RBI tightens norms for NBFCs, Issues Revised Regulatory Framework

RBI has tightened norms for non-banking financial companies (NBFCs) raising the capital adequacy requirement and the net owned fund limit, among others, to mitigate possible risks in the NBFC/microfinance sector.

With a view to streamline the regulations, the RBI also revoked temporary suspension on issuance of Certificate of Registration (CoR) to companies that want to conduct business of non-banking financial institution (NBFI). As per the latest directives, the RBI has raised the limit for NBFCs to maintain the net owned fund (NOF) requirement to 4 times by 2017 to Rs.2 crore.

Explaining the move, the Reserve Bank stated, “a lighter regulatory framework has been placed on NBFCs other than for those with large asset sizes and deposit accepting. For NBFCs with large asset sizes, and for all deposit accepting NBFCs, regulations have been harmonised across NBFCs, and to some extent, with banks. The intent is to create a level playing field that does not unduly favour or disfavour any institution.”

In limited areas where harmonisation has resulted in strengthening the regulations, generally adequate time has been given to manage the transition, said the statement. The regulator will then focus on the most important and systemic risks. Please click here for more details.

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