NEW DELHI: The Non-banking financial companies (NBFCs) cannot lend more than Rs 1 crore to a borrower for funding purchase of initial public offering (IPOs). This is part of a comprehensive set of rules for NBFCs approved on Friday by the Reserve Bank of India (RBI). The new rules would come into effect from 1 October 2021.
As per the new norms, NBFC’s exposure to capital market and commercial real estate would be identified as sensitive exposure, and the NBFCs will have to fix board-approved internal limits for such exposures.
As per the new regulation, while the board is free to determine various sub-limits within the overall sensitive sector exposure internal limits, there should be a sub-limit within the commercial real estate exposure ceiling for financing land acquisition, and a ceiling on IPO funding.
The new regulations divide the NFBCs into four categories, which are base layer, middle layer, upper layer and top layer. Base layer would include all NBFCs with asset size less than Rs 1,000 crore and non-deposit taking NBFCs. Middle layer would include deposit taking NBFCs, all NBFCs with assets over Rs 1,000 crore. Upper layer would comprise NBFCs which are specifically identified by the RBI as warranting enhanced regulatory requirements.
If the Reserve Bank is of the opinion that there is a substantial increase in the potential systemic risk from specific NBFCs in the Upper Layer, then such NBFCs would be moved to the Top Layer. The minimum net owned fund requirement for NFBCs with public funds and public interactions would be increased to Rs 10 crore by 31 March 2027.