The new norms, which were put in the public domain for discussion on Friday, said the internal ceiling on sensitive sectors for NBFCs should separately disclose capital market and commercial real estate exposures.
IPO financing by NBFCs, a large business for some of these companies, has come under close scrutiny, as while there is a limit of 10 lakh for banks financing IPOs, there is no such limit for NBFCs. “Taking in to account the unique business model of NBFCs, it is proposed to fix a ceiling of 1 crore per individual for any NBFC. NBFCs are free to fix more conservative limits,” RBI said.
It has also suggested a sub-limit within the commercial real estate exposure for financing land acquisition.
Other proposals include not to allow NBFCs to provide loans to companies for buy-back of shares/securities and strict restrictions on granting loans and advances to directors, their relatives and to entities where directors or their relatives having shareholding of 10% or more.
“While appraising loan proposals involving real estate, NBFCs to ensure that the borrowers have obtained prior permission from government / local governments / other statutory authorities for the project, wherever required,” the RBI said. Responses and suggestions to the norms should be sent to the central bank by February 22.
The new norms are aimed at tightening regulations around NBFCs which enjoy easier oversight despite some of them having loan books bigger than some smaller lenders. The new rules could raise the safety levels but at the same time shrink overall business margins for NBFCs hurting profitability.
The new rules have proposed a graded system with more severe regulations for the top Tier systematically important NBFCs on par with banks, “since NBFCs lying in the upper layer have ability to cause adverse systemic risks,” RBI said.