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.
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:
- To encourage NBFCs to securitise/assign their eligible assets, the minimum holding period requirement for originating NBFCs was relaxed till December 2019.
- 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.
- 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.
- RBI permitted special dispensation to banks till 31st March 2019, whereby their incremental credit to NBFCs and HFCs after 19th October 2018 could be treated as high-quality liquid assets for calculation of liquidity coverage ratios.
- 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.
This was stated by Shri Anurag Singh Thakur, Minister of State for Finance & Corporate Affairs in a written reply to a question in Rajya Sabha today.