Loading...

Top
Help
×

By creating an account you can:

Logo TaxTMI
Call Us / Help / Feedback

Contact Us At :

E-mail: [email protected]

Call / WhatsApp at: +91 99117 96707

For more information, Check Contact Us

FAQs :

To know Frequently Asked Questions, Check FAQs

Most Asked Video Tutorials :

For more tutorials, Check Video Tutorials

Submit Feedback/Suggestion :

Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters 0/2000
Make Most of Text Search
  1. Checkout this video tutorial: How to search effectively on TaxTMI.
  2. Put words in double quotes for exact word search, eg: "income tax"
  3. Avoid noise words such as : 'and, of, the, a'
  4. Sort by Relevance to get the most relevant document.
  5. Press Enter to add multiple terms/multiple phrases, and then click on Search to Search.
  6. Text Search
  7. The system will try to fetch results that contains ALL your words.
  8. Once you add keywords, you'll see a new 'Search In' filter that makes your results even more precise.
  9. Text Search
Add to...
You have not created any category. Kindly create one to bookmark this item!
Create New Category
Hide
Title :
Description :
❮❮ Hide
Default View
Expand ❯❯
Close ✕
🔎 News - Adv. Search
TEXT SEARCH:

Press 'Enter' to add multiple search terms. Rules for Better Search

Search In:
Main Text + AI Text
  • Main Text
  • Main Text + AI Text
  • AI Text
Category: ?
Categorized by AI
---- All Categories ----
  • ---- All Categories ----
  • Income Tax
  • GST
  • Customs, DGFT & SEZ
  • FEMA & RBI
  • Corp. Laws, SEBI & IBC
  • PMLA, Black Money & ED
  • Budget
  • News and Press Release
  • PTI News
Month:
---- All Months ----
  • ---- All Months ----
  • January
  • February
  • March
  • April
  • May
  • June
  • July
  • August
  • September
  • October
  • November
  • December
Year:
---- All Years ----
  • ---- All Years ----
  • 2026
  • 2025
  • 2024
  • 2023
  • 2022
  • 2021
  • 2020
  • 2019
  • 2018
  • 2017
  • 2016
  • 2015
  • 2014
  • 2013
  • 2012
  • 2011
Sort By: ?
In Sort By 'Default', exact matches for text search are shown at the top, followed by the remaining results in their regular order.
Relevance Default Date
    Rupee rises 7 paise to 95.64 against US dollar in early trade
    Woman passenger from Sharjah held with undeclared gold chain at Ahmedabad airport
    Delhi: Retired railway employee put under 'digital arrest', duped of Rs 30 lakh; one held
    CPI(M) accuses ED of ‘politically targeting’ Pinarayi Vijayan in CMRL case
    ED arrests ex-Andhra minister K Nageswara Rao in liquor transport 'scam'
    Orris Infrastructure MD Amit Gupta arrested in cheating case
    In a knot: Surat weaving units take voluntary two-day holiday as yarn prices shoot up
    Canada will impose retaliatory tariffs on US goods beginning Sept 8 as trade negotiations collapse
    Trade war between Canada, US deepens rupture in what had been close and durable alliance
    Canada will impose retaliatory tariffs on US good beginning Sept 8
    J-K parties oppose hike in power tarrif
    IAS officer Gangwar not ‘missing’, away in UP over father’s health: Karnataka minister
    J-K Dy CM terms ED case against his brother 'selective targeting'
    T'gana HC CJ calls for timely, expert dispute resolution in telecom, broadcasting, airport sectors
    Latur CA booked for issuing certificates to facilitate remittance of hundreds of crores abroad
    Stock Market for Beginners: How to Start Investing Without Feeling Overwhelmed
    CGST Zone detects clandestine pan masala, tobacco unit, detects tax evasion of Rs 160 cr
    Korea Industry Expo (KoINDEX) 2026 Opens at Yashobhoomi on 27 August
    Protection in predicate offence doesn't automatically extend to PMLA case: Delhi HC
    DFS Concludes Two-Day Workshop on Enhancing Accessibility of Financial Services for Divyangjans
❯❯
Maximize Maximize Maximize
0 / 200
Expand Note
Add to Folder

No Folders have been created

+

Are you sure you want to delete "My most important" ?

NOTE:

News
Showing Results for :
Reset Filters
Results Found:
Show All Summaries Hide All Summaries
August 24, 2026
Show AI Summary
Foreign exchange market conditions supported rupee appreciation, but crude prices, importer demand and geopolitical sanctions concerns limited gains.
Foreign exchange market conditions supported a modest early appreciation of the rupee against the US dollar due to relative dollar softness. The gain was limited by elevated crude oil prices, importer demand for dollars, and caution over anticipated sanctions affecting Iranian oil trade, banking networks and shipping routes. Currency markets remained sensitive to geopolitical uncertainty and possible wider trade effects.
August 23, 2026
Show AI Summary
Undeclared gold importation led to customs interception, seizure, arrest and continuing investigation after concealment inside passenger clothing.
Customs enforcement against undeclared gold importation involved interception of a passenger arriving from Sharjah at Ahmedabad airport following passenger profiling. A gold chain concealed inside clothing was recovered after it was not declared for customs purposes. The chain was seized and the passenger was arrested under the Customs Act, 1962, before being released on bail, with further investigation continuing.
August 23, 2026
Show AI Summary
Digital arrest cyber fraud used impersonation, forged notices and coercive video calls to obtain transfers through mule accounts.
Digital arrest cyber fraud allegedly used impersonation of law-enforcement and central banking officials, fabricated notices, threats of arrest and continuous video communications to coerce a retired railway employee into disclosing financial details and transferring funds for purported verification. The alleged proceeds were routed through mule and shell accounts. Banking records, KYC details, digital evidence and transaction trails allegedly connected a recipient account with suspicious transactions and multiple cyber-fraud cases; part of the cheated amount was recovered or refunded.
August 23, 2026
Show AI Summary
Political targeting allegations challenge money-laundering enforcement actions, searches, questioning, and public disclosures in the CMRL investigation.
CPI(M) alleges that enforcement action under the Prevention of Money Laundering Act in the CMRL matter is politically motivated targeting of Pinarayi Vijayan, family members and party associates. It contends that searches, questioning and public communications during the investigation were used to create suspicion without incriminating evidence, and characterises references to hawala as a new investigative narrative. The party also alleges selective anti-money-laundering enforcement against opposition leaders and states that the company will address the CMRL-related matter.
August 23, 2026
Show AI Summary
Money-laundering investigation into alleged liquor transport irregularities results in arrests connected with claimed loss to the government exchequer.
Money-laundering proceedings concerning alleged financial irregularities in liquor transport led to the arrest of former Andhra Pradesh minister Karumuri Nageswara Rao under the Prevention of Money Laundering Act. The inquiry concerns alleged wrongful loss to the government exchequer arising from liquor-transport operations. Investigative measures included raids and the arrest of Rao's son, along with arrests of a former state beverages corporation managing director and the person described as the principal accused.
August 23, 2026
Show AI Summary
Alleged LLP record forgery raises cheating, breach of trust and conspiracy concerns over unauthorised partnership interest changes.
Alleged forgery, cheating, criminal breach of trust and conspiracy concern purported unauthorised changes to LLP statutory records filed with the Registrar of Companies. The allegations include use of false documents to remove a nominated partner, substitute another person as partner and transfer a partner's interest in the LLP. The matter also draws attention to separate land-collaboration allegations and delayed possession claims by homebuyers in a halted housing project.
August 23, 2026
Show AI Summary
Voluntary production curtailment addresses polyester yarn cost volatility as weaving units seek customs-duty relief on inputs.
Voluntary production curtailment by weaving units is being adopted in response to increased polyester yarn and related input costs. Units may reduce shifts or observe periodic holidays according to individual commercial feasibility to limit yarn consumption until prices and fabric-market conditions stabilise. Industry representatives allege that yarn-price increases exceed corresponding input-cost movements and seek examination of possible artificial pricing, along with customs-duty relief on yarn and relevant inputs.
August 22, 2026
Show AI Summary
Retaliatory tariffs escalate trade restrictions as historic tariff authority enables duties without prior investigation or a prescribed duration.
Retaliatory tariffs are set to escalate bilateral trade restrictions after the United States imposed tariffs of up to 50 per cent on specified Canadian imports. Canada proposes dollar-for-dollar countermeasures covering sectors including steel, dairy, appliances, agricultural equipment, pulp and paper and electronics. Section 338 of the Tariff Act of 1930 is invoked as the legal basis for the United States measures, permitting presidential import duties up to 50 per cent without a prior investigation or prescribed maximum duration. Escalation creates uncertainty for supply chains and renewal of the United States-Mexico-Canada Agreement.
August 22, 2026
Show AI Summary
Reciprocal tariffs reshape Canada-United States trade relations, increasing supply-chain risks and accelerating Canadian trade diversification beyond its primary export market.
Canada-United States trade relations are described as entering a confrontational phase after tariff negotiations collapsed. The United States imposed tariffs on specified Canadian goods, while Canada committed to reciprocal import taxes and suspended negotiations. The dispute marks a retreat from preferential market access and continental integration. Canada's export dependence on the United States may limit retaliation and increase risks to output, employment, investment and integrated supply chains. Trade diversification, non-United States investment and expanded Pacific export infrastructure are identified as responses to a potentially enduring protectionist bilateral relationship.
August 22, 2026
Show AI Summary
Retaliatory tariffs on United States goods will target key sectors after trade negotiations failed and reciprocal tariff relief was unavailable.
Retaliatory tariffs on United States goods will take effect from 8 September in response to United States tariffs on Canadian products and unsuccessful negotiations. The dollar-for-dollar measures will cover steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics, with product-specific details to follow. Canada had been willing to remove certain retaliatory tariffs if corresponding United States tariffs were substantially reduced, but considered the final demands unacceptable.
August 22, 2026
Show AI Summary
Power tariff revision faces political opposition over increased consumer electricity costs and conflict with prior free-electricity commitments.
Power tariff regulation in Jammu and Kashmir and Ladakh has been revised through approval of an average tariff increase, effective from 1 September 2026. Political representatives have opposed the increase on the ground that it adds to consumer hardship amid unemployment, inflation, and sectoral difficulties. The criticism also contrasts the revised tariff with prior commitments concerning free domestic electricity and gas.
August 22, 2026
Show AI Summary
Recruitment examination integrity prompted enforcement scrutiny and proposed disciplinary inquiry, while an officer's absence was attributed to family emergency.
Reported absence of an IAS officer was attributed to a family medical emergency and a pending leave request, rather than enforcement searches concerning an alleged recruitment-examination scam. The officer denied any connection with those searches and expressed willingness to face an inquiry. Enforcement searches at the Karnataka Public Service Commission concerned a money-laundering investigation into alleged recruitment irregularities. The State Cabinet decided to advise suspension of the commission chairperson and initiation of an inquiry after an earlier suspension was set aside for lacking the Cabinet's aid and advice.
August 22, 2026
Show AI Summary
Money-laundering and benami asset allegations prompt enforcement proceedings, while the accused officer's brother calls the action selective targeting.
Enforcement proceedings under the Prevention of Money Laundering Act concern allegations that suspended police officer Vijay Choudhary managed numerous assets through benami transactions and engaged in money laundering. An Anti-Corruption Bureau FIR had already been registered in relation to the allegations. Surinder Choudhary characterised the action as selective targeting but maintained that investigating agencies and the judiciary should address and decide matters concerning his family.
August 22, 2026
Show AI Summary
Specialised dispute resolution requires technical expertise, timely proceedings, mediation support, and human oversight to safeguard natural justice.
Specialised, timely and effective dispute-resolution mechanisms are necessary for technically complex disputes in telecom, broadcasting, airport tariffs and cyber sectors. Technology may assist legal reasoning but cannot replace judicial reasoning, requiring verification, professional responsibility and meaningful human oversight. Effective specialised adjudication should combine domain expertise with judicial discipline, respond to technical complexity, and protect natural justice, transparency and reasoned decision-making. Mediation and other consensual mechanisms can support dispute resolution.
August 22, 2026
Show AI Summary
Form 15CB certification faces scrutiny where inadequate verification allegedly enables foreign remittances through shell companies and false certificates.
Alleged misuse of Form 15CB certification has resulted in criminal proceedings concerning certificates issued for foreign remittances without verification of underlying documents. Form 15CB requires certification of applicable taxability and tax-deduction particulars for specified remittances to non-residents before processing by an authorised dealer. The allegations concern certificates that potentially enabled cross-border transfers through shell or non-existent companies, involving cheating, false certification, false evidence and common intention.
August 22, 2026
Show AI Summary
Beginner stock market investing requires regulated accounts, risk-aware financial planning, diversification and informed company assessment before purchasing securities.
Beginner stock market investing requires a bank account, a trading or broking account with a SEBI-registered broker, and a Demat account for electronic holding of securities. Investments involve risk of loss and should align with financial goals, time horizon and loss-bearing capacity. Investors should understand primary and secondary markets, distinguish long-term investing from short-term trading, assess companies before purchase, diversify holdings, consider charges, maintain records and avoid borrowed-money investing, rumours and momentum-driven decisions.
August 22, 2026
Show AI Summary
Capacity-based tobacco taxation targets undeclared packing machinery used for clandestine production and clearance without indirect tax payment.
Clandestine manufacture and clearance of pan masala, scented jarda and tobacco products without registration or payment of GST, HSNS Cess and central excise duty was detected through an intelligence-led search. Undeclared Form-Fill-Seal packing machines, workers, finished goods, raw materials, transport vehicles, packing materials and records indicated unaccounted production and clearance. Capacity-based monthly HSNS Cess for pan masala is computed according to the number, type and capacity of installed packing machines, while a corresponding capacity-based central excise levy applies to chewing tobacco, jarda and gutkha.
August 22, 2026
Show AI Summary
Trade exhibition connects Korean exporters with Indian buyers through sector-specific consultations and certification guidance for market entry.
KoINDEX 2026 is a business-to-business trade exhibition bringing Korean manufacturers and exporters together with buyers in India and South Asia. It focuses on beauty and personal-care products, processed and functional foods, and construction, building and safety products. Commercial engagement includes pre-matched export consultations with project owners, contractors, distributors, wholesalers, e-commerce platforms and food distribution businesses. A seminar addresses Bureau of Indian Standards certification and market-entry requirements for Korean products entering the Indian market.
August 22, 2026
Show AI Summary
Independent PMLA proceedings require separate anticipatory bail assessment; predicate-offence protection alone cannot establish pre-arrest protection.
Protection in a predicate-offence FIR does not automatically extend to independent PMLA proceedings. Anticipatory bail in a money-laundering investigation must be assessed under the applicable PMLA condition and on the material connecting the applicant to alleged proceeds of crime. Relevant considerations include the financial trail, recorded statements, bank-account analysis, compliance with summonses, cooperation with inquiry, and the need for personal participation in evidence collection and confrontation with documentary and digital material.
August 22, 2026
Show AI Summary
Financial accessibility for Divyangjans requires compliance standards, practical implementation measures and stronger institutional capacity across financial services.
Accessibility of financial services for Divyangjans was examined through a workshop focused on public sector banks, insurance companies, regulators and public financial institutions. Discussions covered accessibility standards, compliance requirements, legal provisions, practical implementation challenges and institutional best practices under the Sugamya Bharat initiative. Participants considered operational measures to strengthen institutional capacity, inclusivity and equitable access to financial services.

News

Back

All News

Showing Results for :
Reset Filters
No Records Found

News

Back

All News

Showing Results for : Reset Filters

Chasing the Horizon (Remarks delivered by Shri M. Rajeshwar Rao, Deputy Governor, Reserve Bank of India – October 22, 2021 - at the CII NBFC Summit on Role of NBFCs in Achieving $5 trillion Economy)

October 23, 2021

Contents
Summary
Note

Note

-

Bookmark

Print

Print

Ladies and Gentlemen!

1. It’s a pleasure to be with you this morning. Let me thank Mr. Chandrajit Banerjee, Director General, CII for extending this kind invitation to me for delivering this inaugural talk at the summit organised by CII. NBFC sector has received wide ranging attention for past few years for various reasons. As an important cog of the financial system, it holds immense potential with its ability to reach out to vast cross-section of the population and diverse geographies and my focus today is going to be outlining a path for achieving this potential.

2. As many of you might recall, almost a year back in the National E-Summit on Non-Banking Financial Companies organised by ASSOCHAM, I dwelt upon how the regulations for NBFC sector might shape up in future. The year has passed by and I would like to think we have made significant progress in many of those areas. One important point that we had highlighted back then was the principle of proportionality for regulating the non-banking financial entities. The idea was to calibrate the degree of regulatory prescriptions based on the systemic importance of NBFCs and the contagion risk they pose to other entities in the financial system. To give shape to our principle of proportionality idea, we came out with the Discussion Paper on Revised Regulatory Framework for NBFCs- A Scale-Based Approach in January this year for stakeholder comments. We have received and examined these comments internally and I plan to discuss on the approach a bit later in my talk.

3. In today’s talk, I would like to focus on three key aspects. First, the uniqueness of non-banking financial sector and its importance in the overall scheme of things for development of the country; second, discuss a bit on the Scale Based Regulations as the way forward for regulatory landscape of NBFC sector. Finally, a few asks from the sector, you may call them asks, suggestions or regulatory expectations or by some other name, essentially these are the issues which I believe the industry needs to pay more attention to.

4. Non-Banking Finance Companies (NBFCs) ecosystem in our country is a place of immense diversity and may I add, complexity as well. There are 9651 NBFCs across twelve different categories focussed on a diverse set of products, customer segments, and geographies. As on March 31, 2021, NBFC sector (including HFCs) has assets worth more than ₹54 lakh crore, equivalent to about 25% of the asset size of the banking sector. Therefore, there can be no doubt regarding its significance and role within the financial system in meeting the credit needs of a large segment of the society. Over the last five years the NBFC sector assets have grown at cumulative average growth rate of 17.91 per cent. However, one needs to understand whether it is a demand side pull or supply side push which is contributing to growth of NBFC sector. This distinction becomes important as it has significant implications for the efficiency of the sector. Conventional wisdom tells us that growth consequential to demand side pull factors translates into increased efficiency and better services to the customers. Supply driven growth could, on the other hand, arise out of entry by entrepreneurs who would like to enter financial services industries but are unable to meet the scale and stringent norms meant for banks.

5. The preamble to the Reserve Bank of India Act, 1934, enjoins on the Bank, to operate the currency and the credit system of the country to its advantage. Thus, promotion of an efficient financial intermediation system, which facilitates adequate credit flow to every segment of the society, more so to the financially disadvantaged population is an embedded goal for us at the Reserve Bank. Non-banking financial sector assumes an important role in the process as it is a valuable source of financing for many firms, micro and small units as well as individuals and small business, facilitating competition and diversity among credit providers. Further, niche NFBCs fulfil the unmet and exclusive credit needs of various segments such as infrastructure, factoring, leasing, etc. NBFC- MFIs reach out to the underprivileged sections of the society. Along with banking, which is the primary channel of financial intermediation, NBFCs have been increasingly playing a significant complementary role in financial intermediation and provision of last mile delivery of financial services.

6. Non-banking financial entities, by their regulatory design, enjoy freedom to undertake a wider spectrum of activities as compared to banks for which the permissible activities are enshrined in the statute itself. This freedom, coupled with a light touch regulatory prescription, gives them a greater risk-taking capacity to engage in financial intermediation in the segments which are often underserved by other players. Hence, even with large universal banking’s reach across the country, the NBFC sector has the ability to create a space for itself with customized services with a local feel.

7. Apart from furthering the financial inclusion agenda, the added advantage of a well-functioning NBFC sector is that it can promote resilience in the financial system by being innovative and agile in offering tailored financial products and solutions as a supplemental source of credit alongside banks. It has to be noted that many recent financial sector credit delivery innovations, for example micro-credit and sachetisation of credit, were popularised by non-banking financial entities. This capability and freedom to innovate spurs competitive advantage in the financial services sector with the ultimate beneficiary in the process being the customer.

8. However, the reputation of non-banking financial sector has been dented in recent times by failure of certain entities due to idiosyncratic factors. The challenge therefore is to restore trust in the sector by ensuring that few entities or activities do not generate vulnerabilities which go undetected and create shocks and give rise to systemic risk through their interlinkages with the financial system. Forestalling and where necessary, decisively resolving such episodes becomes a key focus of our regulatory and supervisory efforts.

Scale Based Regulatory Approach

9. Before we discuss further, it would be interesting to make an assessment as to where the Indian NBFC sector stands with respect to significance, activity and regulation as compared to global jurisdictions. The Global monitoring report on NBFI by Financial Stability Board (FSB) classifies non-banking financial activities into five economic functions, (i) collective investment vehicles, (ii) loan companies which depend on short-term funding, (iii) market intermediaries, (iv) entities which engage in facilitation of credit creation (such as credit insurance companies, financial guarantors) and (v), entities undertaking securitisation-based credit intermediation. Globally, the collective investment vehicles are the most dominant category of the non-banking financial activity and account for 73 per cent of the global NBFI sector. In the global context, the second function of NBFIs i.e., loan companies depending on short term funding is a small segment constituting just around 7 per cent of the total NBFI sector, but in India the non-banking sector is largely into direct credit intermediation.

10. The regulatory challenge in India is thus different with the focus on designing prudential regulations specifically meant for lending activities of NBFCs without compromising on their operational flexibility.

11. Before I talk about SBR, let me step back a bit to give a historical perspective on regulation of NBFC sector in India. While the powers for regulation and Registration of Non-Banking Financial Institutions receiving deposits and Financial Institutions was vested in RBI by the insertion of Chapter III B to the RBI act in 1963, it was only in the late nineties that some semblance of structured regulation commenced. However, the general premise for regulation at that time was based on the fact that the sector would cater to niche activities and geographies. It would make its presence felt in remote and inaccessible areas of the country where formal financial services were difficult to reach, complementing the existing banking sector. This was coupled with an implicit assumption that the sector would mostly function on a lower scale and not pose any tangible risks to the financial system. Hence, taking in to account their unique business model, vast reach and operations on lower scale, their regulations were placed on a different pedestal. The arbitrage in favour of NBFCs was by design and not by default.

12. Over the years, the NBFC sector has evolved in terms of its size, operations, technological sophistication with entry into newer areas of financial services and products. To keep pace with the same, regulations have also evolved to address various accompanying risks and concerns. Reserve Bank had introduced an element of differential regulation way back in 2006 when regulatory framework for systematically important NBFCs was strengthened. Further in 2014, a revised regulatory framework was announced and many of the regulatory parameters with regard to net owned fund, prudential requirements and corporate governance standards were strengthened. It may not be out of place to say that the regulatory framework for NBFCs has remained a work in progress and it continues to be so. The fundamental premise has, however, been to allow operational flexibility to NBFCs and help them grow and develop expertise.

13. Now, the non-banking sector has grown significantly and several NBFCs match the size of the largest Urban Cooperative Bank or the largest Regional Rural bank. In fact, few of them are as big as some of the new generation private sector banks. Further, they have become more and more interconnected with the financial system. NBFCs are the largest net borrowers of funds from the financial system and banks provide a substantial part of the funding to NBFCs and HFCs. Therefore, failure of any large NBFC or HFC may translate into a risk to its lenders with the potential to create a contagion. Failure of any large and deeply interconnected NBFC can also cause disruption to the operations of the small and mid-sized NBFCs through domino effect by limiting their ability to raise funds. Liquidity stress in the sector triggered by failure of a large CIC broke the myth that NBFCs do not pose any systemic risk to the financial system.

14. While we are aware that differential regulation in the NBFC sector is required to allow it to bridge the gap in last mile connectivity and exhibit dynamism, this premise remains valid till the time their scale of operations is low. As and when they attain the size and complexity which poses risk for the financial system, the case becomes stronger for greater regulatory oversight. It is in this background that we have conceptualised the scale based regulatory framework aligning it with the changing risk profile of NBFCs while addressing systemic risk issues. A scale-based regulatory framework, proportionate to the systemic significance of NBFCs, may be optimal approach where the level of regulation and supervision will be a function of the size, activity, and riskiness of NBFCs. As regulations would be proportional to the scale of NBFCs, it would not impose undue costs on the Regulated Entities (REs). While certain arbitrages that could potentially have adverse impact would be minimised, the fundamental premise of allowing operational flexibility to NBFCs in conducting their business would not be diluted.

15. Under the proposed scale-based framework, NBFCs would be categorised into four layers - Base Layer, Middle Layer, Upper Layer, and a possible Top Layer. Base Layer will broadly be equivalent to existing non-deposit taking non-systemically important NBFCs (NBFC-NDs), NBFCs without public funds and customer interface and certain NBFCs undertaking specific activities. It is proposed to mostly continue with the ‘light touch regulation’ and focus is not to burden such entities with higher level of prudential regulations but increase transparency by way of greater disclosures and improved governance standards.

16. Middle Layer will, broadly, be equivalent to existing deposit taking NBFCs and systemically important non-deposit taking NBFCs (NBFC-NDSI). In the middle layer, we had proposed to plug the areas of arbitrage between banks and NBFCs where it is felt continuance of the arbitrage would be detrimental to orderly growth in the sector and may contribute to marginal risk to financial system. NBFC - Upper Layer was conceived of as a new category of NBFCs in which a chosen few, around 25-30 systemically significant NBFCs, would be specifically identified by the RBI through certain objective criteria and will be subjected to enhanced regulatory rigour. The NBFCs in this layer would be identified by way of a scoring methodology based on size, interconnectedness, complexity, and supervisory inputs. The idea is to introduce prudential regulations and intensive supervision for such entities proportionate to their systemic significance. Further, to enhance transparency and disclosure, it is also proposed that NBFCs-UL would have to mandatorily list in a stock exchange within a given time frame.

17. There is also a top layer envisaged in the pyramidical structure of SBR. Ideally, this layer would remain empty, and an Institution would be slotted into this layer at the discretion of the supervisor if he is of the opinion that the entity is contributing significantly to systemic risk. Such entities in Top Layer would be required to comply with significantly higher and bespoke regulatory / supervisory requirements.

SBR Framework – Pictographic Representation

18. RBI’s regulatory approach towards non-banking financial sector has been dynamic and has evolved with passage of time with the regulatory initiatives and structures built over the years. There has been a consistent and conscious understanding that a “one size fits all” approach is not suitable for NBFC sector, which are a diverse set of financial intermediaries, with different business models, serve heterogenous group of customers and are exposed to different risks. As I have enunciated earlier also, the overarching goal of the Reserve Bank is to ensure that risks to financial stability are minimised and contained, be it from a sector or an entity.

Regulatory Expectations

19. Let me now turn to what we envisage as four key cornerstones which I feel not only NBFCs, but every financial entity needs to adopt to become a resilient, customer centric and responsible organisation contributing to economic growth of the country.

Responsible financial Innovation

20. The non-banking financial space has been a hotbed of financial innovation. The inherent structure of NBFCs as an agile force makes them capable of and likely to experiment with innovative technologies and devise newer ways, methods, and vehicles to deliver financial products and services to every nook and corner of the country. The NBFCs have been in the forefront in the adoption of innovative fintech based products and services which are transforming the ways of carrying out credit intermediation and extending financial services. As an enabling regulator, the Reserve Bank has also been on the forefront of creating an environment for growth of digital technology. Peer to Peer (P2P) lending, Account Aggregator (AA) and digital-only NBFCs are cases in point where the regulations are helping the segment and entities to grow in a systematic and orderly manner.

21. However, point of caution here is that the innovation should not be at the cost of prudence and should not be designed to cut corners around regulatory, prudential and disclosure requirements. Responsible financial innovation should always have customer at its centre and should be aimed at creating positive impact on the financial ecosystem and the society. One should therefore consider the impact of new ideas on the financial fabric at the conceptualisation stage itself. This is somewhat similar to the concept of evaluating the impact of business on the environment or greening the financial system but applies to every new innovative idea floated by buzzing entrepreneurial energy of financial entities.

Accountable Conduct

22. Second point which I wish to highlight is the imperative need for accountable conduct by financial entities. On the digital finance front, the pandemic gave us several new learning points. During the pandemic there was surge in digital credit delivery, with lenders either lending through their own balance sheet and in-house digital modes or using third party apps to onboard customers. While the benefits accruing from digital financial services is not a point of debate, the business conduct issues, and governance standards adopted by such digital lenders have shaken the trust reposed in digital means of finance in India. We were and are inundated with the complaints of harsh recovery practices, breach of data privacy, increasing fraudulent transactions, cybercrime, excessive interest rates and harassment.

23. Responding quickly to such complaints, RBI on June 24, 2020 came out with a circular reiterating that banks and NBFCs must adhere to fair practices and outsourcing guidelines for loans sourced over proprietary digital platforms or third-party apps under an outsourcing arrangement. Unfortunately, such developments spurred by purely commercial considerations have dented the credibility of the whole system which flourishes and thrives on trust. My ask here is that we should not compromise on the ethos of the finance for mercurial or ephemeral gains. These gains would anyway accrue to the Institutions over the long term if and when it is built on an edifice of trust and mutual benefit.

Responsible Governance

24. Governance as a regulatory theme has engaged our attention for quite some time now. Governance requirements for NBFCs have been less rigorous as compared to banks. Under SBR, some steps to institute an enhanced governance framework for NBFCs in the Middle and Upper Layers have been suggested. These changes pertain to key managerial personnel, appointment and qualification of independent directors, constitution of board committees, compensation guidelines and disclosures. However, while governance structures within an entity can be enforced through legislation or regulations, responsible governance practices cannot. These need to be built by developing appropriate governance culture and traditions. All of us would agree that the governance is more of a cultural issue than a regulatory issue. Therefore, I urge all of you to create a culture of responsible governance in your respective organisations where every employee feels responsible towards the customer, organisation, and society. Good governance is key to long term resilience, efficiency and might I add, survival of the entities.

Centrality of the Customer

26. The natural transition from these discussions is protection of the customers. This in my view is non-negotiable and I have taken every opportunity to voice my concerns on this issue. To us at RBI, any regulatory move has always, the larger public interest as its core theme and we have been doing our best having regard to public interest in general for the financial system. Putting in place an elaborate grievance redressal machinery, an RBI Ombudsman scheme, Fair Practices Code, etc. are pointers in this direction. More recently, the Scheme for Internal Ombudsman has been extended to NBFCs on a selective basis. The IO at the apex of the NBFC’s internal grievance redressal mechanism, shall independently review the resolution provided by the NBFC in the case of wholly or partially rejected complaints.

27. However, regulatory measures alone may not suffice. Protecting customers against unfair, deceptive, or fraudulent practices has to become top priority of every entity and permeate the organisation culturally and become a part of its ethos. Customer service would mean, amongst many other things, that a customer has similar pre-sale and post-sale experience, she/he is not disadvantaged vis-à-vis another customer because he or she approached the financial entity through a different delivery channel, and he or she has a right to hassle-free exit from the contractual obligation. This issue has been deliberated often enough and it’s time to act now.

Conclusion

28. Let me conclude by saying that non-banking financial sector is at an inflection point right now. From here the entities which put interest of the customer above everything else, are responsible while innovating and have strong governance culture, will thrive while others will fade with the passage of time. The Reserve Bank has been carrying out calibrated modifications and adjustments to mould the NBFC regulations in the changing business environment. However, many a times when I think of the regulations in non-banking segment, I am reminded of the metaphoric man of Stephane Crane2 who is pursuing the horizon, determined to achieve its vision.

Thank you.

1 Remarks delivered by Shri M. Rajeshwar Rao, Deputy Governor, Reserve Bank of India at the virtual CII NBFC Summit on Role of NBFCs in Achieving $5 trillion Economy - October 22, 2021. The inputs provided by Shri Chandan Kumar and Pradeep Kumar are gratefully acknowledged.

2 "I saw a man pursuing the horizon" - a poem by Stephen Crane

Topics

Acts Income Tax