India’s RBI governor says to steadily tighten NBFC regulations

Photo: Reuters

The Reserve Bank of India (RBI) is looking to steadily tighten regulation of non-banking financial companies (NBFCs) without causing any disruption to the current recovery of the sector, RBI governor Shaktikanta Das said.

“NBFC regulation is not as strong as (in) banks. We are now making changes to the sector. We have mandated that there should be a chief risk officer. We have also mandated that NBFCs should have liquidity coverage ratio (LCR) requirement to take care of asset-liability (ALM) mismatches. There are a few other regulatory measures, which are under consideration and we will be bringing (them) in steadily. These new regulations have to be brought in a non-disruptive manner,” Das said in an exclusive interview to Mint on Tuesday.

He said there are signs that bank credit to NBFCs is slowly reviving and the better-performing ones are able to access funds from the market at rates that prevailed before the collapse of Infrastructure Leasing and Financial Services (IL&FS). Overall, non-bank credit growth is, however, yet to return to pre-IL&FS levels. According to RBI data, assets of deposit and non-deposit-taking systemically important NBFCs, excluding housing finance companies, have grown from 28.3 trillion in September 2018 to 31.95 trillion in September 2019, a growth of 12.9%.

In the October policy, the governor had said that RBI was regularly monitoring the top 50 NBFCs much more closely and intensively than anyone could expect.

He had also said the central bank was aware of vulnerabilities in the NBFC sector.

(Graphic: Paras Jain/Mint)
(Graphic: Paras Jain/Mint)

To ensure greater credit flow from banks to NBFCs, in August 2019 RBI also increased exposure limits to a single NBFC from 15% to 20% and allowed banks to lend to NBFCs for on-lending to customers.

Referring to the recent measures taken by the finance ministry, Das said the government could find it challenging to find the fiscal space to provide further boost to the ailing economy.

In the October monetary policy, Das had said that the Reserve Bank decided to go for a “temporary pause” in the interest rate-cutting cycle and wait for the government to announce further measures in the Union budget for fiscal 2020-21.

“Spike in food inflation appears to be transient. With inflation at around 4%, nominal GDP growth will come down compared to what it was 7-8 years ago. With current nominal GDP down to 7%, it’ll be a challenge for the government to find space. Therefore, the government will have to focus on accretion of additional revenue, goods and services tax streamlining and plugging loopholes, if any, disinvestment programme and other revenue mobilization measures,” he added.

This article was first published on livemint.com

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.