For growth without any hurdle and to protect customers
Reserve bank of India (RBI) has tightened rules for NBFCs”, by raising minimum
capital requirements and restricting deposits.
The RBI, which has long warned of the risks posed by
unregulated financial firms, said on Monday that their growth meant Non-banking
financial companies (NBFCs) could now pose risks to the broader market. A
senior RBI official said in September that the bank recognizes roughly 12,000
registered NBFCs.
"NBFCs are now deeply interconnected with the entities
in the financial sector," the RBI said in a statement on Monday.
The new rules are meant to replace a set of loose guidelines
that had previously governed the NBFC sector, which has grown rapidly in recent
years. Analysts estimate NBFCs account for about 12 percent of the total assets
in India's financial sector.
RBI tightened Tier 1 capital requirements and said NBFCs
would need to hold capital levels of at least of 10 million rupees ($162,668)
by the end of March 2016 and 20 million rupees by end-March 2017 to avoid
losing their right to operate.
The central bank also said only certain investment-grade
NBFCs would be allowed to take deposits, saying the firms would have until the
end of March 2016 to acquire a credit rating. It capped deposit-taking at 1.5
times the size of a firm's minimum capital -- down from four times previously.
The RBI said the new rules would address risks posed by
these firms "without impeding the dynamism displayed by NBFCs".
"RBI is slowly and steadily removing all kinds of
arbitrage possible," he said, declining to be identified because he was
not authorised to talk to the media. "To that extent, I am more inclined
to believe, this is not the last of it."
Requirement of
Minimum Net Owned Fund (NOF) of Rs. 200
lakh
As per the new rules, The need for strengthening the
financial sector and technology adoption, and in view of the increasing
complexities of services offered by NBFCs, it shall be mandatory for all NBFCs
to attain a minimum NOF of Rs. 200 lakh by the end of March 2017, as per the
milestones given below:
·
Rs. 100 lakh by the end of March 2016
·
Rs. 200 lakh by the end of March 2017
Exemptions
1.
In the circular dated March 21, 2014 on Early
Recognition of Financial Distress, Prompt Steps for Resolution and Fair
Recovery for Lenders: Framework for Revitalizing Distressed Assets in the
Economy, ‘Notified NBFCs’ in the circular shall henceforth be defined as a)
NBFCs with assets of Rs. 100 crore and above, b) NBFCs-D, and c) all
NBFC-Factors.
2.
The revisions brought through this circular
shall be applicable to NBFCs-MFI also except wherever in conflict with the
provision of Non-Banking Financial Company- Micro Finance Institutions (Reserve
Bank) Directions, 2011, in which case the Directions ibid will be followed.
3.
The minimum Tier 1 capital requirement for NBFCs
primarily engaged in lending against gold jewellery remains unchanged for the
present. This shall be reviewed for harmonization in due course.
4.
The above revisions shall be applicable to
registered Core Investment Companies except wherever contrary with the
provisions of Core Investment Companies (Reserve Bank) Directions, 2011, in
which case the Directions ibid will be followed.
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