NBFCs: Reserve Bank to step up vigil with four-layered regulatory framework

Updated: few hours ago

Mumbai, Oct 22 (PTI) The Reserve Bank of India (RBI) will put in place a four-layered regulatory structure for non-banking financial companies to keep a stricter vigil on the shadow banking sector and minimise risks for the overall financial system.

The detailed set of norms, which will come into force from October 2022, provides for a Scale Based Regulation (SBR) framework that takes into consideration capital requirements, governance standards, prudential regulation and other aspects of the Non-Banking Financial Companies (NBFCs).

The central bank's latest move, after extensive stakeholder consultations, also comes against the backdrop of previous instances, including the collapse of IL&FS in 2018 and later DHFL, that had a spillover impact on the entire financial system, especially in terms of liquidity woes. Since then, the focus shifted to having tighter regulations rather than a light touch approach for the country's shadow banking sector.