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A quick look at financial entities not regulated by the RBI
These include merchant banking companies, nidhis, housing finance companies, chit fund companies, stock broking companies and insurance companies.
These companies have been exempted from registration and other regulations of RBI in order to avoid dual regulation on them as they are regulated by other financial sector regulators.
For example, merchant banking companies and stock broking companies are regulated by the Securities and Exchange Board of India, while insurance companies are regulated by the Insurance Regulatory Development Authority of India.
Does the Reserve Bank have any statutory power vis a vis these exempted NBFCs?
It depends on the extent of exemption granted. Housing Finance Companies, for instance, are exempt from RBI regulations. Other entities like Chit Funds, Nidhi companies, Mutual Benefit companies, Insurance companies, Merchant Banking companies, Stock Broking companies, etc., are granted exemption from the requirements of registration, maintenance of liquid assets and statutory reserves.
RBI though does not issue directions that could conflict with the directions issued by other financial regulators, viz., Housing Finance Companies are regulated by the National Housing Bank, Insurance Companies by IRDA, Stock broking, Merchant Banking Companies, Venture Capital Companies and companies that run Collective Investment Schemes and Mutual Funds are regulated by SEBI, Nidhi Companies are regulated by the Ministry of Corporate Affairs and Chit Fund Companies are under the regulatory ambit of the respective State Governments.
Clearly, it makes sense to have a different set of regulators, because of the level of expertise required.
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