Development Financial Institution Act 2002 (Act 618) & Order [As At 20th May 2003]

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Development Financial Institution Act 2002 (Act 618) & Order

[As At 20th May 2003]

Malaysian law known as the Development Financial Institution Act 2002 (Act 618) was passed on July 3, 2002, and it became effective on July 1, 2003. The Act aims to provide rules and oversight for Malaysia's development finance institutions (DFIs). DFIs are financial institutions that offer loans and other types of support to companies and industries that are thought to be crucial to the country's strategic development.

According to the Act, a DFI is a financial institution that holds a Financial Services Act 2013 license and whose main line of business is to finance priority economic sectors over the long term. The Act outlines the duties and authority of DFIs, which include financing, encouraging investment, and carrying out R&D activities.

According to the Act, DFIs must adhere to a number of prudential norms, such as those pertaining to capital adequacy, risk management techniques, and reporting and disclosure obligations. The Act also calls for the establishment of a Registrar of DFIs, who will be in charge of overseeing DFIs and carrying out the Act's administrative duties.

On May 20, 2003, the Development Financial Institutions (Amendment) Order 2003 (Order) was published and went into effect. The Development Financial Institutions Act 2002 (Act 618) is amended by the Order, which also establishes licensing and oversight requirements for DFIs operating in Malaysia.

A DFI is a company that is incorporated in Malaysia in accordance with the Companies Act 1965 or any other written law and whose main activity is to offer long-term financing for development. The Order also specifies the requirements that DFIs must fulfill in order to receive a license, including meeting prudential norms and having a minimum paid-up capital of RM100 million.

According to the Order, DFIs must uphold a number of criteria and restrictions, including a minimum capital adequacy ratio of 15% and a minimum liquidity ratio of at least 10%. Additionally, DFIs must regularly submit reports to the Registrar of DFIs that detail their financial standing, risk management procedures, and degree of compliance with prudential norms.

In order to encourage economic development and growth, the Development Financial Institution Act 2002 (Act 618) and the Development Financial Institutions (Amendment) Order 2003 regulate and oversee DFIs in Malaysia. The Act and the Order specify the prudential requirements that DFIs must meet and provide for the appointment of a Registrar of DFIs to be in charge of managing and supervising DFIs in Malaysia.

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