In a clear change of stance, the RBI has adopted a hands on approach regarding regulation of non-banking financial companies (NBFCs).
RBI is currently working on a package for non-banking finance companies which is likely to be announced within the next couple of weeks.
The announcement is likely to cover categorisation of non-banking finance companies, their deposit raising limits, tightening of prudential norms, and the interest rate structure to be followed.
These moves are reflective of the growing recognition within the Reserve Bank of the need to organise and regulate the sector given the widespread mushrooming of fly-by-night operators.
So far, only deposit mobilisation and interest rate charge came under the RBI purview.
On January 9, 1997, the RBI (Amendment) Act was passed by Parliament, making it mandatory for non-banking finance companies to register with the RBI. The RBI also stipulated that non-banking finance companies seeking registration must have minimum net-owned funds of Rs 25 lakhs. Over 37,000 non-banking finance companies applied for registration following the Reserve Bank directive.
RBI had recently approved a new mechanism for supervision of non-banking finance companies via off-site monitoring and on-site inspection.
For off-site monitoring, the RBI has revised the annual return format so as to provide for certain data regarding core assets and income of the companies.
Under on-site inspection, the Reserve Bank will focus on the quality of the assets besides compliance with the regulatory and supervisory stipulations.
