such entities as well. These companies are similar in function to RBI-registered NBFCs, especially in the context of IFSCs like GIFT City in Gujarat, which is envisioned as a global financial hub.
IFSCA’s rationale is rooted in the principle of regulatory parity—ensuring that finance companies under its jurisdiction are not placed at a disadvantage when compared to their RBI-regulated counterparts. This alignment would not only streamline operations but also attract more financial institutions to the IFSCs by reducing compliance burdens.
Government’s Response and Draft Notification
In response to IFSCA’s representation, the MCA, in consultation with the Department of Economic Affairs (DEA), RBI, and IFSCA, has agreed in principle to amend Rule 11(2) of the Companies (Meetings of Board and its Powers) Rules, 2014. A draft notification proposing this amendment has been prepared and uploaded on the MCA’s official website for public access.
Call for Public Comments
Before finalizing the amendment, the MCA has invited suggestions and comments from stakeholders, including industry participants, legal professionals, and the general public. Feedback must be submitted through the e-Consultation Module on the MCA website by July 17, 2025, along with a brief justification.
Conclusion
This move represents a thoughtful and progressive step by the Government of India toward harmonizing the regulatory framework for financial services. By potentially extending the Section 186 exemption to IFSCA-registered Finance Companies, the government demonstrates its commitment to fostering a business-friendly environment in India’s IFSC jurisdictions. Stakeholders are encouraged to review the draft and contribute to shaping a more efficient and competitive regulatory landscape.
