Mumbai: The top 50 non-banking finance companies (NBFCs) were being monitored closely, said Reserve Bank of India Governor Shaktikanta Das, here on Monday, hinting at the RBI's focus on early detection of risks signs or any contagion effect on the credit system.
"The asset-liability management (ALM) position and other relevant aspects of the top 50 NBFCs are being closely monitored. It covers all NBFCs with asset size above Rs 5,000 crore. The ALM of top 51-100 NBFCs is also being examined by the respective regional offices of the RBI," Das said at the 'Banking landscape in the 21st century' seminar.
The NBFC sector has seen a lot of turmoil, starting with a series of defaults by Infrastructure Leasing & Financial Services (IL&FS), that forced the government to intervene and exposed weaknesses in the sector. Then Dewan Housing Finance Corp also entered a crisis phase making the RBI to keep close vigil.
The RBI was having regualar interaction with statutory auditors, credit rating agencies, credit information firms, mutual funds and banks having large exposures to NBFCs, he said.
"In addition to the four pillars of supervision -- on-site inspection, off-site surveillance, market intelligence and reports of statutory auditors (SAs) -- a fifth pillar of supervision in the form of periodic interaction with stakeholders, including statutory auditors, credit rating agencies, credit information firms, mutual funds and banks having large exposures to NBFCs has been instituted to have a clearer understanding of the emerging risks and developments in the sector," he said.
It would ensure availability of critical information, whenever required, he said.
On the co-operative banks, he said the RBI had developed a robust stress-testing framework for urban cooperative banks (UCBs). It also acts as early warning system for co-operative banks with timely identification of weak banks for appropriate action.
It's a shift from reactive to pro-active supervisory approach, intended to ensure surveillance of UCBs' vulnerabilities. Moreover, as on December 31, 2019, over 90 per cent of these banks are now on the core banking solution, although efforts are required to standardise solutions and have a robust set of internal controls implemented for improved outcomes.
The CAMELS (capital, asset quality, management, earnings, liquidity and systems & control) supervisory rating methodology for UCBs has also been revised. "We have taken steps to bring UCBs under the CRILC reporting framework and issued draft guidelines on exposure norms to mitigate credit concentration risk and enhancement in the priority sector lending targets to further financial inclusion," he said.
To improve governance, the RBI had issued guidelines on formation of the UCB board of management (BOM) with deposit size of Rs 1,000 crore, he said. "To have appropriate regulatory powers in respect of co-operative banks, almost on par with those over banking firms, certain amendments in the Banking Regulation Act, 1949 have been proposed," the RBI Governor said.
The RBI move follows the sanctionining of personal loans by PMC Bank in August by throwing of all rules to the wind. Also, it was over and above the Rs 2,500 crore loan that HDIL had ceased repaying and which the cooperative bank failed to classify as bad loan.