RBI paper proposes new regulatory framework for NBFCs, 4-tier structure

India’s non-banking finance organizations (NBFC) have to have tighter regulation through generation of a multilayer product, reported a discussion paper by the Reserve Bank of India on Friday.

The paper proposed a construction to categorise NBFCs, or shadow banking companies, dependent on their measurement and interconnectedness with the procedure. NBFCs in the decreased layer will be recognized as NBFC-Base Layer (NBFC-BL). NBFCs in the middle layer will be recognized as NBFC-Middle Layer (NBFC-ML). An NBFC in the Higher Layer will be recognized as NBFC-Higher Layer (NBFC-UL) and will invite a new regulatory superstructure.

“An NBFC in the Higher Layer will be recognized as NBFC-Higher Layer (NBFC-UL) and will invite a new regulatory superstructure,” reported the paper.

It proposed a NBFC non-executing classification norm of 180 times be “harmonised” to 90 times. “In view of the new tension in the sector, it has turn into very important to reexamine the suitability of this regulatory strategy, in particular when failure of an exceptionally significant NBFC can precipitate systemic hazards,” reported the paper.

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