NBFCs seek relaxation from RBI on asset classification and provisioning norms
Recently NBFCs have sought relaxation from the Reserve Bank of India on asset classification and provisioning norms.
- Non-Banking Finance Companies (NBFCs) have sought relaxation from the Reserve Bank of India (RBI) on Income Recognition, Asset Classification and Provisioning (IRACP) norms for advances.
- RBI had issued a notification in November 2021. In this, prudential norms relating to advances were clarified for all banks, NBFCS and All India Financial Institutions.
The following provisions have been made in it:
- NBFCs should classify such loans as non-performing assets (NPAs) that have remained unpaid for more than 90 days.
- Accounts classified as NPA should be taken out of this category only after the borrower has paid the entire outstanding amount of interest and principal.
- Lending institutions shall mark the borrowers’ accounts as overdue on the due date as per the procedures for winding up their business.
- It aims to bring about uniformity in the application of ‘IRACP norms’ across lending institutions.
Why NBFCs want exemption?
- Most of the borrowers of NBFCs are self-employed or they belong to the Micro, Small and Medium Enterprises (MSME) category.
- They are also financially weak.
- They will need more time to stabilize their operations again after the disruption caused by the pandemic.
- Customers across the country will have to settle their payments, which will take time.
NBFC is a company registered under the Companies Act, 2013. It provides loans and advances. In addition, it also undertakes purchase of shares/stocks/bonds/debentures/securities etc.
Source – The Hindu
