Reserve Bank of India comes out with norms for NBFCs

Reserve Bank of India (RBI) on Monday emerged with a set of norms for provisioning for standard assets by huge Non-Banking Financial Companies (NBFCs) in view of the rising role played by such entities in the financial system.

In October last year, RBI issued a framework for scale-based guideline for NBFCs. Regulatory structure for NBFCs involves four layers based on their size, movement, and perceived riskiness. In a round on Monday, the central bank specified rates of provision for outstanding loans extended out by ‘NBFC-Upper Layer’.

In the event of individual housing loans and loans to Small and Micro Enterprises (SMEs), the rate of provision has been determined at 0.25 percent and for housing loans extended at teaser rates, it has been fixed at 2%. The latter will decrease to 0.4 percent following 1 year from the date on which the rates are raised.

For Commercial Real Estate – Residential Housing (CRE – RH) sector, the rate of provision is 0.75 percent, and for CRE, other than residential housing, it will be 1%.

Further, RBI said the rate of provision for restructuring loans will be as per the stipulation in the applicable prudential norms. The rate of provision for medium enterprises has been fixed at 0.4 percent.