RBI releases discussion paper on scale-based regulations for NBFCs.
1. No CRR or extra SLR to be imposed on large NBFCs.
2. RBI paper wants to classify NBFCs into 4 groups based on size, complexity, systemic import & interconnectedness with other financial units: base level, middle, upper & top level.
3. Base level are systematically least a important NBFCs with below Rs1000 cr asset size. Of the 9400-odd NBFCs in the country, 9200 would be below Rs. 1000 cr. A RBI paper proposes to raise their minimum owned funds of NBFCs to Rs. 20 cr from Rs. 2 cr; Also 90-day overdue loans will be termed NPA, vs 180 now.
4. For the middle & upper level, more regulations proposed:
More capital: versus 15% Std capital now, risk-based capital has been proposed. Also capital to be maintained for operation & market risk, like banks do. In short new rules will require large NBFCs to keep more capital.
5.Middle and upper level NBFCs to be subject to bank-like governance rules: Board to make comprehensive risk policy, compliance officer to report to board, CEO variable pay to be governed like banks; Statutory auditors to be rotated every 3 years.
6. Limits on lending for share buyback, IPO purchase single client exposure; also loans to commercial real estate to be governed by board policy. More disclosures-divergence between NPA calculation vs RBI's to be disclosed.
New Rules after receiving public comments.
