The Reserve Bank of India (RBI) on Monday said it would issue the final guidelines on new banking licences soon. “We are trying to bring them out as soon as possible,” said Anand Sinha, deputy governor, RBI. He, however, declined to give any time frame for this. Market participants expect the guidelines to be released before the third quarterly review of monetary policy on January 29.
He declined to comment on whether RBI would be giving banking licences to corporate houses. “We have issued draft guidelines. I can’t say anything beyond that,” he said. He was speaking on the sidelines of a discussion on the draft norms for non-banking financial companies (NBFC) released by RBI.
These norms were based on the Usha Thorat committee report on the sector. The discussion was organised by the Finance Industry Development Council (FIDC), an umbrella body of NBFCs.
NBFCs said they felt the draft norms were very difficult to comply with and have requested these be relaxed. FIDC has requested RBI to provide tax benefits, access to asset restructuring companies, etc, before the final norms are place. Unlike banks, NBFCs don’t get any tax benefit on their provisioning book. Also, they aren’t permitted to restructure their assets. Any restructuring would lead to the assets being recognised as non-performing, according to extant regulations.
Sinha said the central bank would look into the concerns raised by NBFCs. He, however, added nothing could be assured and advised NBFCs “to live with it”. He said there was no question of treating NBFCs on a par with banks, as banks had more stringent regulatory norms.
Key norms for NBFCs include higher tier-1 capital, recognising NPAs in 90 days, against the current 180 days, and increased risk weight for sensitive sectors such as real estate. Sinha said the norms were in line with global norms and India, as a G-20 nation, was obliged to follow other such nations. Global norms stipulate regulators to reduce the gap between capital adequacy ratios of banks and NBFCs.
Many small NBFCs fear they would be out of business if RBI, in its final norms, continues the stance of deregistration below an asset size of Rs 25 crore. Sinha said small NBFCs need not fear deregistration.
In fact, they should be happy about this, as they would be out of the regulatory zone, he added on a lighter note.