26/10/2021

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RBI paper proposes new regulatory framework for NBFCs, 4-tier structure

India’s non-banking finance firms (NBFC) want tighter regulation by means of generation of a multilayer model, claimed a discussion paper by the Reserve Lender of India on Friday.

The paper proposed a framework to categorise NBFCs, or shadow banking companies, depending on their dimensions and interconnectedness with the procedure. NBFCs in the reduce layer will be known as NBFC-Base Layer (NBFC-BL). NBFCs in the center layer will be known as NBFC-Center Layer (NBFC-ML). An NBFC in the Higher Layer will be known as NBFC-Higher Layer (NBFC-UL) and will invite a new regulatory superstructure.

“An NBFC in the Higher Layer will be known as NBFC-Higher Layer (NBFC-UL) and will invite a new regulatory superstructure,” claimed the paper.

It proposed a NBFC non-performing classification norm of a hundred and eighty times be “harmonised” to 90 times. “In see of the recent tension in the sector, it has turn out to be crucial to reexamine the suitability of this regulatory approach, especially when failure of an very massive NBFC can precipitate systemic risks,” claimed the paper.

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