 "RBI")
The Reserve Bank of India (RBI) on Wednesday invited applications for recognition of self-regulatory organisations (SRO) to oversee the non-banking finance companies, saying a maximum of two such entities will get the approval for the sector.
Once recognised, these SROs will be mandated to keep the central bank in the loop about developments in the NBFC sector, which also include any regulatory violation.
These SROs should achieve a minimum net worth of Rs 2 crore within one year after recognition, or before commencement of operations as an SRO, whichever is earlier. The SRO needs to maintain the net worth on an ongoing basis.
There are about 9,500 NBFCs registered with the regulator.
“The SRO for NBFC sector is primarily envisaged for NBFCs in the categories of Investment and Credit Companies (NBFC-ICCs), Housing Finance Companies (HFCs) and Factors (NBFC-Factors). However, the SRO may also have other categories of NBFCs as its members,” the regulator said in a press statement.
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The central bank said that different verticals/divisions within the SRO may be set up for catering to different categories of NBFCs, as considered necessary.
The RBI said that the recognised SROs should have a good mix of NBFC-ICCs, HFCs and NBFC-Factors as its members.
“To ensure fair representation to smaller NBFCs, the SRO shall have at least 10% of the total number of NBFCs in the Base Layer as per Scale Based Regulatory Framework and categorised as NBFC-ICC and NBFC-Factor, as its members,” it said.
Failure to achieve such a mix of representation within two years of the grant of recognition as SRO would render it liable for revocation of the recognition granted, RBI said.
The applications must be sent to RBI by September 30, 2024.
On March 21, 2024 the RBI had issued ‘Omnibus Framework for recognition of Self-Regulatory Organisations for Regulated Entities of the Reserve Bank’ wherein broad parameters, like objectives, responsibilities, eligibility criteria, governance standards, application process, etc. were specified.
