Why RBI cancels 1,851 NBFCs permits in FY19?
There is a strict compliance mandate for NDFC, from RBI to follow the norms set by the Reserve bank of India in crushing the shadow finance sector as the number of lenders plunges to 10-year low, has led to increasing permit cancellation. With this NBFCs are finding it hard to stay afloat amid the finance crunch, with the economic slowdown.
As per the Right to Information (RTI) data, RBI data showed that in FY19 as many as 1,851 permits were cancelled – up eight-fold from the previous year, and taking the total number of lenders to 9,700 – the lowest in at least a decade.
In result, NBFC s were facing a financial crunch.
They could not raise even Rs 2 crore to meet regulatory requirements, said Mahesh Thakkar, director general at Finance Industry Development Council.
Government policy too has favoured a stricter approach, and the Centre increased the RBI oversight for shadow lenders and housing finance companies (HFCs).
However, early this month, the central bank took some measures to help stressed NBFCs raise funds from banks. Among the measures, it first increased the ceiling for a bank’s exposure to a single NBFC to 20% of its Tier I capital from 15% earlier. And it has allowed bank lending to NBFCs excluding microfinance institutions for on-lending to specific sectors.
Though, the RBI has not agreed to provide a separate liquidity window for the struggling shadow banks. The strict regulations requiring shadow lenders to appoint a chief risk officer has also not helped the cause.
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