Strengthening regulatory authority of RBI over NBFCs

New Delhi [India], July 5 (ANI): The government will strengthen regulatory authority of Reserve Bank of India (RBI) over non-banking financial companies (NBFCs), Finance Minister Nirmala Sitharaman said on Friday.
NBFCs are playing an extremely important role in sustaining consumption demand as well as capital formation in small and medium industrial segment. They are fundamentally sound should continue to get funding from banks and mutual funds without being unduly risk averse, she said while presenting the Union Budget 2019-20 in Parliament.
For purchase of high-rated pooled assets of financially-sound NBFCs totalling Rs one lakh crore during the current financial year, the government will provide one-time six months' partial credit guarantee to public sector banks for first loss of up to 10 per cent.
"Appropriate proposals for strengthening the regulatory authority of RBI over NBFCs are being placed in the Finance Bill," she said. To allow NBFCs to raise funds in public issues, the requirement of creating a debenture redemption reserve which is currently applicable for only public issues as private placements are exempt will be done away with.
Sitharaman said public sector banks will be provided Rs 70,000 crore capital to boost credit for a strong impetus to the economy. To further improve ease of living, they will leverage technology, offering online personal loans and doorstep banking, and enable customers of one public sector bank to access services across all public sector banks, she said.
Financial gains from cleaning of the banking system are visible, said the Finance Minister. The non-performing assets of commercial banks have reduced by over Rs one lakh crore over the last year.
There has been a record recovery of over Rs four lakh crore due to Insolvency and Bankruptcy Code (IBC) 2016 and other measures has been affected over the last four years. The provision coverage ratio is now at its highest in seven years and domestic credit growth has risen to 13.8 per cent, she said.
The government has consolidated and reduced the number of public sector banks by eight. At the same time, six public sector banks have been enabled to come out of the Prompt Corrective Action Framework. (ANI)