Non Banking Finance Company ICAI

Report
ICAI - DELHI
CA BHAVESH VORA
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Reserve Bank of India has published the
draft guidelines for NBFCs which are
extensive in Nature mainly focusing on
following aspects
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Conditional Exemptions From Registration
Revision in Prudential Norms
Asset Classification – NPA
Criteria for New Entrants as NBFCs
Deposit Taking NBFCs
Liquidity Management
Corporate Governance
CA Bhavesh Vora
Exempted Granted
Registered
- Total assets Below Rs. 25 crores - Deposit Taking NBFCs are always
whether or not accessing public to be registered
funds
- Total assets upto Rs. 500 Crores - Above Rs. 25 Crores and
and not accessing public funds
accessing public funds (Directly or
Indirectly)
RBI has right to inspect and right
to frame rules in future.
“Public funds“ shall include funds raised either directly or indirectly
through public deposits, Commercial Papers, debentures, intercorporate deposits and bank finance but excludes funds raised by
issue of instruments compulsorily convertible into equity shares
within a period not exceeding 10 years from the date of issue.
CA Bhavesh Vora
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Tier I capital requirement has been raised from
7.5% to 12% for captive NBFCs, and NBFCs which
invests or lend in sensitive sectors such as Capital
Market, Commodities or Real Estate Sector
(Implemented in phased manner – 3 years)
For other NBFCs, risk weights for Capital Market
exposure and Real Estate exposure has been raised
to 150% and 125% respectively
Impact: In both of the above cases, NBFCs will have to reduce
their dependence on Tier II capital and will have to infuse more
of permanent capital in the business in the form of Capital
Infusion, Compulsory Convertible Debentures, etc…
CA Bhavesh Vora
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NPA Provisions similar to Bank
◦ Assets will become NPA if overdue for 90 days
instead of 180 days criteria at present
◦ The same will be implemented in phased manner
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Provision on Standard Asset increased to
0.40% from present requirement of 0.25%
Impact: This will affect profitability of NBFCs
because of higher provisioning against NPAs
and provision against Standard Assets.
CA Bhavesh Vora
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Existing Deposit Taking NBFCs should be
credit rated
Unrated NBFCs will be given 1 year time to
get rated
Acceptance of Deposits for Rated Asset
Finance Companies – Reduced to 2.5 times of
Net owned Funds (NOF) as against present
limit of 4 times of NOF
CA Bhavesh Vora
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Minimum Asset size to be Rs. 25 Crores
Fulfill 75% Financial Assets and 75%
Income from Financial assets Criteria
Net
Owned
Funds
requirements
continues to be Rs. 2 crores
For FINANCIAL ENTITIES having asset
size Rs. 1000 Crores or more, need to
register if Financial Assets OR Income
from Financial Assets exceeds 50%
CA Bhavesh Vora
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Need to approach RBI afresh for CoR if
◦ Asset Size exceeds Rs. 25 crores and company
desires to access public funds
◦ Asset size Exceeds Rs. 500 Crores even if no public
funds are accessed
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Notes:
◦ Assets of All NBFCs in single group will be
aggregated for checking applicability of revised
regulations
◦ Existing captive NBFCs will need to raise Tier I
capital in phased manner (3 years)
CA Bhavesh Vora
Surrender or Enhance Asset Size
 Having total assets below Rs. 25 crores –
Required to notify RBI within 3 months from
date of notification with a roadmap to
increase the asset size to Rs. 25 crores (2
years period allowed to achieve the same)
 Revised Principal Business criteria to be
fulfilled in phased manner (75% instead of
50%)
 If no plan to go above Rs. 25 crores asset
size, surrender CoR and get de-registered
CA Bhavesh Vora
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All registered NBFCs (Whether deposit taking
or non deposit taking) should maintain high
quality liquid assets, equal to the gap
between Expected cash outflows and inflows
in the 1 to 30 days bucket.
Quality liquid assets includes cash, bank
deposits available within 30 days, money
market instruments maturing within 30 days,
actively traded debt securities with ratings
CA Bhavesh Vora
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Prior approval from RBI – For change in
control and shareholding of more than 25%
Clause 49 to be followed by NBFCs having
asset size Rs. 1000 Crores or more
Disclosure Norms in balance sheet has been
enhanced to cover any registration under
SEBI, IRDA, FMC, etc and penalties charged by
those regulators
Remuneration and compensation committee
for NBFCs with asset size above Rs. 1000
crores
CA Bhavesh Vora
Norms Affecting Directors and Directorships
 Prior approval for appointment of CEO – for
NBFCs having assets Rs. 1000 crores and
above
 Cap on directorship of director of any NBFCs,
public or private, to be in line with Section
275 of Companies Act, 1956
 All NBFCs-ND-SI and NBFC-D shall have a
policy in place for ascertaining fit & proper
criteria for appointment of directors and
shall certify annually to RBI about fit and
proper status of the Directors
CA Bhavesh Vora
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Fit and proper person declaration to be
given by Directors including
◦ list of relatives, associated entities connected or
interested in any other NBFCs
◦ Fund and non-fund based facility presently
availed by Director himself or by his relatives or
associated concerns from any NBFCs
CA Bhavesh Vora
ICAI - DELHI
CA BHAVESH VORA

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