The Reserve Bank of India (RBI) has decided to tighten rules for non-bank financial corporations (NBFC) in fiscal year (FY) 2023-24. In its 2023-24 shadow banking targets, RBI has stated that it will review licensing requirements and take regulatory action against NBFCs that fail to comply with the rules.
An impact assessment of recent changes in asset classification standards for NBFCs will also be conducted in 2023-2024, it said.
With regard to supervisory measures, RBI claims to have set up a uniform supervisory department in which the supervision of banks, municipal cooperative banks and NBFCs is carried out holistically under one umbrella department.
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The move aims to improve how it handles certain problems arising from regulatory or regulatory arbitrage, interconnectedness and information asymmetry, central banks say.
In 2022-23, RBI said that a working group composed of Reserve Bank officials, selected major NBFCs and accounting firms reviewed and drafted new yield formats under the Regulatory Framework for NBFCs in line with Indian Accounting Standards (Ind-). AS). “These returns will be used for implementation.”
For the purposes of the sectoral assessment of NBFCs under the latest scale-based regulatory framework, 16 NBFCs have been classified in the upper tier. “The model design was also changed to cover all NBFCs in different tiers, namely upper, upper, middle and lower layers.”
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The stress testing model of NBFCs has also been extended to cover multiple balance sheet and income statement parameters/metrics, the forward looking forecasts and CRAR values under baseline, medium and severe scenarios to estimate slippages.
On July 1, 2022, the online scam reporting system for NBFCs was also launched. As part of this system, a separate quarterly report (FMR 4) has been introduced for reporting security incidents, i.e. theft, burglary, crime and robbery. “Additionally, workshops were conducted for selected NBFCs to raise awareness on fraud prevention, timely/accurate reporting and follow-up.”
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The Reserve Bank said it has taken several steps to strengthen the compliance function in such regulated entities. “The unified fraud reporting system for all SEs will be implemented as part of the enhanced reporting system as part of the Centralized Information Management System (CIMS) project.”
In FY23, the central bank said it took action to improve the cybersecurity of all businesses, along with regular assessments by on-site and off-site oversight mechanisms.
In its fraud analysis, RBI says that while private sector banks reported the highest number of fraud cases, public sector banks continued to contribute the highest share of fraud totals in 2022-23. Frauds occurred especially in the area of digital payments (card/internet). “In terms of value, however, fraud cases were reported primarily in the loan portfolio (category advances).”
