The Reserve Bank of India (RBI) on April 19 laid down a set of rules for non-bank financiers on large exposures, lending to directors and sought additional disclosures in their notes to account .
- These guidelines are meant to further harmonize regulations between banks and non-banks.
Four layers NBFC
- The regulatory structure for NBFCs will be divided into four layers based on their size, activity, and perceived riskiness.
- The lowest layer is base layer, followed by middle, upper and top layers.
- New norms would be applicable to NBFCs in the middle and upper regulatory layers.
- While the middle layer would include all deposit-taking NBFCs and non-deposit taking ones with assets of Rs 1,000 crore and above, the upper layer would comprise those identified by RBI for enhanced regulatory requirement.
Exposure limits
- Aggregate exposure of an upper layer NBFC to any entity must not be higher than 20% of its capital base, although the board can approve an additional 5% to take it to 25%.
- However, for infrastructure finance companies, the aggregate limit will be 30% to a single entity. To a group of connected entities, aggregate exposure will be limited to 25% of the capital base (unless on account of an infra loan) for all upper layer NBFCs apart from infrastructure finance companies where it will be 35%.
- Unless sanctioned by the board of directors, NBFCs in the middle and upper layer should not grant loans of Rs 5 crore and above to their directors or relatives of directors.
- The list of exclusion would also include any firm in which any of their directors or their relatives is interested as a partner, manager, employee or guarantor.
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