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Banking
Draft
guidelines for NBFCs, Impact to be staggered
·
Event: The Reserve Bank of India
(RBI) has issued draft guidelines based on Usha Thorat committee for NBFCs.
The draft guidelines are largely in line with what was recommended by the
committee and in fact little liberal in case of tier I Capital Adequacy
·
Impact: We do not expect the
guidelines to have material impact on the NBFCs. In fact once the
disclosures improve in line with the guidelines, it should be positive for
the valuations of the NBFCs.
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Tier I capital adequacy requirement
increased: The draft paper further tightens the prudential norms for
NBFC’s, as it increases the minimum tier I capital requirement from
7.5% earlier to 10% now. Since most of the NBFCs have large part of their
total CAR in form of tier I only, so will not have any material impact.
·
NPA recognition and provision norms
tightened inline with banks: NPA classification norms has also been brought
inline with banks as the guidelines proposes to reduces NPA recognition to
120 day/ 90 days in phased manned from 180/360 days now. The standard
provisioning has also been increased to 0.4% from current norm of 0.25%.
The change in asset classification guidelines to impact Mahindra
Finance(1.3% of advances), Shriram Transport (3% of advances) and Gold loan
financing companies (1-3% of advances). However as it will happen in a
phased manner, the impact will be staggered.
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