RBI lays down set of norms to align NBFCS with banks
MUMBAI: In a slew of regulatory frameworks, the Reserve Bank of India (RBI) on Tuesday laid down a set of rules for non-bank financiers on large exposures and lending to directors and sought additional disclosures in their notes to accounts. The guidelines are meant to further harmonize regulations between banks and non-banks.
In October last year, RBI had announced scale-based regulations for non-banking financial companies (NBFCS), with effect from October this year. The regulatory structure for NBFCS will be divided into four layers based on their size, activity, and perceived riskiness. The lowest layer is the base layer, followed by the middle, upper and top layers. On Tuesday, RBI said that aggregate exposure of an upper layer NBFC to any entity must not be higher than 20% of its capital base, though the board can approve an additional 5% to take it to 25%. However, for infrastructure finance companies, the aggregate limit will be 30% to a single entity. To a group of connected entities, aggregate exposure will be limited to 25% of the capital base, unless on account of an infra loan, for all upper layer NBFCS apart from infrastructure finance companies where it will be 35%.
In another circular, RBI set out norms for lending by NBFCS to their directors and senior employees. The central bank said that unless sanctioned by the board of directors, NBFCS in the middle and upper layers should not grant loans of Rs5 crore or more to directors or relatives of directors. The list of exclusion would also include any firm in which any of their directors or their relatives is interested as a partner, manager, employee or guarantor.
The middle layer would include all deposit-taking NBFCS and non-deposit taking ones with assets of Rs1,000 crore and above, while the upper layer would comprise those identified by RBI for enhanced regulation.
Loan proposals of less than Rs5 crore to directors may be sanctioned by the appropriate authority in the NBFC, but the matter should be reported to the board, RBI said. The regulator said that loans sanctioned to senior officers of NBFCS should be reported to the board.
These, however, would exclude loans against government securities, life insurance policies, fixed deposits, stocks and shares, housing loans, and car loans granted to an employee of the NBFC under any scheme applicable generally to employees.