mushrooming growth of such high-risk entities. It is perhaps a one-of-its-kind scenario where the smaller players want to be registered and regulated, but the regulator wants them to be outside the ambit of regulation," said Raman Aggarwal, director (member managing committee), FIDC.
He said small NBFCs, once de-registered, shall be denied bank lending, because one of the requirements of banks is that the NBFC should be registered. As a consequence, the most likely source of funding for such NBFCs would be public deposits, which in itself may cause more problems, he said.
Besides, deregistration will also cause more complications for NBFCs. According to a panel set up by the ministry of road transport and highways, in case of vehicles financed, the lien in the vehicle registration certificate shall be marked only in favour of banks and registered NBFCs, Aggarwal pointed out.
Further, police, courts and tax departments demand RBI registration certificate as a mandatory requirement to accept applications submitted by NBFCs, he said, adding that, therefore, the norms on asset size for being registered should be made mandatory only for new entrants.
The proposed RBI norms say that while deposit-taking NBFCs will continue to be registered and regulated irrespective of their size, non-deposit taking NBFCs with less than R25 crore-asset size need not be registered or regulated as they do not pose any systemic risk. It also would not prevent small innovative start-up companies from entering into financial activities, the RBI said.
The RBI has also said that NBFCs will not be allowed to take deposits unless they have a mandatory credit rating, adding that those unrated deposit-taking NBFCs, which are currently unrated, will get a year’s time to obtain a rating or else will not be permitted to take fresh deposits or renew the deposits they already have.
Industry experts point out that it is not possible for NBFCs lesser than R25 crore-asset size to get investment rating and, therefore, the proposed RBI guidelines indirectly impact both deposit- and non-deposit taking NBFCs. The RBI cited lack of resources to regulate so many small NBFCs, which the ministry has recognised as a challenge.
The new draft norms