The Reserve Bank of India on Tuesday issued guidelines for upper-layer non-banking financial companies. These scale-based guidelines cover loans and advances, large exposure framework and capital for upper-layer NBFCs.
An upper-layer NBFC must not have an exposure higher than 20 percent of its capital base to any entity, and its board can approve an additional 5 percent exposure limit to take it to 25 percent, the RBI said in its circular.
Infrastructure finance companies must have an aggregate exposure cap of 30 percent to a single entity. To a group of connected entities, the aggregate exposure is limited to 25 percent of the capital base (unless on account of an infrastructure loan) for all upper-layer NBFCs, apart from infrastructure finance companies, where it will be 35 percent, the circular said.
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Unless sanctioned by the board, NBFCs in the middle and upper layers may not grant loans of Rs 5 crore and above to their directors or relatives of directors, the RBI said, adding that loan proposals for under Rs 5 crore to directors is allowed to be sanctioned, but the matter should be reported to the NBFC’s board.
The NBFC must ensure that potential real estate borrowers have obtained prior government permission for the project, wherever required, the regulations stated, adding that all NBFCs must disclose their exposure to the real estate sector, the capital market, intra-group entities, and unhedged foreign currency.
NBFCs in the upper layer would have to get listed within three years of being categorised in that layer as per the RBI circular dated October 22, 2021, “Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs”.
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Further, the RBI stated in the circular that unlisted lenders must draw up a board-approved roadmap for compliance with disclosure requirements of a listed company.
