Indian two thousand and five hundred rupee banknotes are arranged for a photograph in Mumbai, India (Photographer: Dhiraj Singh/Bloomberg)

At Meeting With PM Modi, Non-Bank Lenders Seek Easier Regulations

A delegation of representatives from non-banking finance companies and housing finance industry met Prime Minister Narendra Modi on Wednesday to seek easier norms regulating the sector as they battle a funding crunch that started due to defaults by Infrastructure Leasing and Financial Services Ltd.

At the meeting, which was facilitated by industry body Assocham, delegates highlighted that the funding crunch was exacerbated by recent tough regulations introduced by the Reserve Bank of India.

“Lately, the regulatory framework has been amended with the objective of aligning it with that for banks. As a result the focus has been more on the asset side of our balance sheet which as on date is subject to regulation which have been harmonized with that for banks,” the delegation said in its memorandum—BloombergQuint has reviewed a copy. “However, the liability side i.e., fund-raising activity still remains highly restricted creating a funding crunch.”

The agenda for the meeting with the prime minister comprised a number of requests for easier regulations governing the NBFC and housing finance sectors. These include:

  • Minimum holding period on loans with maturity of two-five years must be reduced to three months.
  • All systemically important NBFCs must be allowed to accept public deposits.
  • RBI should consider a special liquidity window for NBFCs and housing finance companies.
  • All housing finance companies should be allowed to access National Housing Bank refinancing facility.
  • Exposure limits to banking and financial services industry should be raised for life insurance companies and pension funds.
  • Current asset-liability norms of RBI for NBFCs should be maintained and not tightened.
  • End-use restrictions for external commercial borrowings must be relaxed for NBFCs.

In addition, the delegation sought special treatment when an NBFC applies for a banking licence to the RBI. It said that since NBFCs were already subject to on-site and off-site inspections, as well as regular submissions of returns by the RBI, the due diligence process when they apply for a banking licence shouldn't take too long.

The delegation also sought some relief on taxation.