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    Chap 13 NBFC (CP)

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    devrajkinjal
    The Reserve Bank of India put in place prudential norms in 1998 for non-banking financial companies that accept deposits to ensure they operate soundly. Deposit-taking NBFCs are subjected to regulations on income recognition, asset classification, provisioning, capital adequacy, exposure limits, and disclosure requirements, similar to banks but at a lesser rigor. Non-deposit taking NBFCs face minimal regulation. While banks and deposit-taking NBFCs face various prudential guidelines, non-deposit taking NBFCs are exempt from capital adequacy norms, reserve requirements, exposure limits, and restrictions on certain investments. There are also no limits on leverage for non-deposit taking NBFCs unlike deposit-taking NB

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    Chap 13 NBFC (CP)

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    devrajkinjal
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    The Reserve Bank of India put in place prudential norms in 1998 for non-banking financial companies that accept deposits to ensure they operate soundly. Deposit-taking NBFCs are subjected to regulations on income recognition, asset classification, provisioning, capital adequacy, exposure limits, and disclosure requirements, similar to banks but at a lesser rigor. Non-deposit taking NBFCs face minimal regulation. While banks and deposit-taking NBFCs face various prudential guidelines, non-deposit taking NBFCs are exempt from capital adequacy norms, reserve requirements, exposure limits, and restrictions on certain investments. There are also no limits on leverage for non-deposit taking NBFCs unlike deposit-taking NB

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    chap 13 NBFC [CP]

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    The Reserve Bank of India put in place prudential norms in 1998 for non-banking financial companies that accept deposits to ensure they operate soundly. Deposit-taking NBFCs are subjected to regulations on income recognition, asset classification, provisioning, capital adequacy, exposure limits, and disclosure requirements, similar to banks but at a lesser rigor. Non-deposit taking NBFCs face minimal regulation. While banks and deposit-taking NBFCs face various prudential guidelines, non-deposit taking NBFCs are exempt from capital adequacy norms, reserve requirements, exposure limits, and restrictions on certain investments. There are also no limits on leverage for non-deposit taking NBFCs unlike deposit-taking NB

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    28 views2 pages

    Chap 13 NBFC (CP)

    Uploaded by

    devrajkinjal
    The Reserve Bank of India put in place prudential norms in 1998 for non-banking financial companies that accept deposits to ensure they operate soundly. Deposit-taking NBFCs are subjected to regulations on income recognition, asset classification, provisioning, capital adequacy, exposure limits, and disclosure requirements, similar to banks but at a lesser rigor. Non-deposit taking NBFCs face minimal regulation. While banks and deposit-taking NBFCs face various prudential guidelines, non-deposit taking NBFCs are exempt from capital adequacy norms, reserve requirements, exposure limits, and restrictions on certain investments. There are also no limits on leverage for non-deposit taking NBFCs unlike deposit-taking NB

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    13.

    The current status of Non- Banking Financial Companies

    Prudential Norms
    The Reserve Bank put in place in January 1998 a new regulatory framework involving
    prescription of prudential norms for NBFCs which deposits are taking to ensure that these

    NBFC
    NBFCs function on sound and healthy lines. Regulatory and supervisory attention was
    focused on the deposit taking NBFCs (NBFCs D) so as to enable the Reserve Bank to
    discharge its responsibilities to protect the interests of the depositors. NBFCs - D are
    subjected to certain bank like prudential regulations on various aspects such as income
    recognition, asset classification and provisioning; capital adequacy; prudential exposure
    limits and accounting / disclosure requirements. However, the non-deposit taking NBFCs
    (NBFCs ND) are subject to minimal regulation.
    The application of the prudential guidelines / limits is thus not uniform across the banking
    and NBFC sectors and within the NBFC sector. There are distinct differences in the
    application of the prudential guidelines / norms as discussed below:
    i)

    Banks are subject to income recognition, asset classification and provisioning norms;
    capital adequacy norms; single and group borrower limits; prudential limits on capital
    market exposures; classification and valuation norms for the investment portfolio;
    CRR / SLR requirements; accounting and disclosure norms and supervisory reporting
    requirements.

    ii)

    NBFCs D are subject to similar norms as banks except CRR requirements and
    prudential limits on capital market exposures. However, even where applicable, the

    A Study on Non Banking Financial Companies in India

    norms apply at a rigour lesser than those applicable to banks. Certain restrictions
    apply to the investments by NBFCs D in land and buildings and unquoted shares.
    iii)

    Capital adequacy norms; CRR / SLR requirements; single and group borrower limits;
    prudential limits on capital market exposures; and the restrictions on investments in
    land and building and unquoted shares are not applicable to NBFCs ND.

    iv)

    Unsecured borrowing by companies is regulated by the Rules made under the


    Companies Act. Though NBFCs come under the purview of the Companies Act, they
    are exempted from the above Rules since they come under RBI regulation under the
    Reserve Bank of India Act. While in the case of NBFCs D, their borrowing
    capacity is limited to a certain extent by the CRAR norm, there are no restrictions on
    the extent to which NBFCs ND may leverage, even though they are in the financial
    services sector.

    A Study on Non Banking Financial Companies in India

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