Round up of 2022-23

• Non-banking financial companies (NBFCs) maintained robust credit growth during the year through strong capital buffers, improved asset quality;
• Bank credit tNBFCs increased manifold compared tprevious years;
• Monthly average yield on AAA-rated-3 yr. bond stood at 8.12% for NBFCs and monthly average risk premium/spread on AAA rated 3 yr. bonds (over 3 year G-sec) increased from 35 bps t73 bps for NBFCs;
• Implementation of Scale Based Regulation for all NBFCs with further guidelines on:
• Large exposure framework
• Instructions on Loans & Advances
• Loans tdirectors and relatives
• Multiple NBFCs in a group
• Compensation guidelines for KMP and senior management
• Disclosure in financial statements – notes taccounts of NBFCs
• Differential standard asset provisioning norms
• Disclosure of exposure, related party transactions, customer complaints, divergence in asset classification and provisioning etc.
• Sectoral assessment of NBFCs based on the SBR;
• Process of voluntary surrender of CoR by NBFCs streamlined by providing standard application form and list of documents;
• Extension of guidelines on LEI for borrowers of NBFCs;
• Guidelines on Digital Lending issued tmanage engagement of third parties, mis-selling, breach of data privacy, unfair business conduct, charging of exorbitant interest rates and unethical recovery practices;
• Guidelines on Outsourcing of financial services – responsibilities of REs employing recovery agents;
• Inclusion of Goods and Services Tax Network (GSTN) as a Financial Information Provider (FIP) under Account Aggregator (AA) Framework;
• Working Group formed tRationalize NBFC returns in alignment with the Indian Accounting Standards (Ind-AS);
• KRIs rolled out for select NBFCs tensure Cyber Security and IT examination of NBFCs;
• Penalty of 4.39 cr. on 11 NBFCs imposed during April 22- March 23;
• Relaxation of zer% risk weight tselect NBFCs tthe extent which are eligible under respective schemes;
• Action against non-compliant NBFCs taken based on targeted scrutiny for activities related tengagement with Digital Lending Partners (DLPs), non-adherence toutsourcing guidelines (including those pertaining trecovery agents), fair practices code and KYC norms;
• Regulatory framework for asset reconstruction companies (ARCs) reviewed tstrengthen their corporate governance and prudential norms, enhance transparency of their functions and augment their role in resolution of stressed assets;
• Diversification of activities by SPDs;
• Extension of PSL categorization on on-going basis w.r.t lending by SCBs tNBFCs and NBFC-MFIs and other MFIs;
• Online fraud reporting system commenced during the year. Also, workshops conducted for select NBFCs tsensitize them on fraud prevention, prompt /accurate reporting and follow up action;
• Various Analytical studies conducted including an analysis done tcompare the Expected Credit Loss (ECL) required under Ind-AS with provisions under Income Recognition, Asset Classification and Provisioning pertaining tadvances (IRACP);
• Implementation of risk-based approach for KYC/AML supervision of select NBFCs;
• Compliance Function and Chief Compliance Officer for select NBFCs;
• Unified Fraud Reporting (UFR) system developed and currently under adoption;
• Mechanism of structured meetings of senior supervisory managers (SSMs) with
  statutory auditors (SAs) of select NBFCs introduced by the Reserve Bank timprove the effectiveness of communication between supervisors and auditors, in line with international best practices;
• With number of registered NBFC -Account Aggregators, FIPs and FIUs expected tincrease substantially, well considered nuanced approach undertaken by RBI in consultation with ReBIT tmake the ecosystem more robust;

Agenda for 2023-24

• Examination of licensing requirements of NBFCs and initiating supervisory action
  Against non-compliant NBFCs;
• Impact assessment of recent modification in asset classification norms for NBFCs;
• Recognition of self-regulatory organizations (SROs) for NBFCs;
• Review of policy on conduct of activities by NBFCs;
• IT examination for select NBFCs tbe initiated;
• Calibrated harmonization of supervisory approach across segments by phased introduction of process audit and compliance testing
• With non-banking financial companies (NBFCs) constituting an increasingly important segment of the Indian financial system, RBI plans tstrengthen the analysis of transmission tlending rates and sectoral credit flows by expanding the coverage tinclude NBFCs in a phased manner.