RBI tightens norms for NBFCs The Reserve Bank of India has tightened the regulatory framework for non-banking finance companies (NBFCs). Like banks, they will be subject to 90-day overdue norms for identification of bad loans, will be required to make higher provisioning for non-standard assets and have to put in place ‘fit and proper criteria’ for directors. The revised regulatory framework for NBFCs is aimed at addressing regulatory gaps and arbitrage arising from differential regulations, both within the non-banking finance sector as well as in relation to other financial institutions. With the unveiling of the framework, the process of issuing Certificate of Registration (CoR), which was kept in abeyance for the last six months or so for conducting NBFC business, will start once again. Net owned funds Given the need for strengthening the financial sector and technology adoption, and in view of the increasing complexities of services offered by NBFCs, the RBI said it will be mandatory for all NBFCs to attain a minimum net owned fund (NOF) of ₹2 crore by the end of March 2017. The limit for acceptance of deposits across the NBFC sector has been harmonised by reducing the same for rated asset finance companies from four times to 1.5 times of NOF, with immediate effect. Hitherto, an unrated AFC having NOF of ₹25 lakh, complying with all the prudential norms and maintaining capital adequacy ratio of not less than 15 per cent, was allowed to accept or renew public deposits not exceeding one-and-a-half times its NOF or up to ₹10 crore, whichever is lower. Read More: ow.ly/E6MLA
Posted on: Tue, 11 Nov 2014 12:43:31 +0000
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