No More Light-Touch Regulation For NBFCs, Says RBI Governor Das

The era of ‘light-touch’ regulation for non-banking lenders may be over, according to Reserve Bank of India Governor Shaktikanta Das.Das, in his address at the 15th convocation of National Institute of Bank Management in Pune, said the central bank will continue to monitor the NBFC sector’s activity and performance with focus on major entities and their interlinkages with other sectors. “It’s our endeavour to have an optimal level of regulation and supervision so that the NBFC sector is financially resilient and robust,” he said. “We’ll not hesitate to take any required steps to maintain financial stability in the short, medium and long term.”While lending from banks has dried up for non-bank financial companies and borrowing costs in money markets have risen, Das said that the situation has improved. “Market confidence somewhat resurfaced in the last quarter of 2018-19 as the major sources of funding registered a recovery.”The central bank, Das said, will introduce an institutionalised arrangement for periodic interaction with all stakeholders, including statutory auditors, credit rating agencies and banks having large exposures to NBFCs.This fifth pillar of supervision, according to Das, will be in addition to existing supervisory functions that include on-site examination, off-site surveillance, market intelligence and annual reports of statutory auditors. As part of these initiatives, the governor said that the central bank will implement a comprehensive information technology framework for strengthening off-site surveillance of NBFCs.The RBI has attempted to restore calm and stability to the sector since last September by issuing relaxed norms for NBFCs to securitise their loan books, he said. The central bank, according to Das, has also allowed lenders to provide partial credit enhancement to bonds issued by the systemically important non-deposit taking NBFCs and housing finance companies.Guidelines On Liquidity Risk ManagementThe central bank, Das said, will issue final guidelines on liquidity risk management framework for NBFCs. “The objective is to harmonise the liquidity norms between banks and NBFCs.”The RBI has already reduced periodicity of NBFC supervision to 12 months from 18 months earlier to better supervise the sector, he said.Stressed Assets: Guidelines To Improve Credit CultureThe RBI governor said the revised guidelines to deal with stressed assets will sustain improvement in credit culture as it provides for additional provisioning and “strong disincentives” like additional provisioning for delay in initiation of resolution or insolvency proceedings against a corporate debtor.The RBI last week issued a revised stressed asset resolution framework after the Supreme Court struck down its Feb. 12 circular on the same.The central bank, he said, will issue directions to banks to initiate proceedings under the Insolvency and Bankruptcy Code against borrowers for specific defaults “so that the momentum towards effective resolution remains uncompromised.”The new framework, according to Das, will go a long way in promoting a strong and resilient financial system in India.Other Key Highlights:To come up with draft guidelines by 2020 on latest Basel committee reforms.Need to further streamline appointment process, succession planning and compensation to improve public-sector bank governance.Government, the Banks Board Bureau and RBI are developing framework for performance evaluation of state-run lenders.Growth of digital payments necessitates that data protection and cyber security norms need to be continuously strengthened.Examining structure, functions and the regulatory guidelines for umbrella organisation for urban cooperative banks.In the process of issuing guidelines for urban cooperative banks to conduct banking business professionally.Putting in place voluntary merger mechanism for urban cooperative banks; centralised fraud registry soon..RBI Eases Stressed Asset Rules In Review Of Feb. 12 Circular

No More Light-Touch Regulation For NBFCs, Says RBI Governor Das

Das said RBI will monitor the NBFC sector’s activity with focus on major entities and their interlinkages with other sectors.

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No More Light-Touch Regulation For NBFCs, Says RBI Governor Das

Das said RBI will monitor the NBFC sector’s activity with focus on major entities and their interlinkages with other sectors.

NSE Revises Market Lots For Key Index Derivatives From Oct 28 — Check New Nifty 50, Bank Nifty Lot Size

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