The Reserve Bank of India (RBI) has tightened rules for the Non-Banking Financial Companies by raising the minimum capital requirements and restricting deposits with a set of changes that it hopes will protect consumers and the market without stifling growth.
The RBI has raised the limit for NBFCs to maintain the net owned fund (NOF) requirement to four times by 2017 to Rs.2 crore.
Also, NBFCs primarily engaged in lending against gold jewellery, will have to maintain a minimum Tier I capital (or equity capital) of 12 per cent with effective from April 1 as against existing requirement of 10 per cent.
As per the new norms, NBFCs have to raise the Tier I capital to 8.5 per cent by end of March 2016 and 10 per cent by March, 31, 2017.
Towards provisioning of standard assets, the RBI said that NBFCs would be required to raise it to 0.3 per cent by end of March 2016; 0.35 per cent by March 2017 and to 0.4 per cent by end of March 2018.
For Non-Deposit taking NBFCs with an asset size of less than Rs.500 crore, the RBI said they shall not be subjected to any regulation either prudential or conduct of business regulations.