Harmonisation of different categories of NBFCs
1.Please refer to paragraph 5 of the Statement on Developmental and Regulatory Policies of the Sixth Bi-monthly Monetary Policy Statement for 2018-19 dated February 07, 2019on Harmonisation of NBFC Categories.
2. Over a period of time, evolution of the NBFC sector has resulted in several categories of NBFCs intended to focus on specific sector/ asset classes. Different sets of regulatory prescriptions were accordingly put in place.
3. On a review, it has been decided that in order to provide NBFCs with greater operational flexibility, harmonisation of different categories of NBFCs into fewer ones shall be carried out based on the principle of regulation by activity rather than regulation by entity. Accordingly, it has been decided to merge the three categories of NBFCs viz. Asset Finance Companies (AFC), Loan Companies (LCs) and Investment Companies (ICs) into a new category called NBFC – Investment and Credit Company (NBFC-ICC).
4. Differential regulations relating to bank’s exposure to the three categories of NBFCs viz., AFCs, LCs and ICs stand harmonised vide Bank’s circular DBR.BP.BC.No.25/21.06.001/2018-19 dated, February 22, 2019. Further, a deposit taking NBFC-ICC shall invest in unquoted shares of another company which is not a subsidiary company or a company in the same group of the NBFC, an amount not exceeding twenty per cent of its owned fund.
5. All related Master Directions (Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016, Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016, Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016, Standalone Primary Dealers (Reserve Bank) Directions, 2016 and Residuary Non-Banking Companies (Reserve Bank) Directions, 2016) have been updated accordingly.
Interest Subvention Scheme for MSMEs
1.As you are aware, Government of India, on November 2, 2018, has announced ‘Interest Subvention Scheme for MSMEs 2018’.
2. A copy of the salient features and operational guidelines for implementation of the captioned scheme, released by the Ministry of Micro, Small and Medium Enterprises (MSME), Government of India, is enclosed. Small Industries Development Bank of India (SIDBI) is the single national level nodal implementation agency for the scheme.
3. You are therefore requested to take appropriate action as envisaged for RBI registered systemically important non-banking financial companies and issue necessary instructions to your branches /controlling offices for implementation of the scheme.
Review of Instructions on Bulk Deposit
1. In terms of extant instructions, banks have been given discretion to offer differential rate of interest on the bulk deposits as per their requirements and Asset-Liability Management (ALM) projections.
2. In this connection, as announced in the ‘Statement on Developmental and Regulatory Policies’ of the Sixth Bi-monthly Monetary Policy Statement dated February 07, 2019, it has been decided to revise the definition of ‘bulk deposits’ and provide operational freedom to banks in raising these deposits.
3. Accordingly, instructions contained in Master Directions on Interest Rate on Deposits issued vide DBR.Dir.No.84/13.03.00/2015-16 dated March 03, 2016 stand amended as under:
3.1 The existing paragraph No. 3(a)(i)(i) on bulk deposit of the aforesaid Master Direction stands replaced as under:
(i) Single Rupee term deposits of Rupees two crore and above for Scheduled commercial Banks (excluding Regional Rural banks) and Small Finance Banks.
3.2 In the existing paragraph No. 4(c), the following shall be added:
The banks shall maintain the bulk deposit interest rate card in their Core banking system to facilitate supervisory review.
Micro, Small and Medium Enterprises (MSME) sector- Restructuring of Advances
Please refer to circular DBR.No.BP.BC.18/21.04.048/2018-19 dated January 1, 2019 on the above subject. One of the conditions for restructuring of existing loan of MSMEs without a downgrade in the asset classification is as under:
“the borrowing entity is GST-registered on the date of implementation of the restructuring. However, this condition will not apply to MSMEs that are exempt from GST-registration” (c.f. para 1 (iii) of the above referred circular).
2. It is clarified that the eligibility for restructuring without GST-registration, as per the circular under reference, should be determined on the basis of exemption limit obtaining as on the date of the aforesaid circular, i.e., January 1, 2019.
Risk Weights for exposures to NBFCs
1 Please refer to para 5.8 and para 5.13.5 of the Master Circular on Basel III Capital Regulation dated July 1, 2015. At present claims on rated as well as unrated Non-deposit Taking Systemically Important Non-Banking Financial Companies (NBFC-ND-SI), other than Asset Finance Companies (AFCs), Non-Banking Financial Companies – Infrastructure Finance Companies (NBFCs-IFC), and Non-banking Financial Companies – Infrastructure Development Funds (NBFCs-IDF), have to be uniformly risk weighted at 100%. Exposures to AFCs, NBFCs – IFC, NBFCs – IDF and other NBFCs which are not NBFC-ND-SI, are risk weighted as per the ratings assigned by the rating agencies accredited by the Reserve Bank of India.
2. As indicated in the Statement on Developmental and Regulatory Policies dated February 07, 2019, it has been decided that exposures to all NBFCs, excluding Core Investment Companies (CICs), will be risk weighted as per the ratings assigned by the rating agencies registered with SEBI and accredited by the Reserve Bank of India, in a manner similar to that of corporates as prescribed under para 5.8.1 of the Master Circular DBR.No.BP.BC.1/21.06.201/2015-16 dated July 1, 2015on Basel III Capital Regulations read with Circular DBR.No.BP.BC.6/21.06.001/2016-17 dated August 25, 2016 on “Review of Prudential Norms –Risk Weights for Exposures to Corporates, AFCs and NBFC-IFCs” and Mailbox Clarification dated December 29, 2017. Exposures to CICs, rated as well as unrated, will continue to be risk-weighted at 100%.
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