Microfinance Focus, August 29, 2011: RBI’s Working Group on the Issues and Concerns in the NBFC Sector have suggested that NBFCs with assets of Rs. 1000 crore and above should be inspected comprehensively on an annual basis with an annual stress test carried out to ascertain their vulnerability.

The Working group recommends that any transfer of shareholding, direct or indirect, of 25 per cent and above, change in control, merger or acquisition of any registered NBFC should have prior approval of the Reserve Bank.

The Reserve Bank of India today released the Report of the Working Group on the Issues and Concerns in the NBFC (Non-Banking Financial Company) Sector, chaired by Ms. Usha Thorat.

The report proposes that disclosure for NBFCs with assets over Rs 100 crore may include provision coverage ratio, liquidity ratio, asset liability profile, extent of financing of parent company products, movement of non-performing assets (NPAs), off-balance sheet exposures, structured products and securitisations/assignments.

Moreover, it recommends liquidity ratio to be introduced for all registered NBFCs such that cash, bank balances and holdings of government securities fully cover any gaps between cumulative outflows and cumulative inflows for the first 30 days.

NBFCs may be given the benefit under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.