India central bank proposes scale-based regulations for shadow banks
- Higher risk appetite of NBFCs has contributed to their size, complexity and interconnectedness making some of the entities systemically significant.
- The size of the balance sheet of shadow banks including housing finance companies has more than doubled to 49.22 trillion rupees in 2020 from 20.72 trillion rupees in 2015.
MUMBAI: The Reserve Bank of India has proposed a regulatory overhaul of the non-banking financial companies (NBFCs) and recommended a scale-based approach with stricter capital and governance norms, it said in a discussion paper released on Friday.
"Higher risk appetite of NBFCs has contributed to their size, complexity and interconnectedness making some of the entities systemically significant, posing potential threat to financial stability," the RBI said.
The proposed reglulatory and compliance guidelines will bring the 25-30 large shadow banks to parity with the state-owned and other private commercial banks in the country. New norms have also been suggested for the mid to smaller NBFCs but they are likely to be less stringent.
The size of the balance sheet of shadow banks including housing finance companies has more than doubled to 49.22 trillion rupees in 2020 from 20.72 trillion rupees in 2015, the RBI said.
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