COMMENTS TO RESERVE BANK OF INDIA ON DISCUSSION PAPER ON REVISED REGULATORY FRAMEWORK FOR NBFCs
NBFCs have become a systemically important component of the financial system, over the years. They have steadily increased in number and become an integral part of the Indian Financial System playing an important role by financial inclusion into the lesser penetrated market and tapping the underutilized opportunities. In a short span of time, NBFCs have scripted a great success and growth story.
Union Budget For The FY 2020-2021
The Union Minister of Finance and Corporate Affairs, Smt. Nirmala Sitharaman presented India’s first ever digital Union Budget on February 1st 2021. While presenting the budget the FM laid focus on the Six Pillars which are necessary for reviving the economy of the Country and also some proposals are given on Direct and Indirect Taxes. FM further added that this moment in history, when the political, economic and strategic relations in the post COVID world are changing, is the dawn of an era- one in which India is well poised to truly be the land of promise and hope.
RBI releases Discussion Paper on Revised Regulatory Framework for NBFCs- A Scale-Based Approach
With the aim to protect financial stability and ensuring all Non-Banking Financial Companies (NBFCs) to grow and operate with ease, the Reserve Bank of India (RBI) has proposed to introduce a scale-based regulatory framework for NBFC to segregate the larger entities and regulate them with the stricter norms.
In the discussion paper, the RBI has proposed that the regulatory framework of NBFCs shall be based on a four-layered structure – Base Layer (NBFC-BL), Middle Layer (NBFC-ML), Upper Layer (NBFC-UL) and Top Layer.
Extension of due date for conducting Board meetings through Video Conference / OAVM for approving Financial Statements
The Ministry of Corporate Affairs (MCA) notified the Companies (Meetings of Board and its Powers) Fourth Amendment Rules, 2020.
The government relaxed the requirement of holding Board meetings with physical presence of directors under section 173(2) read with rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014 for approval of the annual financial statements, Board’s report, etc.
The meeting may till 30th June, 2021 be held through video conferencing or other audio visual means by duly ensuring compliance of Rule 3 of the Companies (Meetings of Board and its Powers) Rules, 2014.
In the Companies (Meetings of Board and its Powers) Rules, 2014, in rule 4, in sub-rule (2), for the figures, letters and word 31 December 2020″, the figures, letters and word “30th June 2021” shall be substituted.
Draft Commercial Paper and Non-Convertible Debentures (Reserve Bank) Directions, 2020
In pursuance of the announcement made in the Statement on Developmental and Regulatory Policies dated June 6, 2019, Reserve Bank of India has issued the Draft Commercial Paper and Non-Convertible Debentures (Reserve Bank) Directions, 2020 to all the persons/agencies dealing in Commercial Papers and Non-Convertible Debentures as defined in these Directions.
Comments on the Draft Directions are invited from banks, market participants and other interested parties by January 31, 2021.
Declaration of Dividend by NBFCs
BI may allow SFBs to lend to smaller microfinance institutions with loan assets below Rs 500 Cr
Bank lending to smaller MFIs had slowed considerably during COVID on account of high risk aversion. According to the latest RBI data, bank lending to microcredit remained flat in the 12 months till October 2020, compared with a growth of 40.6 percent in the comparable period in the previous year.
Presently, only direct lending to economically weaker sections constitute PSL loans for SFBs. Lending to financial intermediaries does not constitute PSL. MFIs want this rule to change so that credit flows to smaller MFIs.
In this context, Microfinance institutions have made a case with the Reserve Bank of India (RBI) to include small finance bank (SFB) loans to micro lenders in the priority sector lending category, so that they will get a share.