Non Banking Financial Company

NBFC categories to be pruned soon: RBI

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RBIThe Reserve Bank of India (RBI) is all set to tweak the categories of Non-Banking Financial Companies (NBFCs) in the current financial year.

As of now, the NBFCs are divided into 11 categories. These categories comprise of asset finance company (AFC), loan company (LC), investment company (IC), core investment company (CIC), NBFC-factor, infrastructure debt funds-NBFC, Infrastructure finance company (IFC), NBFC-microfinance institution, non-operative financial holding company (NOFHC), NBFC-account aggregator and mortgage guarantee company (MGC).

The central bank is now planning to trim down these segments in a bid to initiate activity-based regulation from an entity-based one.

“Going forward, the Reserve Bank will rationalise the NBFCs into fewer categories,” said RBI, while commenting on its agenda for 2017-18 in the annual report.

If initiated then this would a second step post the major step taken in November 2014 when it RBI had reviewed the entire regulatory framework for NBFCs in order to review activity-based supervision.

The RBI had then focused on making the regulations simple and easy and integrating the norms with banks to a limited extent.

The NBFC sector in India has evolved since 1997 in terms of operations and products.

Though there is no disclosure to what extent would the RBI will trim the categories but the developments came just days after Deputy Governor N.S. Vishwanathan talked about the scope for harmonising the regulations for the sector.

The RBI deputy governor had talked about that the different regulations for various categories of NBFCs creating the scope for arbitrage.

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