Reserve Bank Governor Sanjay Malhotra on Friday proposed exempting smaller NBFCs, those with assets under Rs 1,000 crore and no public funds, from mandatory registration, citing their low systemic risk.
The Scale-Based Regulatory Framework for NBFCs envisages differential regulatory treatment for NBFCs that do not avail public funds and do not have any customer interface.
Given their unique nature, a review of the regulations presently applicable to these NBFCs has been undertaken.
Considering their significantly lower systemic-risk profile, it is proposed that such Type-I NBFCs with asset size not exceeding Rs 1,000 crore may be exempted from registration requirement with the Reserve Bank, subject to certain specified conditions, Malhotra said while announcing the last bi-monthly monetary policy for the current financial year.
The proposed exemption will reduce compliance requirements for these NBFCs. Accordingly, draft Amendment Directions will be issued shortly for feedback from stakeholders.
Besides, Malhotra said, it is proposed to dispense with the requirement for certain NBFCs to obtain prior approval to open more than 1000 branches.
As per extant regulatory requirement, NBFC – Investment and Credit Companies (ICCs) engaged in the business of lending against gold collateral with over 1,000 branches are required to obtain prior RBI approval for opening new branches.
In view of the comprehensive prudential and governance framework applicable to NBFC-ICCs, he said it is proposed to dispense with the requirement of prior approval for opening branches by such NBFCs.
The draft instructions in this regard will be issued shortly, seeking stakeholders’ comments, he said.
Commenting in RBI’s announcements, Shriram Finance Executive Vice Chairman Umesh Revankar said proposals to exempt NBFCs with no public funds and no customer interface, up to an asset size of Rs 1,000 crore, from registration, and to dispense with prior approval for branch expansion for large gold-loan NBFCs, reduce compliance friction and allow more management bandwidth to be devoted to credit delivery and risk management.
At the same time, the RBI’s comfort with the sector’s sound capital, asset quality and liquidity profile reinforces the case for NBFCs to continue playing a meaningful role in extending credit beyond metropolitan centres into smaller businesses and vehicle operators, he added.
With regard to the Lead Bank Scheme (LBS), he said, it is now proposed to issue a comprehensive set of instructions on the Scheme with a view to streamlining the operational aspects.
The Reserve Bank has undertaken a detailed review of the existing guidelines on LBS.
In the revised Scheme, the governor said the objectives of LBS and the framework to achieve them are proposed to be delineated clearly.
The revised guidelines are expected to enhance the effectiveness of the scheme.
The draft circular will be issued shortly for public consultation, he said.
In addition, he said, the Reserve Bank will be launching a unified portal for reporting of Bank-wise LBS data, which is currently fragmented across various portals.
This is expected to significantly enhance the data quality and provide better insights towards achieving the objectives of LBS.
(Disclaimer: This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)
