Skip to main content

RBI cancels registration of 1,490 NBFCs in 2 years; Kolkata tops the list

By
Kolkata tops list with 617 cancellations, Delhi second with 203 Stepping up oversight over credit companies, the Reserve Bank of India has cancelled the registration of 1,490 non-banking financial companies (NBFCs). These included NBFCs that failed to meet prudential norms and those that voluntarily surrendered registration. Kolkata tops the list with 617 cancellations, and New Delhi stands at second spot with 203, followed by Mumbai at 190, according to the data provided by the RBI for parliamentary questions (Lok Sabha).
These cancellations happened owing to non-compliance with mandatory requirements like minimum net-owned funds (NoF) of Rs 20 million, not submitting statutory returns, and companies not being traced at the addresses they gave. In some cases, NBFCS surrendered the certificate of registration, the RBI said. The RBI said NBFCs registered with the regulator were subject to on-site inspection and off-site monitoring through return submission and statutory auditors’ reports. Analysts said finance companies had become crucial in extending support in the last mile to reach customers where banks experience limitations due to structure and staff strength. Finance companies have a nimble set-up, reach and flexibility to reach even remotest locations.
NBFCs are a key link in extending credit and other financial services to micro, small and medium enterprises (MSMEs) and those at the bottom of the pyramid across the country. According to the Financial Stability Report published by the RBI in June 2018, loans and advances of the sector increased 21.2 per cent and investments 13.4 per cent. The aggregate balance sheet size at the end of March was Rs 22.1 trillion. Senior NBFC executives said the quality of risk management and governance by finance companies had a bearing on the financial stability of the system. Defaults by Infrastructure Leasing & Financial Services (IL&FS) and its group entities in the second quarter of the current financial year (FY19) were a major setback to the financial system and hit liquidity for finance companies.
The RBI has stepped up supervision and now looks at liquidity management and loan books for asset quality to spot gaps and risks. The major concerns flagged about finance companies include borrowing short-term for lending to long-term assets, often leading to asset-liability mismatch. Governance and risk management practices need improvement. According to the Financial Stability Report, there was a deceleration in the share capital growth of NBFCs, whereas borrowing grew 19.1 per cent, implying rising leverage. NBFCs have to maintain minimum Tier I and II capital of not less than 15 per cent of aggregate risk-weighted assets. All finance companies are subjected to prudential regulations such as capital adequacy requirements and provisioning norms, along with reporting requirements. In March 2018, there were 11,402 of these companies registered with the RBI. Of those 156 were deposit-accepting (NBFCs-D). There were 249 deemed systemically important non-deposit accepting NBFCs. The number has come down to 10,102 by the end of September 2018, according to the RBI data.

The Business Standard, 24th December 2018

Comments

Post a Comment

Popular posts from this blog

Govt’s gamble on GST cuts: What do the bond and currency markets signal?

By
  It’s not just humans who suffer from cognitive biases; markets do too. Interestingly, different financial markets exhibit distinct biases, each interpreting events through its own prism of prejudice. Take the recent announcements on GST reforms: equity markets have chosen to view them through the lens of growth, while bond and currency markets are focusing on potential macroeconomic risks—fiscal pressures and current account challenges. So, which lens captures the true pulse?Equity markets may be right in expecting GST reforms to revive consumption, which has remained lacklustre for a while. But the key question remains—will this revival come at the cost of broader macro stability?It is well known that consumption stocks have rallied since the GST rationalisation announcement. But what about bond markets? What signals are they sending since this rejig was announced from the ramparts of the Red Fort?The signs aren't encouraging. Bond prices have slumped and yields have surged sinc...
Post a Comment
Read more

Luxury carmakers urge clarity on GST rates to boost festive season sales

By
  A clear picture regarding new GST rates at the earliest will help the overall auto industry, including the luxury car segment, to regain momentum in the ongoing quarter, which generally sees enhanced sales on account of the festive season.The high-powered GST Council, chaired by Finance Minister Nirmala Sitharaman, will meet on September 3-4 to discuss moving to a two-slab taxation.In an interaction with PTI, BMW Group India President and CEO Hardeep Singh Brar said the recent speculation about the change in GST rates has caused uncertainty in the minds of consumers.Consumer interest and demand is strong, but they (prospective buyers) have adopted a wait-and-watch approach, and this delayed decision-making is impacting new vehicle sales at a certain level, he noted."Expediting clarity on GST rates is essential to get back to speed and ensure the auto sector's contribution to economic growth during this quarter is robust," Brar stated.He also hoped that the sustainable p...
Post a Comment
Read more

Sebi proposes tighter norms for green bond third-party reviewers

By
  Sebi on Friday said it has proposed to tighten the norms to appoint independent third-party reviewers or certifiers for green debt securities to align them with requirements for other ESG-linked bonds.In a draft circular, Sebi said that the current norms for green bonds, introduced in February 2023, lack detailed requirements around reviewer independence, conflict of interest mitigation, and disclosure standards that are now in place for other ESG-linked securities under a June 2025 circular.The regulator's latest proposal seeks public comments on a revised framework that would bring parity by incorporating comprehensive criteria for third-party certifiers of green bonds on non-convertible securities.Under the proposed norms, issuers of green debt securities will need to appoint reviewers who are independent of their management, directors, and key managerial personnel. These reviewers will be remunerated in a way that prevents any conflicts of interest and possess relevant expert...
Post a Comment
Read more