RBI NBFC reforms: No-registration rule for small NBFCs and relaxed housing loan norms for UCBs

The Reserve Bank of India (RBI) announced key reforms aimed at reducing regulatory burdens on non-banking financial companies (NBFCs) while ensuring financial stability in the sector.

Governor Sanjay Malhotra said that NBFCs with no access to public funds and no customer interface, and with assets below ₹1,000 crore, will be exempted from registration with the RBI, providing relief to smaller entities and easing operational constraints.

The central bank also proposed dispensing with the requirement for certain NBFCs to seek prior approval before opening more than 1,000 branches, further enhancing flexibility.

Malhotra emphasised that despite these regulatory relaxations, the financial stability parameters of NBFCs remain robust, reflecting resilience in the sector. He also noted that liquidity measures undertaken by the RBI will provide buffers to absorb potential shocks from government cash balance fluctuations and foreign exchange interventions.

Overall, large industries have recorded higher credit growth, and bank credit has shown an uptick in recent months, indicating healthy financial conditions for both NBFCs and banks.

These measures are part of the RBI’s broader approach to ensure that smaller NBFCs can operate efficiently without compromising systemic stability, while the central bank continues to monitor liquidity and credit flows across the economy.

Adding

perspective on the broader policy, Sameer Sawant, Research Analyst at Mirae Asset ShareKhan, noted that the RBI’s neutral stance on repo rates, combined with its assurance of sufficient liquidity, is constructive for both banks and NBFCs.

Ajit Mishra, SVP, Research, Religare Broking, described the policy outcome as broadly constructive for investors, with a pause after aggressive easing reducing uncertainty around rate trajectories.

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