InvestorQ : Is it true that the RBI wants more of the large NBFCs to convert into banks?
Sam Eswaran made post

Is it true that the RBI wants more of the large NBFCs to convert into banks?

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Moii Chavate answered.
1 week ago
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As part of the recommendations made by the Independent Working Group appointed by the RBI, major changes have been proposed. RBI has been quite busy in the last few months with Operation Twist and the LVB near-default as well as the Yes Bank case some months ago. Here are some far reaching changes suggested.

One important point in the recommendations is about converting NBFCs to banks once they achieve a certain size and scale. The suggestion is to convert any large profit making NBFC with assets of over Rs.50,000 crore into a full-fledged bank. This will be restricted in the beginning to only NBFCs with 10-year pedigree and 3 years of profits.

This will ensure same level of central bank regulation for NBFCs as the scheduled banks to reduce systemic risks. The RBI has a point here. It has not been comfortable with NBFCs managing billions and commanding big market values but not being regulated on capital adequacy, transparency as well as on asset classification norms. That could change.

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