The Reserve Bank of India (RBI) has ordered non-banking finance companies (NBFCs) which have not complied with all required prudential norms to work out a time-bound programme to meet the stipulations.
If the plan is not adhered to the apex bank, it will take severe action, including withdrawal of registration certificate.
Ahead of issuing fresh registration certificates to NBFCs, the apex bank will be announcing fresh prudential norms for them.
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While those NBFCs which meet with the norms will be issued registration certificates, RBI bank will initiate a dialogue with those NBFCs which fail to meet the requirements and work out a voluntary compliance plan.
The issuance of fresh registration to such NBFCs will be subject to this plan being chalked out. As part of its off-site and on-site monitoring process, RBI will continuously monitor these non banking finance companies on a monthly basis.
The central bank will ensure that the NBFCs are adhering to the plan. Reserve Bank of India officials have indicated that any violation of the plan will be severely dealt with by the apex bank and may even result in withdrawal of registration.
The Reserve Bank of India has indicated that it is going slow on the registration process in an attempt at caution as once it has granted a registration permit, it will be difficult to withdraw it.
Meanwhile, RBI's on-site and off-site inspection as well as special audit will commence in November 1997.
The audit is being done in conjunction with the Institute of Chartered Accountants of India. Following this audit, Reserve Bank of India will finalise the list of NBFCs which will be granted registration.
For NBFCs with asset exposure over Rs 100 crore, returns will have to be submitted on a monthly basis.
Those NBFCs with asset exposure of over Rs 50 crore, there will be special audit by a panel of strategy auditors which normally serve the banking sector.
Those NBFCs with asset exposure below Rs 50 crore, will be inspected by RBI's own team of auditors.