RBI issues circular on consumer credit and bank credit to NBFCs

The Reserve Bank of India (RBI) has announced a series of regulatory and developmental measures.

The Reserve Bank of India (RBI) has announced a series of regulatory and developmental measures. These measures encompass a wide range of areas, including regulation, payment systems, and consumer protection.

One of the key initiatives is the Prudential Framework for Income Recognition, Asset Classification, and Provisioning pertaining to Advances Projects Under Implementation. This initiative is designed to enhance the current regulatory framework that governs project finance and to align instructions across all regulated entities.

Another important initiative is the revision of Credit Concentration Norms – Credit Risk Transfer. The existing guidelines allow exposures to the original counterparty to be offset with certain credit risk transfer instruments for Non-Banking Financial Company – Upper Layer (NBFC-UL). However, the current credit concentration norms for NBFC in the Middle Layer (ML) and Base Layer (BL) do not explicitly envisage any such mechanism. To harmonize these norms among NBFCs, RBI has decided to permit NBFCs in the ML and BL to offset their exposures with eligible credit risk transfer instruments.

In terms of consumer protection, the RBI has decided to increase the monetary ceiling of gold loans that can be granted under the bullet repayment scheme from ₹2.00 lakh to ₹4.00 lakh for Urban Co-operative Banks (UCBs) who have met the overall Priority Sector Lending (PSL) target and sub-targets as on March 31, 2023. These banks will be required to continue to meet the targets and sub-targets thereafter.