'To the believers of crypto regulations, I have only one question to ask, how will you regulate it?'
Co-lending deals between non-banking financial companies (NBFCs) and banks are likely to rise after the Reserve Bank of India's (RBI's) decision to increase the risk weight on consumer credit, industry leaders and experts say. Smaller NBFCs, they add, may increasingly opt for co-lending as capital markets could become costlier for them. "Smaller NBFCs will be more comfortable with co-lending because they are geography-specific in terms of industry or customers.
Applicants have also in the past expressed fear about higher capital requirements, stringent priority sector lending norms and rules on promoter shareholding as key deterrents.
Payouts to key management personnel in non-banking financial companies (NBFCs) are under the banking regulator's scrutiny. Top industry officials said this is a follow-through on the Reserve Bank of India's (RBI's) circular of April 29, 2022, which asked NBFCs in the "middle" and "upper" layer of its four-tiered scale-based regulatory (SBR) framework to put in place a board-approved compensation policy.
Barclays Finance, the non-banking finance arm of Barclays Corporate in India, plans to close the majority of its branches here, as part of the lender's plan to scale down retail operations in the country.
A lower risk appetite among investors has driven gold, traditionally a safe-haven asset, to record highs so far this year. Fuelled by geopolitical tensions in West Asia, robust demand from central banks - particularly in Asia - and US President Donald Trump's tariff volleys, spot gold touched an all-time high of $2,956 per ounce on February 24 in the international markets.
In FY24, loans given out by such firms had topped a whopping Rs 146,517 crore, up by 49 per cent year-on-year and spread over 10.19 million accounts (up 35 per cent).
As part of it, the govt may permit 26% FDI in insurance broking through the automatic route.
'The RBI's clarification on non-performing advances accounting is likely to increase NPAs by around one-third for non-banking finance companies,' domestic rating agency India Ratings and Research said in a report on Friday.
The panel suggests the government be authorised to raise the thresholds, which trigger applicability of Corporate Social Responsibility provisions.
Analysts believe that new companies getting into banking space will look at acquiring old private banks. Following this view, there has been a significant rally in banking stocks.
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Stating that there are strong inter-linkages between banks, NBFCs and other deposit-taking entities, he said for monetary policy to be effective and financial markets to remain stable, they should be regulated by the central bank.
Stocks in the automotive, financial, cement, metal, and hotel sectors are likely to benefit if the Narendra Modi-led Bharatiya Janata Party (BJP) comes back to power for a third time. The key investment themes have been identified after analysing the Sankalp Patra - the party's manifesto for the next five years - released on Sunday.
"RBI will given additional licences" for setting up banks in the country, he said presenting the budget for 2010-11 in the Lok Sabha.
Non-banking financial companies, that used to comprise at least 70 per cent of the issuance in the corporate bond market, are witnessing a credit freeze as investors shun bond issued by lower-rated firms.
The fund will promote domestic shipbuilding of all types and sizes to reduce India's dependence on foreign ships.
To ensure more transparency, the new regulations require investment advisers -- banks, non-banking financial companies and corporates -- would have to segregate their investment advisory services from other activities.
Fundraising activity in the debt market is gaining momentum ahead of the festival season. Several non-banking financial companies (NBFCs) and the National Bank for Agriculture and Rural Development (Nabard) are planning to raise at least Rs 5,560 crore in the next two days by issuing bonds, with a greenshoe size of Rs 6,370 crore. Ajay Malglunia, managing director and head of investment grade group at JM Financial, said, "The market likes certainty, the market will gain clarity after the US Federal Reserve's (Fed's) policy.
However, financial flows to the economy remained constrained because of decline in the amount of equity finance raised from the capital markets and stress in the NBFC sector, Finance Minister Nirmala Sitharaman pointed out.
The move comes against the backdrop of rising instances of people getting duped by illicit money pooling activities
The first wave of COVID-19 last year impacted households as their financial savings moderated to 8.2 per cent of GDP in December quarter from 10.4 per cent in the previous three-month period, revealed an RBI data released on Wednesday. The preliminary estimate of household financial savings is placed at 8.2 per cent of GDP in October-December 2020-21, exhibiting a sequential moderation for the second consecutive quarter after having spiked in the pandemic-hit June quarter, RBI said in a release. "The moderation was driven by a significant weakening in the flow of household financial assets, which more than offset the moderation in the flow of household financial liabilities," it said.
Real estate investment trusts (Reits) are in talks with regulatory bodies - the Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI) - to seek changes in regulations that will allow easier access to capital. The Indian Reits Association (IRA) said it has approached the market regulator seeking to get classified as an 'equity' asset, which will open the path for their inclusion in equity indices and also make investment by mutual funds (MFs) easier. The association is also in active discussions with the RBI to allow banks to lend to a Reit.
The RBI has changed the way it approached supervision in the past. Having seen a couple of collapses in the NBFC sector and the near-collapse of a few banks, it is focusing on regular drills to prevent a fire from breaking out, explains Tamal Bandyopadhyay.
The Reserve Bank, in Annual Monetary Policy Statement, has also asked banks to set up internal exposure limits for those non-banking financial companies who have gold loans portfolio of more than 50 per cent of the total financial assets.
German luxury car maker BMW on Tuesday launched its financing arm in India with an investment of $50 million (about Rs 230 crore) to serve the credit needs of retail customers, fleet owners and dealers.
The German luxury carmarker on Tuesday said it will invest $50 million (about Rs 230 crore) to set up a financial services subsidiary to better serve its customers besides industry as a whole.
Tech M's priorities include retaining current customers, winning back business lost as a result of the crisis, retaining key associates, winning new businesses and exploring the best ways to realise operational and structural synergies between the two companies. On the possibility of layoffs and cost-cutting, Vineet Nayyar, Tech Mahindra's vice-chairman and MD, said, "I can't say anything. The company has to be viable and we will work at it. Layoffs will be the last option."
The top 50 exposures, amounting to Rs 7.8 trillion, of government-registered non-banking financial companies (G-NBFCs) constitute about 40 per cent of corporate credit within the NBFC sector, indicating concentration risk, according to the Reserve Bank of India's report "Trend and Progress of Banking in India 2022-23". Notably, all the 50 are tied to the power sector, a domain fraught with inherent challenges, the report said. The report highlighted recognising the escalating systemic importance of G-NBFCs, the Prompt Corrective Action (PCA) framework had been expanded to include G-NBFCs excluding those falling within the base layer.
Most major corporate houses, such as the Tata group, Birla group and Reliance Industries, besides non-banking financial companies like L&T Finance, M&M Financial Services and the Shriram group, are said to be interested in setting up new banks.
In the backdrop of Finance Minister Pranab Mukherji offering banking licences to NBFCs (Non-Banking Financial Companies), rediff.com spoke to T T Srinivasaraghavan, managing director, Sundaram Finance Ltd, the oldest NBFC in the country (founded in 1954).
Back in March this year, when the Reserve Bank of India stepped in with a cap of 60 per cent on the loan-to-value ratio for gold loan non-banking financial companies, it said it was acting to pre-empt systemic risks and to safeguard public funds.
The RBI is fully aware that the high-cost loans and high indebtedness of the borrowers could pose financial stability risks, if not addressed by these NBFCs. Governor Shaktikanta Das has issued a stern warning, saying the RBI is closely monitoring these areas and will not hesitate to take appropriate action, if necessary, if the culprits don't opt for self-correction. Watch out for some action, soon, notes Tamal Bandyopadhyay.
The pace of lending to the infrastructure sector, including power and roads, fell sharply to 1.8 per cent year-on-year (YoY) in May, 2023 compared to 9.8 per cent in May, 2022. Within the segment, the growth in loans to the power sector was at 0.3 per cent YoY in May 2023, down from 9.3 per cent in May 2022. The RBI data showed that outstanding credit to power sector stood at Rs 6.17 trillion in May.
Highly-rated finance firms and housing finance companies are expected to benefit from the absence of Housing Development Finance Corp (HDFC) from the bond market once it merges with the HDFC Bank in early FY24. Post merger, the bond market is expected to become less crowded, which will ease fund raising conditions for other players in the field. It may perhaps also compress the spread for debt instruments floated by housing finance companies (HFCs) over 10-year government bonds, subject to demand and supply conditions.
He believes that it leads to conflict of interest.
Rashtriya Janata Dal chief Lalu Prasad has no immovable assets but Rabri Devi, his wife who is also former Bihar chief minister, has over Rs 1.41 crore in terms of landed property.
'One of the aspects for transparency and fair governance is to give the industry being represented the chance of lobbying with the regulator.'
Shares of Bajaj Finance surged over 6 per cent on Thursday after the diversified non-banking finance company reported an 18 per cent increase in consolidated net profit to Rs 4,308 crore for the December quarter. The stock rallied 6.33 per cent intraday to touch Rs 8,249.95 - a 52-week high -- on the BSE.
