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    HomeBusinessRBI issues differential provisioning norms for standard assets for large NBFCs

    RBI issues differential provisioning norms for standard assets for large NBFCs

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    The Reserve Bank of India (RBI) has aligned provisioning norms for standard assets of large non-banking financial companies with that for commercial banks.

    As per the revised scale-based regulatory framework, NBFCs in the Upper Layer will comprise of entities which are specifically identified by RBI as warranting enhanced regulatory requirement. The top ten eligible NBFCs in terms of their asset size shall always reside in the upper layer, irrespective of any other factor.

    In the case of individual housing loans and loans to Small and Micro Enterprises (SMEs), NBFC-UL have to maintain provisions in respect of ‘standard’ assets’ for the funded amount outstanding at the rate of 0.25 per cent.

    For standard housing loans extended at teaser rates, the rate of provisioning will be 2 per cent. This will decrease to 0.40 per cent after 1 year from the date on which the rates are reset at higher rates (if the accounts remain ‘standard’).

    RBI said standard advances to the Commercial Real Estate – Residential Housing (CRE – RH) and Commercial Real Estate (CRE) Sector (other than CRE-RH) sectors will carry a provisoning of 0.75 per cent and 1 per cent, respectively.

    Standard restructured advances will carry provisioning as stipulated in the applicable prudential norms for restructuring of advances.

    All other standard loans and advances not included above, including loans to Medium Enterprises, will carry 0.40 per cent provisioning.

    Current credit exposures arising on account of the permitted derivative transactions will also attract provisioning requirement as applicable to the loan assets in the ‘standard’ category, of the concerned counterparties.

    RBI said the provisioning guidelines for NBFC-UL will be effective from October 1, 2022.

    Published on June 06, 2022

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