The Reserve Bank of India (RBI) has announced new norms for non-banking financial companies (NBFCs) in the upper regulatory layer.

India’s central bank has said that NBFCs will have to make provisions for ‘standard’ assets for the funded amount outstanding.

Go deeper with GlobalData

Premium Insights

The gold standard of business intelligence.

Find out more

A standard asset is one that does not pose more than normal risk attached to the business and does not disclose any problems.

The RBI’s move is seen as an effort to impose bank-like norms on these shadow lenders in the wake of increased activity by them in the retail lending space.

As per RBI’s new provisioning norms, NBFCs will be required to set aside a minimum percentage of funds to cover potential future losses.

For individual housing loans and loans to small and micro enterprises (SMEs), the NBFCs will have to maintain a provision of 0.25%.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

Housing loans extended at teaser rates will attract a provision of 2%, which will be reduced to 0.4% after a year from the date on which the rates are reset at higher rates.

NBFCs will have to maintain a 0.75% provision for loans extended to the commercial real state – residential housing (CRE-RH) sector, whereas a 1% provision has been specified for other real estate loans.

For all loans extended to medium-size enterprises and those not included in any other category, NBFCs will have to set aside 0.4% of their outstanding exposure.

“Current credit exposures arising on account of the permitted derivative transactions shall also attract provisioning requirement as applicable to the loan assets in the ‘standard’ category, of the concerned counterparties,” the RBI added.

Finance firms in the ‘NBFC- Upper Layer’ are specifically identified by the central bank as warranting enhanced regulatory requirements.