Introduction: On January 15, 2024, the Reserve Bank of India (RBI) unveiled a Draft Circular addressing “Credit/Investment Concentration Norms” applicable to Government-owned Non-Banking Financial Companies (NBFCs) registered with the RBI.
Detailed Analysis: Paragraph 91.7 of the Master Direction – RBI (NBFC – Scale Based Regulation) allows Government NBFCs to seek exemptions from credit/investment concentration norms. Following a review, exemptions granted on a case-by-case basis since May 2018 are now withdrawn.
The circular mandates adherence to exposure norms specified in relevant directives, including the Master Direction on NBFC Scale-Based Regulation, dated October 19, 2023. The withdrawal of exemptions aims to standardize regulations for Government NBFCs, ensuring alignment with prudential norms.
To address implementation challenges, existing breaches as of the circular date will be allowed to run-off until maturity. However, no further exposure to such obligors is permitted unless fully secured by eligible credit risk transfer instruments, as outlined in the circular on Credit/Investment Concentration Norms – Credit Risk Transfer, dated January 15, 2024.
Conclusion: Government NBFCs are urged to align with the revised regulatory framework and exposure limits outlined in the circular. The RBI invites stakeholders to provide feedback on the draft circular by February 29, 2024, contributing to the refinement of credit/investment concentration norms for the NBFC sector.
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RESERVE BANK OF INDIA
RBI invites comments on the Draft Circular on “Credit/Investment Concentration Norms – Government owned NBFCs”
Date : Jan 15, 2024
The Reserve Bank has today placed on its website the Draft Circular on “Credit/Investment Concentration Norms – Government owned NBFCs” which shall be applicable to all Government owned NBFCs registered with RBI.
Feedback on the draft circular is invited from the stakeholders and may be submitted by email with the subject line “Feedback on Credit/Investment Concentration Norms – Government owned NBFCs” by February 29, 2024.
(Yogesh Dayal)
Chief General Manager
Press Release: 2023-2024/1680
Reserve Bank of India
RBI/2023-24/__
DOR.CRE.REC.XXX/21.01.003/2023-24
January 15, 2024
All Government Owned NBFCs
Madam/ Dear Sir,
Draft circular – “Credit/investment Concentration Norms – Government owned NBFCs”
Please refer to paragraph 91.7 of Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023 dated October 19, 2023 as per which Government owned NBFCs set up to serve specific sectors are permitted to approach the Reserve Bank for exemptions, if any, from credit/investment concentration norms.
2. As substantial time has elapsed since Government owned NBFCs were brought within the ambit of prudential regulations in May 2018, a review of the exposure norms for these NBFCs has been carried out and it has been decided to withdraw the case-by-case basis exemptions granted to Government NBFCs. Henceforth, the Government NBFCs shall be guided by the exposure norms and limits contained in the following circulars as applicable to them: –
i. Paragraphs 91.1 to 91.6 of the Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023 dated October 19, 2023 as amended from time to time;
ii.Master Direction – Non-Banking Financial Company – Housing Finance Company (Reserve Bank) Directions, 2021 dated February 17, 2021 as amended from time to time;
iv. DOR.CRE.REC.70/21.01.003/2023-24 on Credit/Investment Concentration Norms – Credit Risk Transfer dated January 15, 2024.
3. In order to address implementation challenges and to ensure non-disruptive transition, it has been decided that the existing breaches (including draw down of existing sanctioned limits), if any, of the NBFCs as on the date of this circular shall be allowed to run-off till maturity subject to the condition that no further exposure is taken to such obligors so long as they are in breach of the prudential exposure limits, unless the additional exposure is fully secured by eligible credit risk transfer instruments. The eligible credit risk transfer instruments for this purpose shall be those prescribed under paragraph 3 of the circular on Credit/Investment Concentration Norms – Credit Risk Transfer dated January 15, 2024.
Yours faithfully,
(Vaibhav Chaturvedi)
Chief General Manager
