The Reserve Bank of India announced a revised framework for non-banking financial companies (NBFCs), raising the minimum net owned funds limit while capping deposit acceptance and aligning bad loan norms with banks, reports CNBC-TV18's Latha Venkatesh.
Among the important norms laid out in the framework: all NBFCs will have to take a certificate of registration for continuing business and they must have net-owned funds of at least Rs 1 crore by 2016 and Rs 2 crore by 2017.
Rules have also been changed for asset finance companies, who until now could easily take public deposits -- they now have to obtain an investment-grade rating from a rating agency but this rule too is applicable from March 2016.
The most important ones, though, are the changes in the bad loan rules. As of now, NBFCs mark a loan as bad loan only if the interest is not paid for six months while for banks it is three months.
Now NBFCs have to mark a loan as bad loan if the interest has not been paid for 90 days or 3 months. This, however, kicks in only by March 2018. As of now the six months remain for this financial year (FY15), for the next financial year (FY16), a loan is bad if it is not paid for 5 months, and it turns bad if not paid within 4 months in FY17.
The RBI also raised the minimum net worth for “systemically-important” NBFCs from Rs Rs 100 crore to Rs 500 crore.
Deposit-taking NBFCs and systemically important NBFCs have to maintain 10 percent Tier I capital (out of 15 percent capital adequacy ratio). Earlier, NBFCs were required to maintain capital adequacy ratio of 15 percent, of which 7.5 percent was Tier I capital. This will have to be raised by 2017.
The stricter norms are expected to weigh on NBFC shares in the immediate term even though the central bank has given time to comply with the changes.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
