The non-banking finance sector started receiving closer scrutiny from the Reserve Bank of India after the sudden collapse of Infrastructure Leasing & Finance Limited (IL&FS) earlier this year.
The RBI Governor Shaktikanta Das has been taking personal interest in the sector and had spoken on many occasions in the past on various issues relating to the NBFCs. In his latest interview to Mint, Das has confirmed that the regulator is keen on further tightening the regulations governing the non-banking finance companies. He has added that this will be carried out without disturbing the ongoing process of reviving the sector.
According to the RBI Governor, there are already signs that the better-performing NBFCs are able to borrow from the banks and in turn offer loans to their borrowers. The nightmarish situation immediately after the IL&FS fiasco appears to have faded away. If you went by RBI data, there has been an increase of close to 13% in the assets of NBFCs in the one year between September 2018 and September 2019, from Rs 28.3 trillion to Rs 31.95 trillion. This does not include the housing finance companies. The NBFCs included in this data are the systemically important ones, that accept deposits and those that don’t accept deposits.
The Governor feels these may be early days as far as the complete normalization or the pre-IL&FS days are concerned.
On the steps proposed to make the norms for the NBFCs stricter, Das has said, one stipulation is that the companies must appoint a chief risk officer. There is a condition laid on the liquidity coverage ratio requirement. Apart from these more are being worked upon and the regulator may announce these sooner than later. The bottom line is that the Reserve Bank is fully conscious of the issues relating to the non-banking financial sector and is fully involved in correcting the situation.
On the steps already initiated, he has cited the increase in the exposure limit of banks to a single NBFC from 15% to 20% this August. This has eased the fund flow to the sector.