The Reserve Bank of India (“RBI”) has amended the Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023 (“Master Direction”).

The present amendment majorly incorporates separate circulars (issued by RBI recently) in the Master Direction.

Key Takeaways:

1. BFCs-BL have to put in place an internal Board approved policy for credit/investment concentration limits for both single borrower/party and single group of  borrowers/ parties. Computation of exposure shall be on similar lines as that for NBFC-ML.
2. The NBFCs have to review their extant sectoral exposure limits for consumer credit and put in place, if not already there, Board approved limits in respect of various sub-segments under consumer credit as may be considered necessary by the Boards as part of prudent risk management. In particular, limits have to be prescribed for all unsecured consumer credit exposures. The limits so fixed have to be strictly adhered to and monitored on an ongoing basis by the Risk Management Committee.
3. All top-up loans extended by NBFCs against movable assets which are inherently depreciating in nature, such as vehicles, have to be treated as unsecured loans for credit appraisal, prudential limits and exposure purposes.
4. Pursuant to RBI Circular dated 19^th December, 2023, the requirement of investments in Alternative Investment Funds (AIFs) has been provided. These requirements have been incorporated in the Master Direction through the present amendment.
5. Penal charges in loan accounts: NBFCs may carry out appropriate revisions in their policy framework and ensure implementation of the instructions in respect of all the fresh loans availed/ renewed from the effective date. In the case of existing loans, the switchover to new penal charges regime shall be ensured on next review or renewal date19 falling on or after April 01, 2024, but not later than June 30, 2024
6. The requirement to obtain prior approval from RBI for issuing co-branded credit cards in collaboration with SCBs has been done away with.

Please refer to the updated version of the Master Direction hyperlinked below for a detailed read.

Source: Reserve Bank of India

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