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RBI removes ceiling on bank credit to NBFCs

The Reserve Bank of India has removed the ceiling on bank credit in respect of all registered non-banking financial companies, engaged in principal business of equipment leasing, hire-purchase, loan and investment activities.

Banks may now assess and provide need-based finance to NBFCs, as per the loan policy laid down by them with the approval of their boards.

Earlier, in respect of NBFCs, (other than RNBFCs) which were registered with the RBI, but had not satisfied the requirements of credit rating and prudential norms, bank credit was restricted to a certain multiple of their net owned funds or NoF.

As regards bank finance to the NBFCs which do not require to be registered with the RBI, banks may take their credit decisions on the basis of other usual factors, such as, the purpose of credit, nature and quality of underlying assets, repayment capacity of borrowers as also risk perception.

NBFCs which do not require registration with the RBI include, insurance companies registered under Section 3 of the Insurance Act, 1938, Nidhi companies under Section 620 A of the Companies Act, 1956, chit fund companies, stock broking companies/merchant banking companies, registered with the Securities and Exchange Board of India and housing finance companies.

UNI

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