Committee for Small Biz recommended merger of various categories of NBFCs: R Gandhi
Updated: Dec 22, 2015 01:14:58pm
Mumbai, Dec 22 (KNN) The Committee on Comprehensive Financial Services for Small Businesses and Low Income Households, headed by Nachiket Mor, had recommended merger of various categories of NBFCs, into two - NBFCs and Core Investment Companies (CICs) and moving towards activity based regulation, said R Gandhi, Deputy Governor, RBI.
At present, there are several categories of NBFCs and regulations vary across these NBFCs.
“The regulatory framework, put in place in November 2014, is a first step in this direction. Going forward, we will work towards greater harmonisation of the regulations with a view to reducing the number of NBFC categories,” said while addressing the CII Summit on Non-Banking Financial Companies (NBFCs) to deliberate on “Regulatory Paradigm & Contours of Growth – Vision 2020”.
However, the Reserve Bank is alive to the developmental needs of the economy and therefore will continue to approve of new types of NBFCs if the economy will need them. One such is NBFC-Account Aggregator (NBFC-AA) about which the Reserve Bank announced on July 02, 2015, Gandhi said.
The NBFC-AA will provide a technology enabled solution to a person to view at one place the position of his financial assets across institutions under different sectoral regulators. The guidelines for the same are under preparations.
He said that the Reserve Bank is actively studying the Peer-To-Peer lending arrangements that are slowly gaining traction.
“While recognising the need for innovative products and services, we should be conscious about the risks that may emanate out of such innovations. Based on the detailed study, we intend to bring out a Discussion Paper for public consultation,” he said.
There are demands that the regulations relating to the Core Investment Companies need revisiting, he said adding “This is a work-in-process”.
Quoting the FSB’s 2015 Report, Gandhi said, “Intermediating credit through non-bank channels can have important advantages and contributes to the financing of the real economy, but such channels can also become a source of systemic risk, especially when they are structured to perform bank-like functions (e.g. maturity and liquidity transformation, and leverage) and when their interconnectedness with the regular banking system is strong. Appropriate monitoring of shadow banking and the application of appropriate policy responses, where necessary, helps to mitigate the build-up of such systemic risks”.
The Reserve Bank remains committed to such an approach, he said.
Total number of NBFCs have come down from 51,929 in 1997 to 11,769 as on September 30, 2015 whereas the asset size has grown from Rs 75913 crore as at end March 1998 to Rs 16,10,729 crore at end September 2015. Share of NBFC assets as a percentage of scheduled commercial banks’ assets has increased from 7% in 1998 to 14.8% in March 2015. (KNN Bureau)
At present, there are several categories of NBFCs and regulations vary across these NBFCs.
“The regulatory framework, put in place in November 2014, is a first step in this direction. Going forward, we will work towards greater harmonisation of the regulations with a view to reducing the number of NBFC categories,” said while addressing the CII Summit on Non-Banking Financial Companies (NBFCs) to deliberate on “Regulatory Paradigm & Contours of Growth – Vision 2020”.
However, the Reserve Bank is alive to the developmental needs of the economy and therefore will continue to approve of new types of NBFCs if the economy will need them. One such is NBFC-Account Aggregator (NBFC-AA) about which the Reserve Bank announced on July 02, 2015, Gandhi said.
The NBFC-AA will provide a technology enabled solution to a person to view at one place the position of his financial assets across institutions under different sectoral regulators. The guidelines for the same are under preparations.
He said that the Reserve Bank is actively studying the Peer-To-Peer lending arrangements that are slowly gaining traction.
“While recognising the need for innovative products and services, we should be conscious about the risks that may emanate out of such innovations. Based on the detailed study, we intend to bring out a Discussion Paper for public consultation,” he said.
There are demands that the regulations relating to the Core Investment Companies need revisiting, he said adding “This is a work-in-process”.
Quoting the FSB’s 2015 Report, Gandhi said, “Intermediating credit through non-bank channels can have important advantages and contributes to the financing of the real economy, but such channels can also become a source of systemic risk, especially when they are structured to perform bank-like functions (e.g. maturity and liquidity transformation, and leverage) and when their interconnectedness with the regular banking system is strong. Appropriate monitoring of shadow banking and the application of appropriate policy responses, where necessary, helps to mitigate the build-up of such systemic risks”.
The Reserve Bank remains committed to such an approach, he said.
Total number of NBFCs have come down from 51,929 in 1997 to 11,769 as on September 30, 2015 whereas the asset size has grown from Rs 75913 crore as at end March 1998 to Rs 16,10,729 crore at end September 2015. Share of NBFC assets as a percentage of scheduled commercial banks’ assets has increased from 7% in 1998 to 14.8% in March 2015. (KNN Bureau)
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