RBI lists rules for provisioning by NBFCs on advances to hsg, realty, SME

Rules apply to 'upper layer' of finance firms specifically identified by the central bank for enhanced regulatory requirements.

The Reserve Bank of India (RBI) on Monday said that non-banking financial companies (NBFCs) in the upper regulatory layer will have to maintain provisions for standard advances based on category of assets like SME, real estate, and housing loans, including those given at teaser rates. This is seen as a step to prescribe bank-like regulatory norms for finance companies.

The individual housing loans and loans to small and micro enterprises (SMEs) will attract provision of 0.25 per cent. NBFCs will have to maintain 2 per cent provision for housing loans extended at a teaser rate. This provision will decrease to 0.40 per cent one year from the date on which the rates were raised.

NBFCs would have to keep a 0.75 per cent provision for advances to commercial real estate – residential housing (CRE - RH).  Other real estate loans would carry slightly higher provisions of 1 per cent.

The loans to medium-size enterprises and advances not included in any of other the categories would attract a 0.40 per cent provision.

'NBFC - Upper Layer' consists of finance firms that are specifically identified by the RBI as warranting enhanced regulatory requirements. The top ten eligible NBFCs in terms of their asset size shall always reside in the upper layer, irrespective of any other factor.

The central bank said that current credit exposures due to permitted derivative transactions shall also attract provisioning requirements as applicable to the loan assets in the 'standard' category.

The RBI said NBFCs with net worth of Rs 250 crore and above would be required to comply with Indian Accounting Standards (Ind AS) to prepare financial statements. They shall continue to hold impairment allowances as required under Ind AS. These provisions will be included in the computation of the prudential floor. However, they shall not be considered for calculating net non-performing assets (NPAs), the RBI added.