Want ‘tighter’ norms for NBFCs

New Delhi, November 6

Asserting the need to recalibrate regulations for shadow banking sector, RBI Deputy Governor M Rajeshwar Rao on Friday said NBFCs with significant externalities and which contribute substantially to systemic risks must be identified and subjected to a higher degree of regulation.

M Rajeshwar Rao, Deputy Governor, RBI

We could perhaps consider a graded regulatory framework for NBFCs, calibrated in relation to their contribution to systemic significance

“One can also argue that the design of prudential regulatory framework for such NBFCs can be comparable with banks so that beyond a point of criticality to systemic risks, such NBFCs should have incentives either to convert into a commercial bank or scale down their network externalities within the financial system,” he said. This would make the financial sector sound and resilient while allowing a majority of NBFCs to continue under the regulation-light structure, Rao said. — PTI

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