What is the exposure norms for NBFC in India?
“Under the revised guidelines on large exposure framework that came into effect from April 1, 2019, a bank’s exposure to a single NBFC is restricted to 15 per cent of its Tier I capital, while for entities in the other sectors the exposure limit is, 20 percent of Tier I capital of the bank, which can be extended to 25 …
Is Basel norms applicable to NBFC?
For instance, banks under the Basel III framework have to maintain a minimum Common Equity Tier 1 (CET 1) capital (of 7.375 per cent including capital conservation buffer). The top NBFCs will also move to differentiated standard provisioning norms (against the fixed 0.4 per cent), on par with banks.
What is group exposure limit?
Group exposure limit determines the maximum amount a bank can lend to one business house. This is done to prevent the troubles at entity having a spillover effect on the bank which could lead to a systemic risk.
What are exposure norms?
This measure of RBI is aimed at better risk management and avoidance of credit risks. RBI’s prudential exposure norms mandate that a bank exposure to a single borrower should capped to 20% of a lender’s tier -I capital base and to 25% limit to a group of connected entities with effect from April 1, 2019.
What is group exposure as per RBI?
Credit exposure to borrowers belonging to a group may exceed the exposure norm of 40 percent of the bank’s capital funds by an additional 10 percent (i.e., up to 50 percent), provided the additional credit exposure is on account of extension of credit to infrastructure projects.
What is minimum Capitalisation norms for NBFC?
1. The guidelines for foreign equity investment in Non Banking Financial Services sector would be amended to provide for a minimum capitalisation norm of US$ 0.5 million, for the activities which are not fund based and only advisory or consultancy in nature, irrespective of the foreign equity participation level.
Is Basel III applicable to NBFC?
At present, under the existing guidelines on Basel III capital regulations, exposures/claims of banks on rated as well as unrated non-deposit-taking systemically important non-banking financial companies (NBFC-ND-SI), other than AFCs, NBFCs-IFCs, and NBFC-IDF [Infrastructure Development Funds], have to be uniformly …
What are the RBI guidelines for NBFC?
The NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months and maximum period of 60 months. They cannot accept deposits repayable on demand. NBFCs cannot offer interest rates higher than the ceiling rate prescribed by RBI from time to time. The present ceiling is 12.5 per cent per annum.
What is single borrower exposure limit?
Credit exposure to single borrower may exceed the exposure norm of 15 percent of the bank’s capital funds by an additional 5 percent (i.e. up to 20 percent) provided the additional credit exposure is on account of infrastructure.
Who is a large borrower?
RBI had introduced the large borrower framework three years ago to reduce concentration risk in a banking industry laden with bad loans. The guidelines had capped every bank’s exposure to a group of connected firms at 25% of its core capital, and to an individual company at 20%.
Which of the following regulatory norm is not applicable to NBFCs?
iii) Capital adequacy norms; CRR / SLR requirements; single and group borrower limits; prudential limits on capital market exposures; and the restrictions on investments in land and building and unquoted shares are not applicable to NBFCs – ND.
Which activity Cannot be done by NBFC?
ii. NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself; iii. deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.
What is the minimum exposure of a bank to an NBFC?
(iv) The exposure (both lending and investment, including off balance sheet exposures) of a bank to a single NBFC should not exceed 10% of the bank’s capital funds as per its last audited balance sheet.
What are the concentration norms for NBFCs?
Currently, concentration norms for NBFCs are laid down separately for lending and investment exposures (15 per cent each for single borrower and 25 per cent for a group of borrowers). This is computed as a percentage of net owned funds.
What if NBFC – ND – SI does not comply with exposure norms?
In case of any extenuating circumstances on account of which an NBFC – ND – SI is not able to comply with the single / group exposure norms they may apply to the Reserve Bank for an appropriate dispensation consistent with the spirit of the exposure limits.
How are NBFC-MLS’ exposure limits computed?
This is computed as a percentage of net owned funds. For NBFC-MLs, the RBI has proposed to merge the lending and investment limits into a single exposure limit of 25 per cent and group exposure of 40 per cent, computed as a per cent to Tier 1 capital (instead of net owned funds).