NBFCs: Tighter regulations, cost of funds to determine future path

RBI has proposed scale-based regulatory approach as the way forward for non-bank lenders

Investors of non-banking finance company (NBFC) stocks should brace themselves for volatility in the coming months, as the Reserve Bank of India (RBI) has set the stage for further narrowing of regulatory arbitrage they enjoy vis-à-vis banks.

In a first of its kind proposal, the RBI governor spelt out the need for a dividend distribution policy for NBFCs, given the increasing significance of NBFCs and their interlinkages with different segments. A draft paper is likely soon. Not just that, a fortnight after the RBI’s internal working committee (IWC) spelt out the need for large NBFCs with assets upwards of Rs