Bombay:
Reserve Bank of India (RBI) released a set of standards for standard asset provisioning by major non-bank financial corporations (NBFCs) on Monday in light of the increasing role such entities play in the financial system.
In October last year, RBI had released a framework for scale-based regulation for NBFCs. Regulatory structure for NBFCs consists of four tiers based on their size, activity and perceived risk.
In a circular Monday, the central bank specified provisions for outstanding loans provided by NBFC-Upper Layer.
In the case of individual housing loans and small and micro-enterprise (SME) loans, the provisioning rate is specified at 0.25 percent and for housing loans granted at teaser rates, it is set at 2 percent. The latter falls to 0.4 percent after 1 year from the date on which the rates are increased.
For the Commercial Real Estate – Residential Housing (CRE – RH) sector, the amenities percentage is 0.75 percent, and for CRE, other than residential homes, 1 percent.
Furthermore, RBI said that the provisioning rate for restructuring loans will comply with the provision in the applicable prudential standards.
The provisioning rate for medium-sized companies has been set at 0.4 percent.
It also said that the current credit risks arising from the permitted derivatives transactions will draw the required provisions as applicable to the loan assets in the ‘default’ category of the relevant counterparties.
The top tier includes those NBFCs specifically identified by RBI as justifying enhanced regulatory requirements based on a set of parameters and scoring methodology.
The top ten eligible NBFCs in terms of their asset size are always in the top tier regardless of any other factor.
According to the scale-based regulations for NBFCs, the four layers are the base layer, the middle layer, the top layer and the top layer.
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