Jio Financials gets RBI approval to become a core investment company, know the details

The Reserve Bank of India has granted approval to Jio Financial Services for the conversion of the company from a Non-Banking Financial Company (NBFC) to a Core Investment Company. It mirrors a strategic shift in focus by the company.

Now one can ask what is a CIC. This CIC, according to the definition by RBI, comes under the special category of NBFC and requires a minimum asset base of Rs 100 crore. The principal function enshrined in the circular of RBI in December 2016 was essentially to acquire and manage shares and securities under specified conditions.

At least 90% of the CIC's net assets are invested in equity shares, preference shares, bonds, debentures, loans, or other assets within group companies.

The change in structure would therefore let Jio Financial Services focus on investments and management of subsidiaries, bringing in operational efficiencies.

This CIC structure allows financial facility involvement with each subsidiary, separate and apart from any particular company. It could mean better investor value recognition.

Unlike traditional NBFCs, CICs do not accept deposits. The implication is that Jio Financial can have an undivided focus on its core investment activities.

This, as a CIC, gives freedom to the company to foray into new areas and diversify its investment portfolio in a manner that is amenable to changes in market dynamics.

In response to the development related to the transformation of Jio Financial, the market reacted positively. Early in the session on Friday, the share price of the company gained more than 1.5 percent.  The move is strategic for Jio Financial Services since it can then finalize an investment strategy best suited for its objectives in order to unlock growth opportunities.