Loans to senior executives, large NBFC exposures: RBI ring-fences norms

The new guidelines will bring NBFCs almost on par with commercial banks.

In a notification, the RBI said that aggregate exposure of an upper layer NBFC to any entity must not be higher than 20 per cent of its capital base, although the board can approve an additional 5 per cent to take it to 25 per cent.

However, for infrastructure finance companies, the aggregate limit will be 30 per cent to a single entity. To a group of connected entities, aggregate exposure will be limited to 25 per cent of the capital base (unless on account of an infra loan) for all upper layer NBFCs apart from infrastructure finance companies where it will be 35 per cent. Further, the RBI said loans and advances sanctioned to senior officers of NBFCs should be reported to the board. “No senior officer or any committee comprising a senior officer as member, should, while exercising powers of sanction of any credit facility, sanction any credit facility to a relative of that senior officer. Such a facility should be sanctioned by the next higher sanctioning authority under the delegation of powers,” the RBI said in a notification.

While appraising loan proposals involving real estate, NBFCs should ensure that the borrowers have obtained prior permission from the government, local government or other statutory authorities for the project, wherever required, it said. To ensure that the loan approval process is not hampered on account of this, while the proposals may be sanctioned in normal course, the disbursements should be made only after the borrower has obtained requisite clearances from the government and other statutory authorities, the RBI said.

Unless sanctioned by the board of directors/ Committee of Directors, NBFCs should not grant loans and advances aggregating Rs 5 crore and above to their directors, including the Chairman/ Managing Director or relatives of directors. They should not grant loans to any firm in which any of their directors or their relatives is interested as a partner, manager, employee or guarantor and any company in which any of their directors, or their relatives is interested as a major shareholder, director, manager, employee or guarantor.

NBFCs will have to disclose their exposure to real estate, capital market, intra-group entities, and unhedged foreign currency exposure. They must make adequate related-party disclosures, and provide a summary information on complaints received.