RBI Plans Scale-Based Regulations For Shadow Banks

New norms have also been suggested for the mid to smaller NBFCs but they are likely to be less stringent.

The Reserve Bank of India (RBI) has proposed a regulatory overhaul of the non-banking financial companies (NBFCs) and recommended a scale-based approach with stricter capital and governance norms, it said in a discussion paper released on Friday.

“Higher risk appetite of NBFCs has contributed to their size, complexity and interconnectedness making some of the entities systemically significant, posing potential threat to financial stability,” the RBI said.

The proposed regulatory and compliance guidelines will bring the 25-30 large shadow banks to parity with the state-owned and other private commercial banks in the country. New norms have also been suggested for the mid to smaller NBFCs but they are likely to be less stringent.

The size of the balance sheet of shadow banks including housing finance companies has more than doubled to Rs 49.22 lakh crore in 2020 from Rs 20.72 lakh crore in 2015, the RBI said.