Reserve Bank of India Governor Shaktikanta Das has said the RBI’s endeavour is to “ensure that no large NBFC collapses” and bring about an optimal level of regulation and supervision so that NBFCs are financially robust.
“It is our endeavour to ensure that no large NBFC collapses,” Das reiterated and said the objective of the RBI is to harmonise the liquidity requirements for banks and NBFCs. “It is our endeavour to have an optimal level of regulation and supervision so that NBFCs are financially resilient and robust. We will not hesitate to take whatever steps are required to maintain financial stability in the short, medium and the long-term.”
Das said there was no proposal to conduct an asset quality review of non-bank finance companies (NBFCs) which were facing a liquidity crunch. “No at the moment there is no such proposal to have an asset quality review. Around 50 odd NBFCs and housing finance companies are being closely monitored. Our monitoring and supervision includes all aspects of the functioning of NBFCs including their capital adequacy, stability, their cash inflow and outflow,” Das said on the sidelines of the FICCI-IBA conference.
“We are also looking at governance and risk management structures in NBFCs” Das said and recalled that as late as in May 2019, the RBI had asked NBFCs with a size of over Rs 5,000 crore to appoint functionally independent chief risk officers with clearly specified role and responsibilities with a view to bring in professional risk management system.
On the housing finance companies, some of which are also in trouble following the NBFC crisis, and whose regulatory remit has been vested with the RBI after being taken away from the National Housing Bank since the July budget, he said all the regulations put in place by the NHB will continue for HFCs, but RBI is in the process of reviewing some norms.
“As we have seen in the recent past, the build-up of risks among regulated entities due to interconnectedness, exposure concentrations, non-transparent market practices, governance deficiencies, and their contagion effects have repercussions for financial stability,” he said at the Ficci-IBA meet. The RBI is keeping a close watch on the interconnectedness of banks and non-banks, Das said. The Working Group on Core Investment Companies has started its deliberations and based on its recommendations, RBI proposes to carry out changes in the regulatory architecture for CICs.