Govt considering giving more powers to RBI to regulate NBFCs: Nirmala Sitharaman
The minister said the RBI was closely monitoring the liquidity position of NBFCs and will continue to monitor the activity and performance of the sector with a focus on major entities and their interlinkages with other sectors.
The government is considering strengthening the Reserve Bank's regulatory and supervisory powers over the non-banking finance companies (NBFCs), Finance Minister Nirmala Sitharaman said in the Lok Sabha on Monday.
Replying to a question, the minister said RBI was closely monitoring the liquidity position of NBFCs and will continue to monitor the activity and performance of the sector with a focus on major entities and their interlinkages with other sectors.
The central bank, she added, has also informed that with a view to strengthen the NBFCs and maintain the stability of the financial system, it has been taking necessary regulatory and supervisory steps.
"Government has received a proposal from RBI to strengthen RBI's regulatory and supervisory powers under the Reserve Bank of India Act, 1934, and the same is under consideration," Sitharaman said in a written reply.
She further said that the government, from time to time, infuses capital in public sector NBFCs based on an objective assessment of requirements.
However, there was no proposal under consideration of the government to recapitalise private NBFCs.
As on June 23, 2019, 9,643 NBFCs were registered with RBI.
To another question, the minister said that gross non-performing assets (NPAs) ratio of NBFCs (deposit-taking and systemically important non-depositing NBFCs) was at 6.6 percent during 2018-19, up from 5.3 percent in the preceding financial year.
According to another report, the Reserve Bank of India is not in favour of providing special credit window to the NBFC sector to tide over the liquidity crunch as the cash crunch phenomenon is not systemic, said sources.
Industry players and government think tank NITI Aayog made a case for giving special credit window for non-banking financial companies (NBFCs) facing liquidity crunch following default by group of companies of IL&FS since September 2018.
The central bank feels that the cash crunch is not a sector-specific phenomenon but limited to a few large NBFCs which have over-leveraged due to aggressive lending.