RBI paper proposes new regulatory framework for NBFCs, 4-tier structure

India’s non-banking finance businesses (NBFC) will need tighter regulation via generation of a multilayer product, mentioned a dialogue paper by the Reserve Financial institution of India on Friday.

The paper proposed a framework to categorise NBFCs, or shadow financial institutions, depending on their dimensions and interconnectedness with the system. NBFCs in the reduce layer will be recognized as NBFC-Foundation Layer (NBFC-BL). NBFCs in the center layer will be recognized as NBFC-Middle Layer (NBFC-ML). An NBFC in the Upper Layer will be recognized as NBFC-Upper Layer (NBFC-UL) and will invite a new regulatory superstructure.

“An NBFC in the Upper Layer will be recognized as NBFC-Upper Layer (NBFC-UL) and will invite a new regulatory superstructure,” mentioned the paper.

It proposed a NBFC non-undertaking classification norm of a hundred and eighty times be “harmonised” to 90 times. “In check out of the the latest worry in the sector, it has become very important to reexamine the suitability of this regulatory solution, in particular when failure of an really big NBFC can precipitate systemic challenges,” mentioned the paper.

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