Loans to senior executives, giant NBFC exposures: RBI ring-fences norms

The Reserve Bank of India (RBI) on Tuesday unveiled pointers for non-banking monetary firms (NBFCs) on giant exposures, lending to administrators and sought extra disclosures in notes to accounts.

The new pointers will deliver NBFCs virtually on par with business banks.

In a notification, the RBI mentioned that mixture publicity of an higher layer NBFC to any entity should not be increased than 20 per cent of its capital base, though the board can approve a further 5 per cent to take it to 25 per cent.

However, for infrastructure finance firms, the combination restrict will likely be 30 per cent to a single entity. To a bunch of related entities, mixture publicity will likely be restricted to 25 per cent of the capital base (until on account of an infra mortgage) for all higher layer NBFCs other than infrastructure finance firms the place it will likely be 35 per cent. Further, the RBI mentioned loans and advances sanctioned to senior officers of NBFCs ought to be reported to the board. “No senior officer or any committee comprising a senior officer as member, should, while exercising powers of sanction of any credit facility, sanction any credit facility to a relative of that senior officer. Such a facility should be sanctioned by the next higher sanctioning authority under the delegation of powers,” the RBI mentioned in a notification.

ExplainedRequisite approvals

While appraising mortgage proposals involving actual property, NBFCs ought to make sure that the debtors have obtained prior permission from the federal government, native authorities or different statutory authorities for the venture, it mentioned. To make sure the mortgage approval course of just isn’t hampered on account of this, whereas the proposals could also be sanctioned in regular course, disbursements ought to be made solely after the borrower has obtained requisite clearances.

While appraising mortgage proposals involving actual property, NBFCs ought to make sure that the debtors have obtained prior permission from the federal government, native authorities or different statutory authorities for the venture, wherever required, it mentioned. To make sure that the mortgage approval course of just isn’t hampered on account of this, whereas the proposals could also be sanctioned in regular course, the disbursements ought to be made solely after the borrower has obtained requisite clearances from the federal government and different statutory authorities, the RBI mentioned.

Unless sanctioned by the board of administrators/ Committee of Directors, NBFCs mustn’t grant loans and advances aggregating Rs 5 crore and above to their administrators, together with the Chairman/ Managing Director or relations of administrators. They mustn’t grant loans to any agency by which any of their administrators or their relations is as a accomplice, supervisor, worker or guarantor and any firm by which any of their administrators, or their relations is as a significant shareholder, director, supervisor, worker or guarantor.

NBFCs must disclose their publicity to actual property, capital market, intra-group entities, and unhedged international forex publicity. They should make satisfactory related-party disclosures, and supply a abstract info on complaints obtained.