The new measures have been directed towards NBFCs which accept public deposits. Following are the important regulations applicable to them:
1) Net Owned Funds (NOF):
Although all NBFCs are required to have a certificate of Registration from RBI, the NBFCs with public deposits should have a minimum Net Owned Funds (NOF) of Rs.25 lakh. The minimum NOF condition has since been raised to Rs. 2 or >re in respect of newly formed NBFC.
2) Liquid Assets:
ADVERTISEMENTS:
All NBFCs having public deposits are required to maintain at least 15 per cent of the value of public deposit as investment in approved securities. This is to ensure liquidity position of NBFC and similar to SLR requirements of banks.
3) Prudential Norms:
The prudential norms regarding classification of assets into standard, sub-standard, doubtful and loss assets has been made applicable to NBFCs. Similarly, creation of provision for NPA is also applicable. A minimum capital adequacy of 12 per cent has been applied to NBFCs. This is intended to be raised to 15 per cent shortly.
4) Reserve Fund:
ADVERTISEMENTS:
All NBFCs must transfer a minimum of 20 per cent of its net profit every year to a Statutory Reserve Fund before declaring any dividend.
5) Interest Rate Ceiling:
No NBFC can pay interest exceeding 16 per cent on public deposits.
6) Period of Deposit:
ADVERTISEMENTS:
The NBFC cannot accept public deposit for a period less than a year and for a period exceeding 3 years. In other words deposits from public can be only between one and three years.
7) Quantum of Deposits:
The maximum deposits that can be accepted by an NBFC is related to its net owned funds. This is also marginally different depending upon the type of NBFC. One another important criterion for the ceiling on public deposit is with reference to the credit rating of NBFC.
The higher is the credit rating, the larger is the quantum of maximum public deposit and vice versa. Presently, the maximum deposit permissible for H.R & leasing companies is 4 times of NOF and for savings and loan companies up to 2.5 times of NOF.
ADVERTISEMENTS:
8) NOF – Computation:
The RBI Act provides the manner in which NOF should be computed for NBFCs. In fact, the entire chapter III B of RBI Act deals with NBFCs’ operations.