The Reserve Bank of India (RBI) has proposed tighter capital requirements and provisioning guidelines for non-banking finance companies (NBFCs) in the draft guidelines based on the Thorat committee report on reviewing the existing norms for NBFCs.
The central bank said that Tier-I capital of captive NBFCs be raised to 12% from the current 7.5% but that of infrastructure financing companies be kept unchanged at 10%.
NBFCs that fall short of the required capital level will be given three years to comply, the draft norms said.
For entering the NBFC business, a company not accepting deposits, will qualify for registration if and when its financial assets aggregate R25 crore and constitute 75% and above of its total assets and financial income constitutes 75% or above of its gross income.
Currently a company is treated as an NBFC if its financial assets are more than 50% of its total assets and income from these financial assets is more than 50% of the gross income.
The risk weights on exposure to capital market and real estate, for NBFCs in a bank group is proposed to be kept same as the bank while that for NBFCs not sponsored by banks may be raised to 150% for capital market and 125% for realty exposures, the RBI said.
The central bank also proposed that NBFCs must classify loans as non-performing assets within 90 days of non-payment, bringing them on par with banks.
Further, the provisioning for standard assets be raised to 0.40% from 0.25% of the outstanding amount from March 2014 onwards, the central bank said.
All registered NBFCs — deposit taking as well as non-deposit taking, must maintain high quality liquid assets in cash, bank deposits available within 30 days, money market instruments maturing within 30 days, investment in actively traded debt securities (valued at 90% of the quoted price) and carrying a rating not lower than AA or equivalent. There should not be any liquidity gap in the 1-30 day bucket, the RBI proposed.
The central bank has invited comments from stakeholders until January 10, 2013.