RBI panel calls for revised NBFC classification

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RBI panel calls for revised NBFC classification
The Reserve Bank of India (RBI) appointed panel on Tuesday proposed classifying the Non-Banking Finance Companies (NBFCs) into two main categories-- one for core investment companies and another category for all other NBFCs.

The committee headed by Nachiket Mor proposed that priority sector lending (PSL) definition should be revised to allow the gradual transition of NBFCs to wholesale consumer banks or wholesale investment banks or national banks. There should a provision in the Banking Regulation Act to allow this, he said. The panel also said that NBFCs should continue to receive benefits such as asset finance or infrastructure finance units, even after consolidation.

The Committee has advocated regulatory convergence between banks and NBFCs based on the principle of neutrality with regard to classification of non-performing assets and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 eligibility.

To help ease the funding limitations faced by NBFCs, the panel advised that RBI and the market regulator should come together and form a framework for Qualified Institutional Buyers and Accredited Individual Investors to participate in debt market issuances.

Dion Global Solutions Ltd.

Story first published: Wednesday, January 8, 2014, 9:21 [IST]
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