FE Editorial: Making NBFCs safer
RBI’s draft norms for NBFCs may come across as softer than those proposed by the Usha Thorat Committee last year, but it’s clear the regulator wants a tighter grip on these intermediaries. The general idea seems to be to keep a closer watch on the larger players, especially those that are mobilising money from the public, and not worry too much about the smaller lot. As the regulator points out, since many of the companies are highly leveraged—they borrow a fair amount from the banks—their well-being is important for the health of the financial system. The fact that they’re offering more ‘complex’ products also seems to be a matter of concern for RBI. So, the regulator will be asking for a lot more information—NBFCs with assets of R1,000 crore and more will need to furnish data not just as is required under clause 49 of SEBI’s listing norms but also to disclose a fair amount of balance sheet data and even declare off-balance sheet items. Also, an NBFC that wants to access deposits would need to get itself rated, not a bad move even if rating agencies aren’t always ahead of the curve when it comes to spotting trouble.
The regulator understandably wants stronger institutions and it was always evident that capital requirements would be upped. However, while the Thorat Committee had suggested a core or a Tier-1 capital of 12%, RBI has been more lenient lowering it to 10% except in
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