RBI Declines Special Exposure Relaxations for Government-Owned NBFCs

 The Reserve Bank of India (RBI) has issued amended directions on exposure norms for non-banking financial companies (NBFCs), declining requests to continue case-specific relaxations for government-owned NBFCs while introducing changes for Infrastructure Finance Companies (IFCs), as per news reports. 

RBI Declines Requests for Exemptions 

The central bank said it would not continue case-specific exemptions from concentration norms for government-owned NBFCs. 

It also rejected requests to increase single counterparty exposure limits for lending to public sector enterprises (PSEs). 

According to the RBI, extending such exemptions would be inconsistent with a principles-based regulatory framework and could create avoidable regulatory uncertainty. 

Earlier Relaxations 

The RBI noted that case-specific exemptions had been permitted in the past. 

However, most of these exemptions were granted with a sunset clause, which has since expired. The affected entities have subsequently brought their exposures within the prescribed limits. 

Existing Breaches Allowed to Continue 

Residual breaches under the revised concentration norms have been allowed to be grandfathered. 

The RBI also stated that these exposures may be offset using eligible credit risk transfer instruments, including state government guarantees.

Government-owned NBFCs have also been permitted to continue with breaches of single and group exposure limits, provided the existing exposures are run off until maturity and there is no increase in net incremental exposure. 

Higher Exposure Limit for IFCs 

The amended directions increase the large exposure limit for Infrastructure Finance Companies (IFCs) in the Upper Layer. 

The ceiling has been raised from 35% to 45% of the capital base. 

Read More: RBI Injects ₹1.41 Trillion Into Banking System Through 7-Day VRR Auction to Ease Liquidity Deficit! 

Conclusion 

The amended directions retain the existing regulatory approach towards concentration norms for government-owned NBFCs while incorporating revised exposure limits for Upper Layer Infrastructure Finance Companies.   

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