GOVERNMENT OF INDIA

MINISTRY OF FINANCE
RAJYA SABHA
UNSTARRED QUESTION NO-3367
ANSWERED ON-23.07.2019

REGULATION OF NBFCs BY RBI

3367. SHRI T. RATHINAVEL:

Will the Minister of FINANCE be pleased to state:

(a) whether it is a fact that Government is considering to give more powers to Reserve
Bank of India (RBI) to regulate Non-Banking Financial Companies (NBFCs);
(b) if so, the details thereof;
(c) whether it is also a fact that the RBI has been taking necessary regulatory and
supervisory steps to strengthen the NBFCs and maintain stability of the financial
system; and
(d) if so, the details thereof?
ANSWER
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI ANURAG SINGH THAKUR)
(a) and (b): Amendments to give more powers to RBI to regulate NBFCs form part of
Finance Bill, 2019, which has been introduced in the ongoing Budget Session 2019 of
Parliament. The proposed amendments would empower RBI to supersede the Board of
an NBFC or remove its director(s), amalgamate or reconstruct or split an NBFC in
public interest or for financial stability, remove and debar auditors, direct the
inspection and audit of any group company of an NBFC, raise the Net Owned Fund
requirement for NBFCs, and impose higher penalties in case of legal contraventions.
(c) and (d): With regard to taking of necessary regulatory and supervisory steps to
strengthen NBFCs and maintain stability of the financial system, RBI has stated that it
has taken a number of measures to strengthen NBFCs and maintain stability of the
financial system including the following:
1. To remove the regulatory arbitrage between banks and non-banks, regulatory and
supervisory frameworks for NBFCs are being aligned with that of Scheduled
Commercial Banks.
2. Minimum capital adequacy norms have been prescribed for different categories of
NBFCs, and for deposit-taking NBFCs, the deposit amount has been limited to 1.5
times of net owned fund.
3. Net owned fund requirement for Asset Reconstruction Companies (ARCs) has
been fixed at Rs. 100 crore on an ongoing basis.
4. With a view to extend temporary support to NBFCs and maintain stability of the
financial system, RBI has been taking the following regulatory measures to
alleviate stress in the NBFC sector in the near-term:
(i) To encourage NBFCs to securitise/assign their eligible assets, the minimum
holding period requirement for originating NBFCs was relaxed till
December 2019.
(ii) The single-borrower exposure limit for NBFCs that do not finance
infrastructure was increased from 10 percent to 15 percent of capital funds,
up to 31st March 2019.
(iii) Banks were permitted to provide partial credit-enhancement for non-deposit
accepting systematically-important NBFCs registered with RBI and housing
finance companies (HFCs) registered with the National Housing Board
(NHB) as per guidelines.
(iv) RBI permitted special dispensation to banks till 31 st March 2019, whereby
their incremental credit to NBFCs and HFCs after 19 th October 2018 could
be treated as high-quality liquid assets for calculation of liquidity coverage
ratios.
(v) NBFCs with assets over Rs. 5,000 crore have been asked to appoint a Chief
Risk Officer to improve the standards of risk management.
5. Supervision of NBFCs is carried out through on-site surveillance, off-site
surveillance, market intelligence, and reports received annually from statutory
auditors.
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