The Reserve Bank of India (RBI) on Monday announced a new framework for non-banking finance companies (NBFCs), raising the minimum ‘net owned funds’ limit while capping deposit acceptance and aligning bad loan norms with banks.
Explaining the rationale behind the revised framework, the RBI said, “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 … and to some extent, with banks.” The RBI said the intent is to create a level playing field.
NBFCs will need to have minimum ‘net owned funds’ of Rs 1 crore by end-March 2016, and raise it to Rs 2 crore by end-March 2017 from the current level of Rs 25 lakh, the RBI said in a circular.
Existing unrated asset financing NBFCs will have to get themselves rated by March 31, 2016. Those NBFCs that do not get an investment grade rating by March 31, 2016, will not be allowed to renew existing or accept fresh deposits thereafter, it said. All non-deposit taking NBFCs which have an asset size of Rs 500 crore and above, and all deposit-taking NBFCs should maintain minimum Tier 1 capital of 10 per cent in two stages — 8.5 per cent by end of March 2016 and 10 per cent by end of March 2017.
Classification of loans as non-performing assets for NBFCs has been brought in line with banks. All NBFCs have to classify loans overdue for 90 days as NPAs. However, this new rule will be applied in a phased manner starting in March 2016 till March 2018.