Informist, Tuesday, May 23, 2023
–Govt source: RBI held meeting with PSU NBFC heads in Delhi today
–RBI ED Murmu chaired meeting with PSU NBFC heads
–25-30 PSU NBFCs, state finance corporations attended RBI meet
–Small PSU NBFCs raised concern on high compliance cost
–Small PSU NBFCs see case for scale-based regulations
–PSU NBFCs propose automated NPA marking
–At NBFC meet, RBI batted for no “dual-hatting” of roles
–PSU NBFCs pitched for realistic credit ratings
–At RBI meet, PSU NBFCs sought green bond framework soon
By Priyasmita Dutta and Sagar Sen
NEW DELHI – In a first of its kind meeting, the Reserve Bank of India today held a meeting here with heads of 25-30 non-banking finance companies and state finance corporations to discuss their asset quality and governance-related matters, a senior government official said.
“Around 25-30 NBFCs including PFC (Power Finance Corp Ltd), REC were present at the meeting, along with state finance corporations from states like Tamil Nadu, Telangana, Haryana, West Bengal,” the official told Informist.
The meeting was headed by RBI Executive Director S.C. Murmu.
“The idea (as communicated by the RBI) was that you should comply with the directions issued by the RBI from time to time on a strong governance system, robust risk management system and flow of credit,” the official said.
At the meeting, the smaller financial institutions raised concern over the high cost of regulatory compliance, which is at par with the norms for big non-banking financial institutions.
“They pitched for scale-based regulations, so that the compliance cost is more manageable for them,” the official said.
Another issue that was brought to RBI’s notice by the institutions was that in the case of standard assets, their restructured loans should not be treated as stressed accounts. “Restructuring of standard accounts should be allowed,” the official said.
Currently, if loans of standard accounts are restructured, the account gets immediately downgraded as a non-performing asset. However, some of these may just be accounts with a prolonged repayment schedule.
The official also said that RBI asked the NBFCs to ensure that the roles of risk, compliance and information security do not overlap. “The RBI warned that the companies should avoid dual-hatting of key roles. It also pushed for robust information technology platform of NBFCs without manual intervention,” the official said.
The non-bank lenders took up the need for “realistic” external credit ratings so that the better managed companies get a better rating vis-a-vis peers, the official said. “Even if the regulator has no direct role to play in this, they need to sensitise the rating agencies about the differential treatment.”
Currently, government-backed financial institutions automatically get the sovereign rating for their overseas fund-raising while on the domestic front, they get their individual rating.
At the meeting, the NBFCs demanded that the framework for green bonds, the ‘Green Taxology’ norms, should be made available soon for them to mobilise funds.
“The RBI and Department of Economic Affairs are working on the draft paper on green bond framework and may be available soon,” the official said.
This meeting is part of the RBI’s series of engagements with heads of the banking and financial institution ecosystem. Monday, RBI Governor Shaktikanta Das met with directors of state-owned banks in the capital and emphasised the need for banks to ensure continued financial and operational resilience.
The RBI will soon meet the heads of private sector banks to check their financial health and discuss other issues, the official said. End
Edited by Ranjana Chauhan
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