Reserve Bank of India capped lending limits of NBFCs

The Reserve Bank of India (RBI) has tightened the rules for non-banking finance companies (NBFCs) relating to their large exposures. RBI capped aggregate exposure of NBFCs which are in the upper layer toward one entity at 20% of the capital base. The limit can only be extended by another 5% with the board’s approval.

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For a particular borrower group, the cap is at 25%, with an additional 10% if exposure is towards infrastructure. The upper-layer NBFCs are typically the top 10 ones in terms of asset size. However, NBFCs that are into infrastructure finance can have exposure of 25 per cent, with an option of an additional 5 per cent of Tier I capital to a single counterparty. For a group of connected counterparties, infrastructure companies can have an exposure of 35 per cent of Tier-I capital. These norms will come into effect from October 1, 2022.

Important takeaways for all competitive exams:

• RBI Founded: April 1, 1935;
• RBI Headquarters: Mumbai, Maharashtra;
• RBI Governor: Shaktikanta Das;
• RBI Deputy Governors: Mahesh Kumar Jain, Michael Debabrata Patra, M Rajeshwar Rao, T Rabi Sankar.

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