Reserve Bank of India (RBI) He said non-banking financial companies (NBFCs) should provide loans to the real estate sector only after obtaining all the necessary approvals for their projects. The RBI clarified that NBFCs will need to get approval of their projects from the government and other regulatory authorities before approving loans. Apart from this, the RBI also said that NBFC should not give loans of Rs 5 crore and above to its directors, including their chairman and managing director or their relatives and related entities. These rules will come into force from October.
What did the RBI instruct?
In a notification issued on revised regulatory restrictions on NBFCs for lending, the central bank said that for loans of less than Rs 5 crore, these borrowers could be approved by the appropriate authority but the matter would be taken up with the board of directors. To bring
“NBFCs, considering loan applications from the real estate sector, will ensure that the respective borrowers get the necessary approvals from the government / local authorities / other statutory authorities for their projects,” the RBI said. The apex bank said the loan could be sanctioned under normal circumstances but would be disbursed only after the borrower obtains necessary approvals from the government / other statutory bodies regarding his project. This guideline will be implemented from 1 October 2022 and will apply to Intermediate Level (ML) and High Level (UL) NBFCs.
What are basic level NBFCs?
Basic Level (BL) NBFCs are those which do not accept deposits and have Rs. Has assets of less than Rs 1,000 crore. On the other hand, mid-tier non-banking financial companies also do not accept deposits but their asset size is Rs. 1,000 crore or more. At the same time, there is a high level of NBFCs that have been identified by the Reserve Bank to increase regulatory requirements.
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