Newly-appointed deputy governor M Rajeshwar Rao today (6th November 2020) said larger non-banking finance companies (NBFC) should be regulated as strictly as banks in order to preserve financial stability, at the same time letting the other NBFCs enjoy the light-touch regulation for the sector.
The sector can expect to witness a graded regulatory framework for NBFCs "calibrated in relation to their contribution to systemic significance.” This may include having a relook on the regulation of microfinance institutions, and curtailing the regulatory arbitrage enjoyed by certain NBFCs that are neither too big to cause systemic instability, nor small enough to be ignored.
"NBFCs with significant externalities and which contribute substantially to systemic risks must be identified and subjected to a higher degree of regulation. One can also argue that the design of a prudential regulatory framework for such NBFCs can be
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