The Reserve Bank of India (RBI) on Tuesday said it will issue the draft guidelines on the regulatory framework for NBFCs (non-banking financial companies) by June-end.
These would be based on the recommendations of the Usha Thorat Working Group. The central bank also tightened norms for lending to NBFCs that lend predominantly against gold as collateral. RBI said banks should reduce their regulatory exposure ceiling to a single NBFC, having gold loans to the extent of 50% or more of its total financial assets, from the existing 10% to 7.5% of bank?s capital funds.
The Thorat Committee had recommended higher risk weights for exposure to sensitive sectors, an increase in minimum Tier-I capital to 12% to be achieved in three years, and liquidity requirements, similar to those for banks. Asset classification and provisioning norms too will be similar to those for banks. NBFCs that follow the 180-day classification norm for standard assets may have to shift to 90 days.
RBI will set up a working group that would undertake a detailed study of gold demand, trends in gold prices and lending by NBFCs against gold. The draft guidelines on overseas investment by core investment companies (CICs) will be placed on the Reserve Bank?s website for public comments by end-April 2012.
Muthoot, which has a portfolio size of around R25,000 crore, is expected to slow down owing to the capital requirement.
George M George, the executive director of Muthoot, said: ?Our business growth is directly linked to the capital available to us, however, we have been raising capital through non-convertible debentures. There are several banks that do not have exposure to gold loans.?
Another gold loan NBFC, Manappuram, has 60% of its capital coming from banks such as State Bank of India, Axis Bank, ICICI Bank and Union Bank of India.
?The total exposure for banks in lending to our company is less than 2% ? R8,000 crore ? and RBI guidelines would not affect our capital infusion,? said I Unnikrishnan, the managing director, Manappuram Finance.
Both the NBFCs are witnessing a slowdown in their portfolio growth following RBI guidelines on priority sector lending (PSL) blocking banks factoring in gold loans as PSL.