RBI notifies Lending Restrictions on NBFCs
In pursuance of the Scale Based Regulatory Framework
-Anita Baid | Vice- President and Aanchal Kaur Nagpal | Assistant Manager
The Scale Based Regulatory Framework, introduced by the Reserve Bank of India (‘RBI’), among several other things, proposed to regulate loans extended by NBFCs to their directors, senior officers and relatives thereof.
In this regard, the RBI has, vide its notification on Loans and Advances – Regulatory Restrictions – NBFCs dated April 19, 2022, issued two sets of regulatory provisions – one for NBFC-UL and NBFC-ML and the other for NBFC-BL (‘Guidelines’).
- NBFC-BL are required to have a board approved policy on grant of loans to directors, senior officers and relatives of directors and to entities where directors or their relatives have major shareholding.
- NBFC-ML and NBFC-UL, on the other hand, have to abide by the restrictions prescribed by RBI, while extending loans to directors, senior officers and their relatives. The said restriction may have an adverse impact on the loans extended by the NBFC to its group companies with common directorship.