 "NBFC")
The Reserve Bank of India (RBI) has proposed to withdraw the case-by-case basis exemptions granted to Government-owned Non-Banking Finance Companies (NBFCs) from meeting credit/investment concentration norms.
Substantial time has elapsed since Government-owned NBFCs were brought within the ambit of prudential regulations in May 2018. The RBI has carried out a review of the exposure norms for these NBFCs. Henceforth, the Government NBFCs shall be guided by the exposure norms and limits contained in the circulars as applicable to them, according to the RBI’s draft circular.
The top 50 exposures of Government-Registered NBFCs (G-NBFCs), amounting to Rs. 7.8 trillion, constitute about 40 per cent of the total corporate credit within the NBFC sector, indicating a concentration risk, according to the Reserve Bank of India’s report on Trend and Progress of Banking in India 2022-23, released last month. Notably, all 50 exposures are tied to the power sector, a domain fraught with inherent challenges, the report had said.
At present, Government-owned NBFCs set up to serve specific sectors are permitted to approach the Reserve Bank for exemptions, if any, from credit/investment concentration norms. This is based on the RBI’s Master Directions for Non-Banking Financial Company – Scale Based Regulations.
The existing breaches, including drawdown of existing sanctioned limits, if any, of the NBFCs as of the date of this circular shall be allowed to run-off till maturity to address implementation challenges and ensure a non-disruptive transition. This is subject to applicable prudential regulations for exposures.
