NBFCs with Substantial Systemic Risks Must Be Subjected to Higher Degree of Regulation: RBI DG
4 years, 4 months ago

NBFCs with Substantial Systemic Risks Must Be Subjected to Higher Degree of Regulation: RBI DG

News 18  

Asserting the need to recalibrate regulations for shadow banking sector, Reserve Bank Deputy Governor M Rajeshwar Rao on Friday said NBFCs with significant externalities and which contribute substantially to systemic risks must be identified and subjected to a higher degree of regulation. "One can also argue that the design of prudential regulatory framework for such NBFCs can be comparable with banks so that beyond a point of criticality to systemic risks, such NBFCs should have incentives either to convert into a commercial bank or scale down their network externalities within the financial system," he said. Observing that NBFCs currently enjoy great degree of regulatory arbitrage vis-a-vis banks, he said, these entities can contribute to build-up of systemic risks because of the regulatory arbitrage enjoyed by them and hence there is a need to recalibrate the regulations. Talking about microfinance sector, Rao said, the share of NBFCs-MFIs in the overall microfinance sector has come down to a little over 30 per cent as several large MFIs have converted into Small Finance Banks.

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History of this topic

NBFC stress may lead to system liquidity due to interconnectedness: IMF
4 weeks ago

NBFC stress may lead to system liquidity due to interconnectedness: IMF

The Hindu  

Stress in the Non Banking Finance Companies may pose risk in the financial system due to their overexposure to power and infrastructure sector and interconnectedness with other markets, said IMF in a report. The International Monetary Fund report titled “India Financial System Stability Assessment” found that 63% of the power sector loans were from the three largest Infrastructure Financing Companies, …

IMF flags major systemic risk with NBFCs with exposure to power sector
4 weeks, 2 days ago

IMF flags major systemic risk with NBFCs with exposure to power sector

Deccan Chronicle  

Chennai: The IMF has flagged major systemic risk with NBFCs in India. Their concentrated exposures, especially to the power sector, could trigger systemic issues through their linkages with banks, corporate bond markets, and mutual funds, it said. If major NBFCs were to become distressed, the shock could spill over to banks, corporate bond markets, and mutual funds, IMF said in …

‘Banks will take cautionary stance on lending to NBFCs’
1 month ago

‘Banks will take cautionary stance on lending to NBFCs’

The Hindu  

Banks will stay conservative in the short run while lending to non-banking finance companies due to fears of performance in the sector, according to Pankaj Naik, Director of India Ratings and Research. Mr. Naik further said a gradual increase in bank’s exposure to NBFCs would be concentrated on the ones with higher rating. “Just because the risk rate is now …

Lower capital requirements for bank loans to NBFCs to ease funding woes
1 month ago

Lower capital requirements for bank loans to NBFCs to ease funding woes

Live Mint  

The Reserve Bank of India’s decision to ease rules on bank loans to non-banking financial companies has been driven by a slowdown in credit flow to these entities, which have been facing a funding crunch amid systemic liquidity deficit and rising asset quality stress in small-ticket and microfinance loans, analysts said. The central bank had in November 2023 hiked risk …

RBI eases lending rules for small borrowers and NBFCs. Here's what it means
1 month, 1 week ago

RBI eases lending rules for small borrowers and NBFCs. Here's what it means

India Today  

The Reserve Bank of India has eased the stricter loan rules for small borrowers and non-bank lenders at a time when the economy is showing signs of slowing down. The RBI has also put on hold its earlier proposals to increase the capital that banks must set aside for new project loans and the liquidity they need to maintain for …

RBI reduces risk weights on bank loans to NBFCs, MFIs
Trending News
1 month, 1 week ago

RBI reduces risk weights on bank loans to NBFCs, MFIs

Live Mint  

Amid cries of deficit liquidity in the banking system and funding crunch for several small lenders, the Reserve Bank of India on Tuesday reduced the risk weights on bank loans to non-banking finance companies and microfinance loans. The RBI’s decision to roll back its November 2023 hike in risk weights for NBFC loans has been driven by the significant slowdown …

RBI deputy governor urges banks to be prudent on lending to NBFCs
1 year, 3 months ago

RBI deputy governor urges banks to be prudent on lending to NBFCs

Live Mint  

Mumbai: Banks need to reconsider whether they want to be part of lending consortiums to non-bank financiers that have scores of other lenders – up to 40 at times – to improve their monitoring of borrowers' use of sanctioned loans, RBI deputy governor Swaminathan J said. The deputy RBI governor was responding to a question from SBI managing director Ashwini …

Here's why NBFCs will have to look beyond banks for funds
1 year, 3 months ago

Here's why NBFCs will have to look beyond banks for funds

Live Mint  

Mumbai: Non-bank lenders that borrow heavily from commercial banks to lend further may need to diversify their funding sources in the year ahead, given the rising competition for bank credit, and higher risk weights on loans to these lenders, experts said. “The idea is to improve funding access to productive sectors, but the regulations can lead to customers paying more …

RBI announces scale-based regulatory framework for NBFCs
3 years, 5 months ago

RBI announces scale-based regulatory framework for NBFCs

Live Mint  

The Reserve Bank of India has introduced a revised scale-based regulatory framework for non-banking financial companies, which will be effective from 1 October, 2022. The scale-based framework encompasses different facets of regulation of NBFCs covering capital requirements, governance standards, prudential regulation, and others. NBFCs in the lowest layer will be known as NBFC - Base Layer, while those in the …

Central bank to review rules as Assam eyes curbs on MFI ops
4 years, 1 month ago

Central bank to review rules as Assam eyes curbs on MFI ops

Live Mint  

The Reserve Bank of India’s decision to look at a uniform regulatory framework for all microfinance lenders, though being discussed for more than five years now, has been brought into focus by an Assam government bill to regulate microlenders in the state, experts said. Uniformity in rules has been sought since Bandhan Financial Services turned into a bank in 2015 …

NBFCs have an edge in banking licence race
4 years, 4 months ago

NBFCs have an edge in banking licence race

Live Mint  

Large non-bank lenders stand to gain the most from the Reserve Bank of India panel’s proposal to allow large companies and shadow lenders into banking services, experts said. More importantly, it would allow RBI to increase regulatory oversight over some of the large shadow lenders, particularly after the collapse of Infrastructure Leasing & Financial Services Ltd and Dewan Housing Finance …

RBI proposes changes in regulations for HFCs
4 years, 9 months ago

RBI proposes changes in regulations for HFCs

India TV News  

The Reserve Bank on Wednesday proposed to double the minimum net owned fund requirement for housing finance companies to Rs 20 crore and classification of such firms under its draft framework for these companies. The step is aimed at strengthening the capital base mainly of small housing finance companies, the RBI said while releasing the proposed changes in the regulatory …

RBI asks NBFCs to adopt better tools to detect liquidity strains early
5 years, 4 months ago

RBI asks NBFCs to adopt better tools to detect liquidity strains early

Live Mint  

Reserve Bank on Monday asked the already fund-starved NBFCs to adopt better risk monitoring tools that capture the strains early on and also to maintain a liquidity buffer as per the mandated liquidity coverage ratio. It also asked NBFCs to segregate into granular buckets the 1-30-day time bucket in the statement of structural liquidity to 1-7, 8-14, and 15-30 days …

NBFCs should lend more to reverse downturn: Anurag Thakur
5 years, 5 months ago

NBFCs should lend more to reverse downturn: Anurag Thakur

Live Mint  

Minister of State for Finance Anurag Thakur on Thursday urged non-banking financial companies to step up lending and help the government reverse the current economic slowdown. Thakur further said that not many NBFCs participated in the ‘grahak mela’ or the outreach programme organized by banks and other lending institutions across 200 districts in the country last week and they should …

FM Nirmala Sitharaman directs banks, NBFCs to focus on increasing credit outgo in 400 districts
5 years, 6 months ago

FM Nirmala Sitharaman directs banks, NBFCs to focus on increasing credit outgo in 400 districts

Live Mint  

To increase credit disbursement during the ongoing festive season, finance minister Nirmala Sitharaman on Thursday directed commercial banks and non-banking financial companies to reach out to customers across 400 districts in two phases before 15 October. Besides, Sitharaman asked banks not to declare stressed assets of MSMEs as non-performing asset till 31 March 2020, invoking the existing guidelines of the …

RBI increases banks' loan exposure limit to single NBFC from 15% to 20% of its capital base
5 years, 6 months ago

RBI increases banks' loan exposure limit to single NBFC from 15% to 20% of its capital base

Firstpost  

Banks’ exposure to a single non-banking financial company is restricted to 15% of their available eligible capital base Mumbai: The RBI on Thursday increased loan exposure limit of banks to a single NBFC from 15 percent to 20 percent of its capital base, a move that will help increase credit supply to the crisis-ridden shadow banking sector. According to the …

As RBI tries a Panglossian message, NBFC investors face a harsher reality
5 years, 7 months ago

As RBI tries a Panglossian message, NBFC investors face a harsher reality

Live Mint  

As messages go, Reserve Bank of India governor Shaktikanta Das gave a Panglossian one, expressing yet again the central bank’s resolve to help non-banking financial companies weather the crisis they are mired in currently. “Our discussion with market participants suggests that debt investors are keen to invest only in high-quality retail players, mostly with strong parentage, such as Bajaj or …

RBI governor Shaktikanta Das rules out asset quality review of NBFCs for now
5 years, 7 months ago

RBI governor Shaktikanta Das rules out asset quality review of NBFCs for now

Firstpost  

Mumbai: Even as he reiterated the regulatory resolve to not let any large NBFC fail, Reserve Bank governor Shaktikanta Das Monday ruled out ordering an asset quality review of the systematically important shadow banks for now. Addressing the press on the sidelines of the national banking conference being organised by the industry lobby Ficci, Das ruled out ordering an asset …

Bank can lend more to Non Banking Finance Companies
5 years, 7 months ago

Bank can lend more to Non Banking Finance Companies

Deccan Chronicle  

Mumbai: To enhance credit flow to the crisis hit Non Banking Finance Companies sector, the Reserve Bank of India on Wednesday announced a slew of measures. On the same lines, in order to boost consumption, the central bank also reduced the risk weights for consumer loans such as personal loans, auto loans to 100 per cent from 125 per cent. …

RBI to regulate housing finance firms, review assets: Report
5 years, 8 months ago

RBI to regulate housing finance firms, review assets: Report

Live Mint  

India will soon give Reserve Bank of India power to regulate housing finance companies, which will almost certainly lead to the lenders facing stringent asset quality reviews, two sources with direct knowledge of the matter said. The housing finance companies, which are part of the broader shadow banking sector known as non-banking finance companies, are currently regulated by the National …

NBFC crisis not a solvency issue, says industry body
5 years, 8 months ago

NBFC crisis not a solvency issue, says industry body

Live Mint  

Finance Industry Development Council, the industry body for non-banking financial companies, said the current liquidity crisis is not a solvency issue, but is more of a growth-related problem. At a press conference held on Tuesday, FIDC said that while funds were available at a higher cost, there was a need for a special liquidity window through banking channels, which will …

Making sense of the NBFC puzzle box
5 years, 9 months ago

Making sense of the NBFC puzzle box

Live Mint  

Mumbai: Non-banking financial companies have been in the news since September last year for all the wrong reasons. An RBI research report showed that 99.7% of shadow banking in India makes long-term loans against short-term funding, primarily carried out by NBFCs and housing finance companies. Amit Bapna, RCAP’s group chief financial officer, told Mint that following the IL&FS crisis, funding …

RBI to have fresh look at NBFC supervision: All you need to know about what's ailing India's shadow banking sector
5 years, 9 months ago

RBI to have fresh look at NBFC supervision: All you need to know about what's ailing India's shadow banking sector

Firstpost  

Many large NBFCs have come under severe liquidity pressure, compelling them to bring down their reliance on commercial papers following series of default by group companies of IL&FS Concerned over the stress in the NBFC sector, RBI Governor Shaktikanta Das on Saturday said there is a need to have a fresh look at the regulation as well as supervision, and …

MFIs stay resilient to liquidity crisis
5 years, 9 months ago

MFIs stay resilient to liquidity crisis

Deccan Chronicle  

Chennai: The liquidity crisis in the non-banking finance company sector does not seem to have affected the microfinance institutions in this space. The segment has clocked over 40 per cent growth in gross loan portfolio in FY19. Data collated by industry body MFIN India shows the aggregated gross loan portfolio of 53 large and medium NBFC-MFIs, as on March 31, …

Federal Bank to avoid lending to lower-rated NBFCs, says Shyam Srinivasan
5 years, 10 months ago

Federal Bank to avoid lending to lower-rated NBFCs, says Shyam Srinivasan

Live Mint  

Mumbai: Kerala-based private sector lender, Federal Bank is now more cautious than ever on lending to the non-banking financial companies. Following the defaults and liquidity crunch in the sector, the bank has decided not to renew credit lines to low-rated NBFCs, managing director and chief executive officer Shyam Srinivasan said in an interview. To be sure, the bank’s total risk-weighted …

RBI eases norms for bank lending to well-rated NBFCs
6 years, 1 month ago

RBI eases norms for bank lending to well-rated NBFCs

Live Mint  

The RBI today eased norms for maintaining risk weights on bank lending to non-banking finance companies or NBFCs. With a view to facilitating flow of credit to well-rated NBFCs, it has now been decided that rated exposures of banks to all NBFCs, excluding core investment companies, would be risk-weighted as per the ratings assigned by the accredited rating agencies, in …

Opinion | The case for a unified supervision regime for NBFCs
6 years, 1 month ago

Opinion | The case for a unified supervision regime for NBFCs

Live Mint  

Early last week, Cobrapost, an investigative blog, promised a “sting”. Non-deposit taking systemically important entities, tagged with the alphabet soup acronym NBFC ND-SI, are those with a threshold asset size greater than ₹500 crore—asset finance companies, asset reconstruction companies, infrastructure finance companies, and microfinance companies are among the various types that make up the broad group of NBFCs. Australia follows …

RBI, Modi govt trying to reach common ground on easing of lending norms for MSME sector, other key issues
6 years, 4 months ago

RBI, Modi govt trying to reach common ground on easing of lending norms for MSME sector, other key issues

India TV News  

The government and Reserve Bank seem to be veering around to reach an agreeable solution particulary with respect of relaxation of the Prompt Corrective Action framework and easing of lending norms for the MSME sector ahead of the RBI board meeting on November 19, sources said. The RBI is also likely to agree to easing of lending norms for the …

RBI, govt trying to reach common ground on some key issues
6 years, 4 months ago

RBI, govt trying to reach common ground on some key issues

Live Mint  

New Delhi: The government and Reserve Bank seem to be veering around to reach an agreeable solution particulary with respect of relaxation of the Prompt Corrective Action framework and easing of lending norms for the MSME sector ahead of the RBI board meeting on November 19, sources said. The RBI is also likely to agree to easing of lending norms …

RBI may tighten capital adequacy rules for NBFCs
6 years, 5 months ago

RBI may tighten capital adequacy rules for NBFCs

Live Mint  

Mumbai: The Reserve Bank of India is likely to tighten certain regulations governing non-banking financial companies following the crisis at Infrastructure Leasing & Financial Services Ltd, experts said. They expect RBI to tighten regulations around NBFCs’ capital adequacy norms, related party transactions and asset liability mismatches. He added that it is to be seen how RBI effectively regulates holding companies …

NBFCs gear up to seek licence as RBI set to tweak norms on small banks
10 years, 4 months ago

NBFCs gear up to seek licence as RBI set to tweak norms on small banks

Firstpost  

Given the RBI’s focus on financial inclusion, smaller banks with local knowledge and operational experience can do much more to financially include the unbanked than full service banks The Reserve Bank of India’s plan to permit the proposed small banks to operate nationwide,albeit in a limited scale, can be the real game changer for India to push its agenda of …

Tougher rules tackle only part of India’s ‘shadow bank’ troubles
10 years, 4 months ago

Tougher rules tackle only part of India’s ‘shadow bank’ troubles

Live Mint  

Mumbai: The Reserve Bank of India may have tightened rules for the country’s “shadow banks” this week, but it has yet to tackle the complex problem of unregulated, “chit” or small investment funds that serve hundreds of millions of villagers and small businesses. India, analysts say, needs to do more to get to grips with the roughly 18,000 collective investment …

NBFCs keen to become smaller banks but here's what's proving to be a turn-off
10 years, 8 months ago

NBFCs keen to become smaller banks but here's what's proving to be a turn-off

Firstpost  

The proposed payment banks are mainly transactional banks, while smaller banks, as the name suggest, will cater to tiny companies and small value customer segment. There may not be too many takers among non-banking finance companies to become payments banks, even though the Reserve Bank of India, in its draft guidelines, has opened the doors for all entities to apply …

Microfinance institutions showing signs of maturity
10 years, 9 months ago

Microfinance institutions showing signs of maturity

Live Mint  

Alok Prasad, chief executive officer of the Micro Finance Institutions Network, a lobby group for India’s ₹ 30,000 crore microfinance industry, is a happy man. RBI’s decision to give MFin SRO status is the culmination of a process that started in 1998 when the National Bank of Agriculture and Rural Development set up a task force for framing regulations for …

The Guv keeps the bar high
12 years, 1 month ago

The Guv keeps the bar high

The Hindu  

It took nearly three years for the Reserve Bank of India to give a final shape to the government’s decision to let more players in the private sector banking field. When it did come out with guidelines for “Licensing of New Banks in the Private Sector”, the central bank has let it known to aspirants at large in unambiguous terms …

‘Opaque MFI contracts can lead to sort of sub-prime crisis’
14 years, 1 month ago

‘Opaque MFI contracts can lead to sort of sub-prime crisis’

The Hindu  

Stressing on transparency more than capping of interest rates, the pre-budget Economic Survey today asked the government to take steps to ensure borrowers understand the contract when he borrows from micro finance institutions. We have seen these kinds of phenomena even in advanced economies like the U.S. where the sub-prime home borrowers took on loans without understanding the terms they …

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