NBFCs on converting to Banks urge RBI to relax the compliance rules

Non-bank financial companies are demanding that the Reserve Bank of India reduce its compliance with the booking rates, the priority sector, and the disclosure of sectors during the transformation of the bank.

Also, through the Finance Industry Development Council (FIDC), they have asked the regulator to continue with the government, the issue of tax neutrality in restructuring existing businesses (NBFCs) to become a bank under the framework of an unemployed company.

FIDC submitted its comments to the RBI on the recommendations made by the RBI’s Internal Working Group regarding the ownership guidelines and business framework of private banks.

Speaking of the minimum size to apply, FIDC said the RBI should consider canceling the process, which requires the applicant group to have a combined asset of $ 50 million in joint assets within the group. Businesses applying for a banking license may not have enough assets and the group may have two separate entities such as a real estate finance company and the NBFC. It is possible for a group to have two separate NBFCs and collectively, these may qualify for a banking license. In addition, the converted business should be given time to replace existing debt with CASA and a fixed amount to fund its existing asset base.

Since the existing NBFCs are getting converted into the banks, the existing assets of these NBFCs will now form part of the assets of the new proposed bank. Therefore, the use of reserve ratios (such as the Cash Reserve Ratio) in the entire bank account will be a burden on the new business. The last letter of the NBFC will be given the opportunity to not pay for compliance requirements under bank rules or sufficient time may be given to achieve the intended objectives, in addition to FIDC. this extended time will help them replace the existing asset base properly.


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