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    HomeBusinessRBI lists rules for provisioning by NBFCs on advances to hsg, realty,...

    RBI lists rules for provisioning by NBFCs on advances to hsg, realty, SME


    The upper layer of non-banking finance companies (NBFC) must maintain provisions for standard advances to assets like housing loans, small and medium enterprises (SME), and real estate, said the Reserve Bank of India on Monday.

    The central bank’s instruction is seen as a step to prescribe bank-like regulatory norms for finance companies.

    The individual housing loans and loans to Small and Micro Enterprises (SMEs) will attract 0.25 per cent provision. NBFCs will have to maintain two per cent provision for housing loans extended at teaser rate. This provision will decrease to 0.40 per cent after one year from the date on which the rates are reset at higher rates.

    NBFC-Upper Layer comprises those finance firms specifically identified by the central bank for enhanced regulatory requirements. The top ten eligible NBFCs, in terms of asset size, shall always be in the upper layer, irrespective of any other factor.

    The Reserve Bank said NBFCs would keep 0.75 per cent provision for advances to Commercial Real Estate – Residential Housing (CRE – RH). Other real estate loans would carry slightly higher provisions of one per cent.

    The loans to medium size enterprises and advances not included in any of the categories would attract 0.40 per cent provision.

    Current credit exposures due to the permitted derivative transactions shall also attract provisioning requirements as applicable to the loan assets in the ‘standard’ category.

    NBFCs with net worth of Rs 250 crore and above are required to comply with Indian Accounting Standards (Ind AS) to prepare financial statements. They shall continue to hold impairment allowances as required under Ind AS. These provisions will be included in the computation of the prudential floor. However, they shall not be considered for calculating net non-performing Assets (NPAs), said the Reserve Bank.

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