Need ‘tighter’ norms for NBFCs

New Delhi, November 6

Asserting the need to recalibrate regulations for shadow banking sector, RBI Deputy Governor M Rajeshwar Rao on Friday said NBFCs with significant externalities and which contribute substantially to systemic risks must be identified and subjected to a higher degree of regulation.

“One can also argue that the design of prudential regulatory framework for such NBFCs can be comparable with banks so that beyond a point of criticality to systemic risks, such NBFCs should have incentives either to convert into a commercial bank or scale down their network externalities within the financial system,” he said. This would make the financial sector sound and resilient while allowing a majority of NBFCs to continue under the regulation-light structure, Rao said. — PTI