NBFCs re-initiate talks with RBI regarding on-tap banking licences. RBI’s new draft NBFC regulations may affect credit growth, trigger consolidation. PNB Q4 net loss narrows to INR4,750cr on back of lower provisions. RBI likely to relax voting threshold of lenders to 90%. Consumer internet startups in talks to sell their goods and services on GeM. Tax norms to be eased to give advantages to startups under the second term of the Modi government. Wikipedia joins hands with Bengaluru-based NGO to expand content in local Indian languages. Alibaba looking to raise $20bn through second stock listing in Hong Kong. Oyo enters strategic partnership with China’s CTrip.
Moving on to the top Business news of the day.
NBFCs re-initiate talks with RBI regarding on-tap banking licences. RBI’s new draft NBFC regulations may affect credit growth, trigger consolidation.
Renewed Talks: A few leading Non-Banking Financial Companies (NBFCs) have once again initiated discussions with the Reserve Bank of India (RBI) regarding regulatory issues around on-tap banking licences.
Fear of Rejection: Multiple NBFCs have not applied for the licence fearing rejection without response. In cases where the application was rejected, lack of a formal feedback mechanism on the non-acceptance of applications further affected their ability to apply again.
Issued in Public Interest: In an attempt to protect lenders and depositors of NBFCs, the RBI recently released draft guidelines on liquidity risk management framework for NBFCs and core investment companies (CICs).
Blind Spot: As per the draft, the Central Bank plans to implement liquidity coverage ratio (LCR) in a phased manner over four years starting April 2020. However, setting aside 60% of their net cash outflows, as envisaged in the initial phase, in so-called high-quality liquid assets such as government securities and cash will prevent the NBFCs from deploying these funds for lending.
As per experts, a possible consequence of the norms is that weaker NBFCs with poor liquidity management will get absorbed into their larger counterparts to comply with RBI’s liquidity buffer norms.
Moreover, these norms could lead to a credit slowdown for NBFCs that do not have a well-managed asset-liability situation.
Read RBI’s original Press Release here.