RBI cancels registrations of 30 NBFCs; more than 500 NBFCs shut operation this year

Mumbai, Aug 28 (KNN) The Reserve Bank of India (RBI) has cancelled licences of more than 500 non-banking financial companies (NBFCs) so far this year.

This is more than double the number of such cancellations in the whole of 2017. The main reason for this is failing to meet regulatory norms.

RBI in a notification yesterday informed that it has cancelled the certificates of registrations of as many as 30 NBFCs. Most of these NBFCs were from West Bengal followed by Uttar Pradesh, Andhra Pradesh, Telangana and Rajasthan.

RBI said these companies shall not transact the business of a Non-Banking Financial Institution, as defined in clause (a) of Section 45-I of the RBI Act, 1934.

According to the amendment in the RBI Act of 1997, the central bank had mandated the minimum capital requirement for NBFCs at Rs 25 lakh. The requirement was increased to Rs 2 crore for new NBFCs.

However, the old ones were allowed to continue with the earlier capital requirement until RBI issued a revised regulatory framework in 2014. Under this, it had set a deadline for all NBFCs to reach the minimum net owned fund of Rs 2 crore before 31 March 2017. 

The RBI’s financial stability report highlighted that the aggregate balance sheet size of the NBFC sector as on 31 March 2018 was Rs 22.1 trillion.

According to a media report quoting industry experts, the last time such large-scale cancellation of licences occurred was in 1997 after RBI introduced the concept of registration for NBFCs. Of the 40,000 unregistered NBFCs then, close to 5,000 opted out.