"It is our endeavour to have an optimal level of regulation and supervision so that the NBFC sector is financially resilient and robust," he said
The Reserve Bank of India (RBI) is closely monitoring inter-linkages of non-banking finance companies (NBFCs) with the banking sector, capital market and other financial entities to ensure stability, Governor Shaktikanta Das said on Monday.
"It is our endeavour to have an optimal level of regulation and supervision so that the NBFC sector is financially resilient and robust," he said.
"We will not hesitate to take whatever steps are required to maintain financial stability in the short, medium and the long-term," he said at the annual global banking conference organised by Indian Banks' Association (IBA) and Federation of Indian Chambers of Commerce and Industry (FICCI).
NBFCs with a size of more than Rs 5,000 crore have been advised to appoint a functionally independent chief risk officer with clearly specified role and responsibilities. This is expected to bring in professional risk management to the working of large NBFCs, said Das.
At the same time, the move to bring housing finance companies under the regulatory ambit of RBI is significant, given their asset-liability profiles. Including housing finance companies, the size of the NBFC sector constitutes about 25% of combined balance sheet of scheduled commercial banks.
Das said the central bank will take necessary measures to deal with these challenges. Much progress has been made in maintaining a stable financial system.
"However, as we have seen, the financial landscape is continuously changing, and new challenges are emerging. The RBI is continuously harnessing the regulatory and supervisory framework to better adapt to the evolving scenario," he said.
Das said that despite certain teething problems, the Insolvency and Bankruptcy Code (IBC) is proving to be a game-changer. New norms for resolution of stressed assets framed in June 2019 by the RBI provide incentives for early resolution with discretion to lenders on resolution processes.
"The objective is to ring-fence future build-ups of non-performing asset (NPA) stress and protect the banking sector. The recent amendments to the IBC should also be able to facilitate faster resolution of stressed assets," he said.
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