Regulatory Framework for NBFCs revised by RBI

Revised Reg­u­la­to­ry Frame­work for NBFCs

Please refer to the revised reg­u­la­to­ry frame­work issued vide DNBR (PD) CC.No. 002/ 03.10.001/ 2014–15 dat­ed Novem­ber 10, 2014 (the cir­cu­lar). At para 14 of the cir­cu­lar it was men­tioned that the Noti­fi­ca­tions in this regard shall follow.

2. In this con­nec­tion, the fol­low­ing Noti­fi­ca­tions are enclosed for metic­u­lous compliance

1. Noti­fi­ca­tion No. DNBR. 007/ CGM (CDS) ‑2015 dat­ed March 27, 2015 amend­ing the Net Owned Fund requirements.
2. Non-Sys­tem­i­cal­ly Impor­tant Non-Bank­ing finan­cial (Non-Deposit Accept­ing or Hold­ing) Com­pa­nies Pru­den­tial Norms (Reserve Bank) Direc­tions, 2015 issued vide­No­ti­fi­ca­tion No. DNBR. 008/ CGM (CDS) ‑2015 dat­ed March 27, 2015.
3. Sys­tem­i­cal­ly Impor­tant Non-Bank­ing finan­cial (Non-Deposit Accept­ing or Hold­ing) Com­pa­nies Pru­den­tial Norms (Reserve Bank) Direc­tions, 2015 issued vide Noti­fi­ca­tion No. DNBR. 009/ CGM (CDS) ‑2015 dat­ed March 27, 2015.
4. Noti­fi­ca­tion No. DNBR. 010/ CGM (CDS) ‑2015 dat­ed March 27, 2015 amend­ing the Non-Bank­ing Finan­cial Com­pa­nies Accep­tance of Pub­lic Deposits (Reserve Bank) Direc­tions, 1998.
5. Noti­fi­ca­tion No. DNBR. 011/ CGM (CDS) ‑2015 dat­ed March 27, 2015 amend­ing the Non-Bank­ing Finan­cial (Deposit Accept­ing or Hold­ing) Pru­den­tial Norms (Reserve Bank) Direc­tions, 2007.
6. Noti­fi­ca­tion No. DNBR. 012/ CGM (CDS) ‑2015 dat­ed March 27, 2015 amend­ing the Non-Bank­ing Finan­cial Com­pa­ny – Fac­tor (Reserve Bank) Direc­tions, 2012.

3. It may be empha­sised that the changes made vide above notifications/ amend­ing noti­fi­ca­tions are only that cor­re­spond­ing to the circular.

Yours faith­ful­ly

(C D Srinivasan)
Chief Gen­er­al Manager

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RESERVE BANK OF INDIA
DEPARTMENT OF NON-BANKING REGULATION
CENTRAL OFFICE, CENTRE I, WORLD TRADE CENTRE
CUFFE PARADE, COLABA, MUMBAI 400 005

Noti­fi­ca­tion No.DNBR.007/ CGM (CDS) ‑2015 dat­ed March 27, 2015

In exer­cise of the pow­ers under clause (b) of sub-sec­tion (1) of sec­tion 45 –IA of the Reserve Bank of India Act, 1934 (Act 2 of 1934) and all the pow­ers enabling it in that behalf, the Reserve Bank of India, in super­s­es­sion of Noti­fi­ca­tion No. 132/ CGM (VSNM) ‑99 dat­ed April 20, 1999, here­by spec­i­fies two hun­dred lakhs rupees as the net owned fund required for a non-bank­ing finan­cial com­pa­ny to com­mence or car­ry on the busi­ness of non-bank­ing finan­cial institution.

Pro­vid­ed that a non-bank­ing finan­cial com­pa­ny hold­ing a cer­tifi­cate of reg­is­tra­tion issued by the Reserve Bank of India and hav­ing net owned fund of less than two hun­dred lakhs of rupees, may con­tin­ue to car­ry on the busi­ness of non-bank­ing finan­cial insti­tu­tion, if such com­pa­ny achieves net owned fund of, -

1. one hun­dred lakhs of rupees before April 1, 2016; and
2. two hun­dred lakhs of rupees before April 1, 2017

(C D Srinivasan)
Chief Gen­er­al Manager

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RESERVE BANK OF INDIA
DEPARTMENT OF NON-BANKING REGULATION
CENTRAL OFFICE, CENTRE I, WORLD TRADE CENTRE
CUFFE PARADE, COLABA, MUMBAI 400 005

Noti­fi­ca­tion No.DNBR. 010/ CGM (CDS)-2015 dat­ed March 27, 2015

The Reserve Bank of India, hav­ing con­sid­ered it nec­es­sary in pub­lic inter­est and being sat­is­fied that, for the pur­pose of enabling the Bank to reg­u­late the cred­it sys­tem to the advan­tage of the coun­try, it is nec­es­sary to amend the Non-Bank­ing Finan­cial Com­pa­nies Accep­tance of Pub­lic Deposits (Reserve Bank) Direc­tions, 1998 (Noti­fi­ca­tion No. DFC.118/ DG(SPT)-98 dat­ed Jan­u­ary 31, 1998) (here­inafter referred to as the said Direc­tions), in exer­cise of the pow­ers con­ferred by sec­tion 45J, 45K, 45L and 45MA of the Reserve Bank of India Act, 1934 (2 of 1934) and of all the pow­ers enabling it in this behalf, here­by directs that the said Direc­tions shall be amend­ed with imme­di­ate effect as fol­lows, namely –

1. In para­graph 4,

(i) in sub-para­graph (1), the exist­ing pro­vi­so to clause (i), shall be sub­sti­tut­ed by the fol­low­ing new pro­vi­so, namely,-

“Pro­vid­ed that in case of an unrat­ed asset finance com­pa­ny, it shall obtain the min­i­mum invest­ment grade or oth­er spec­i­fied cred­it rat­ing on or before March 31, 2016. Those AFCs that do not get a min­i­mum invest­ment grade rat­ing by March 31, 2016, shall not renew exist­ing deposits or accept fresh deposits there­after. In the inter­ven­ing peri­od, i.e. till March 31, 2016, unrat­ed Asset Finance Com­pa­nies or those with a sub-invest­ment grade rat­ing shall only renew the exist­ing deposits on matu­ri­ty, and shall not accept fresh deposits, till they obtain an invest­ment grade rating”.

(ii) sub-paragraph(4) shall be mod­i­fied as under–

“an asset finance com­pa­ny or a loan com­pa­ny or an invest­ment company

(a) hav­ing min­i­mum NOF as stip­u­lat­ed by the Reserve Bank, and

(b) com­ply­ing with all the pru­den­tial norms,

may accept or renew pub­lic deposit, togeth­er with the amounts remain­ing out­stand­ing in the books of the com­pa­ny as on the date of accep­tance or renew­al of such deposit, not exceed­ing one and one-half times of its NOF.”

“Pro­vid­ed that an asset finance com­pa­ny hold­ing pub­lic deposits in excess of the lim­it of one and one-half times of its NOF shall not renew or accept fresh deposits till such time they reach the revised limit”.

(iii) sub-para­graph (5) shall be mod­i­fied as under-

“In the event of down­grad­ing of cred­it rat­ing below the min­i­mum spec­i­fied invest­ment grade as pro­vid­ed for in para­graph 4(1), a non-bank­ing finan­cial com­pa­ny, being an asset finance com­pa­ny or a loan com­pa­ny or an invest­ment com­pa­ny, shall reg­u­larise the excess deposit as pro­vid­ed hereunder;

1. with imme­di­ate effect, stop accept­ing fresh pub­lic deposits and renew­ing exist­ing deposits;
2. all exist­ing deposits should runoff to matu­ri­ty; and

3. report the posi­tion with­in fif­teen work­ing days, to the con­cerned Region­al Office of the Reserve Bank of India where the NBFC is registered.

(C D Srinivasan)
Chief Gen­er­al Manager

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RESERVE BANK OF INDIA
DEPARTMENT OF NON-BANKING REGULATION
CENTRAL OFFICE, CENTRE I, WORLD TRADE CENTRE
CUFFE PARADE, COLABA, MUMBAI 400 005

Noti­fi­ca­tion No. DNBR. 011/ CGM (CDS) ‑2015 dat­ed March 27, 2015

The Reserve Bank of India, hav­ing con­sid­ered it nec­es­sary in pub­lic inter­est and being sat­is­fied that, for the pur­pose of enabling the Bank to reg­u­late the cred­it sys­tem to the advan­tage of the coun­try, it is nec­es­sary to amend the Non-Bank­ing Finan­cial (Deposit Accept­ing or Hold­ing) Com­pa­nies Pru­den­tial Norms (Reserve Bank) Direc­tions, 2007(Notification No.DNBS.192/ DG(VL)-2007 dat­ed Feb­ru­ary 22, 2007) (here­inafter referred to as the said Direc­tions), in exer­cise of the pow­ers con­ferred by sec­tion 45JA of the Reserve Bank of India Act, 1934 (2 of 1934) and of all the pow­ers enabling it in this behalf, here­by directs that the said Direc­tions shall be amend­ed with imme­di­ate effect as follows –

1. In para­graph 2, sub-para­graph (1),-

(A) after clause (iv), the fol­low­ing pro­vi­so shall be inserted -

“Pro­vid­ed that the peri­od ‘exceed­ing 18 months’ stip­u­lat­ed in this clause shall be ‘exceed­ing 16 months’, for the finan­cial year end­ing March 31, 2016; ‘exceed­ing 14 months’, for the finan­cial year end­ing March 31, 2017 and ‘exceed­ing 12 months’, for the finan­cial year end­ing March 31, 2018 and thereafter.”

(B) in clause (xiii),

(i) after sub clause (f), the fol­low­ing pro­vi­so shall be insert­ed, namely, –

“Pro­vid­ed that the peri­od of ‘six months or more’ stip­u­lat­ed in sub- claus­es (a) to (f) of this clause shall be ‘five months or more’ with for the finan­cial year end­ing March 31, 2016; ‘four months or more’ for the finan­cial year end­ing March 31, 2017 and ‘three months or more’ for the finan­cial year end­ing March 31, 2018 and thereafter.”

(ii) after sub clause (g), the fol­low­ing pro­vi­so shall be insert­ed, namely, -

“Pro­vid­ed that the peri­od of ‘twelve months or more’ stip­u­lat­ed in this sub-clause shall be ‘nine months or more’ for the finan­cial year end­ing March 31, 2016; ‘six months or more’ for the finan­cial year end­ing March 31, 2017 and ‘three months or more’, for the finan­cial year end­ing March 31, 2018 and thereafter.”

© in clause (xvi), after sub-clause (a), the fol­low­ing pro­vi­so shall be insert­ed, namely, -

“Pro­vid­ed that the peri­od ‘not exceed­ing 18 months’ stip­u­lat­ed in this sub-clause shall be ‘not exceed­ing 16 months’ for the finan­cial year end­ing March 31, 2016; ‘not exceed­ing 14 months’ for the finan­cial year end­ing March 31, 2017 and ‘not exceed­ing 12 months’ for the finan­cial year end­ing March 31, 2018 and thereafter”.

2. After para­graph 9A, the fol­low­ing pro­vi­so shall be inserted –

“Pro­vid­ed that the pro­vi­sion for stan­dard assets shall be 0.30 per­cent as on March 31, 2016; 0.35 per­cent as on March 31, 2017; 0.40 per­cent as on March 31, 2018 and thereafter”.

3. Para­graph 11 shall be omitted.

4. In para­graph 16,

(i) for sub-para­graph (1), the fol­low­ing shall be sub­sti­tut­ed, namely, -

“(1) Every non-bank­ing finan­cial com­pa­ny shall main­tain a min­i­mum cap­i­tal ratio con­sist­ing of Tier I and Tier II cap­i­tal which shall not be less than 15 per­cent of its aggre­gate risk weight­ed assets on-bal­ance sheet and of risk adjust­ed val­ue of off-bal­ance sheet items.”.

(ii) for sub-para­graph (2), the fol­low­ing shall be sub­sti­tut­ed, namely, -

“(2) The total Tier I cap­i­tal, at any point of time shall not be less than 8.5 per­cent by March 31, 2016 and 10 per­cent by March 31, 2017.

5. In para­graph 20, in sub-para­graph (1), the third pro­vi­so shall be omitted.

(C D Srinivasan)
Chief Gen­er­al Manager

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RESERVE BANK OF INDIA
DEPARTMENT OF NON-BANKING REGULATION
CENTRAL OFFICE, CENTRE I, WORLD TRADE CENTRE
CUFFE PARADE, COLABA, MUMBAI 400 005

Noti­fi­ca­tion No.DNBR.012/ CGM (CDS)-2015, dat­ed March 27, 2015

The Reserve Bank of India, hav­ing con­sid­ered it nec­es­sary in the pub­lic inter­est, and being sat­is­fied that, for the pur­pose of enabling the Reserve Bank to reg­u­late the finan­cial sys­tem to the advan­tage of the coun­try and to pre­vent the affairs of any Non-Bank­ing Finan­cial Com­pa­ny – Fac­tor (NBFC-Fac­tor) from being con­duct­ed in a man­ner detri­men­tal to the inter­est of investors or in any man­ner prej­u­di­cial to the inter­est of such NBFC – Fac­tors, it is nec­es­sary to amend the Non-Bank­ing Finan­cial Com­pa­ny – Fac­tor (Reserve Bank) Direc­tions, 2012 (Noti­fi­ca­tion No. DNBS. PD.No.247/ CGM(US)-2012 dat­ed July 23, 2012) in exer­cise of the pow­ers con­ferred under Sec­tion 3 of the Fac­tor­ing Reg­u­la­tion Act, 2011, here­by directs that the said Direc­tions shall be amend­ed with imme­di­ate effect as follows –

1. For Para­graph 6 fol­low­ing shall be substituted –

6. Prin­ci­pal Business

“An NBFC-Fac­tor shall ensure that its finan­cial assets in the fac­tor­ing busi­ness con­sti­tute at least 50 per cent of its total assets and the income derived from fac­tor­ing busi­ness is not less than 50 per cent of its gross income”.