BANKS CAN INVEST MORE IN NBFCs
The Reserve Bank of India has given more room for banks to lend and to invest in Non-Banking Finance Companies (NBFCs) in its revised draft guidelines. In the earlier draft guidelines released
on November 3, banks were allowed exposure of up to five per cent of their net owned funds in single NBFCs and up to 40 per cent to a group of NBFCs. As per the revised guidelines ceiling has
been increased to 10 per cent for a single borrower; the base has been changed to the banks’ capital funds from their net worth. There is a relaxation because capital funds, which include tier I and tier II capital, constitute a larger base. Net owned funds are capital funds not including banks’ investment in subsidiaries.
on November 3, banks were allowed exposure of up to five per cent of their net owned funds in single NBFCs and up to 40 per cent to a group of NBFCs. As per the revised guidelines ceiling has
been increased to 10 per cent for a single borrower; the base has been changed to the banks’ capital funds from their net worth. There is a relaxation because capital funds, which include tier I and tier II capital, constitute a larger base. Net owned funds are capital funds not including banks’ investment in subsidiaries.
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