REGULATION OF NBFCs BY RBI

About: 

• Amendments to give more powers to RBI to regulate NBFCs form part of Finance Bill, 2019, which has been introduced in the ongoing Budget Session 2019 of Parliament. The proposed amendments would empower RBI to – 
  • supersede the Board of an NBFC or remove its director(s),
    
    
  • amalgamate or reconstruct or split an NBFC in public interest or for financial stability,
    
    
  • remove and debar auditors,
    
    
  • direct the inspection and audit of any group company of an NBFC,
    
    
  • raise the Net Owned Fund requirement for NBFCs, and
    
    
  • impose higher penalties in case of legal contraventions.
    
    
  
  
  
• RBI has also taken a number of regulatory and supervisory measures to strengthen NBFCs:
  • To remove the regulatory arbitrage between banks and non-banks, supervisory framework for NBFCs is being aligned with that of Scheduled Commercial Banks.
    
    
  • Minimum capital adequacy norms have been prescribed for different categories of NBFCs.
    
    
  • Net owned fund requirement for Asset Reconstruction Companies (ARCs) has been fixed at Rs. 100 crore on an ongoing basis.