What changed
RBI issued a master circular consolidating all instructions for NBFC-ND-SI issued up to June 30, 2011, into one document. It reaffirmed the minimum CRAR of 12% (from March 31, 2010) and 15% (from March 31, 2011) for these entities, transitioning from an earlier 10%. It also reiterated exposure norms and the classification of asset finance companies (AFCs) with additional exposure flexibility.
What it means for you
Banks and NBFCs now have a single reference point for compliance requirements for systemically important non-deposit taking NBFCs. The circular ensures clarity on capital adequacy and exposure limits, reducing regulatory ambiguity. AFCs get a 5% extra exposure headroom over standard norms with board approval, aiding lending to productive sectors.
What you must do
- Ensure NBFC-ND-SI clients maintain CRAR of at least 12% (from March 31, 2010) or 15% (from March 31, 2011) as per their balance sheet date.
- Verify that exposure policies for single/group entities are in place and compliant with RBI norms.
- For AFCs, document board approvals for any exposure exceeding standard limits by up to 5% of owned funds in exceptional circumstances.
- Note that NBFCs set up under automatic route are restricted to 18 permitted activities; diversification requires FIPB approval, but this applies to NBFCs generally, not specifically NBFC-ND-SI.
Who it affects
All NBFC-ND-SI with asset size of Rs. 100 crore or more as per last audited balance sheet, Asset Finance Companies (AFCs), Banks lending to or investing in NBFC-ND-SI, Compliance and risk management teams at NBFCs, Note: RNBCs, Primary Dealers, and government-owned companies (with roadmap) are exempted from certain provisions.
What is the minimum CRAR for NBFC-ND-SI as per this circular?
NBFC-ND-SI must maintain a minimum CRAR of 12% from March 31, 2010, and 15% from March 31, 2011, as per the circular.
Can an AFC exceed the standard single exposure limit?
Yes, AFCs can exceed the single party/group exposure limit by up to 5% of owned fund in exceptional circumstances, with board approval.
Does this circular apply to all NBFCs?
No, it applies specifically to systemically important non-deposit taking NBFCs (NBFC-ND-SI) with asset size of Rs. 100 crore or more.