RBI Details Provisioning Requirements For Large NBFCs

The Reserve Bank of India has detailed provisioning requirements for large NBFCs (upper layer) under its new scale-based regulations.

The new norms, effective Oct. 1, 2022, will see provisioning lowered across some key categories like home loans, but will also mean higher provisions for others like commercial real estate loans, according to a notification by the central bank.

These rules are applicable to standard assets, or those that are not classified as non-performing.

The provisions have been set as follows:

• Individual housing loans / SME loans: 0.25%.

• Housing loans extended at teaser rates: 2% with a reset to 0.4% one year after rates are reset.

• Commercial real estate (residential housing) loans: 0.75%.

• Other commercial real estate loans: 1%.

• All other loans and advances: 0.40%.

NBFCs currently have to set aside a provision of 0.4% against most standard assets. In October 2021, however, the RBI had introduced scale-based regulations for NBFCs, wherein the largest non-bank lenders are being subjected to rules similar to banks. As part of those rules, the RBI had said it would introduce differential provisioning for the largest NBFCs.