SME Times is powered by   
Search News
Just in:   • Equity indices break two-day losing streak on value buying  • IMF urges Sri Lanka to tighten monetary policy  • Global semiconductor sales to reach $676 bn this year: Gartner  • Tinna Rubber hits upper circuit, investors accumulate 900% returns in year  • Availability of jobs in Japan improves for 1st time in 3 yrs 
Last updated: 19 Dec, 2021  

Rupee.9.Thmb.jpg NBFC PCA to bring parity between banks, non-banks: Ind-Ra

Rupee.9.jpg
   Top Stories
» Net direct tax collection reaches highest-ever figure in FY 22
» Musk has to manufacture here to sell Tesla cars in India: Gadkari
» Round tripping of industrial inputs by large players unfavourable to local value chains
» Sitharaman engages investors in Silicon Valley
» Modi hails India's success in achieving target of $400 billion of exports
SME Times News Bureau | 19 Dec, 2021
The prompt corrective action (PCA) framework for non-banking financial companies (NBFCs) will bring a further parity in terms of the regulations between banks and non-banks, said India Ratings and Research (Ind-Ra).

Accordingly, the ratings agency cited that the trend will be supported on the back of increased size and scale of NBFCs and interconnectedness with banks, along with the scale-based regulation implemented in October 2021 and the alignment of asset quality classifications implemented in November 2021.

Recently, the Reserve Bank of India introduced the PCA framework for NBFCs and it will come into effect from October 1, 2022, based on the financial position of NBFCs on or after March 31, 2022.

"It also establishes a regulatory course of action in an event of a breach of certain parameters, thus acting as an early warning signal."

"In case of any breach, the NBFCa¿s performance will be measured over four consecutive quarters on risk threshold parameters to declassify the NBFC placed under PCA."

As per Ind-Ra, NBFCs breaching any of the risk threshold have time to course correct till March 2022 as the guidelines will be based on year-end numbers.

"NBFCs with net non-performing assets of 6 per cent and higher may have to make higher provisions or sell assets to asset reconstruction companies during 2HFY22 to bring in the ratio outside the threshold, in line with the guidance."

"This may impact profitability and capital buffers."

As of now, the agency said most of the large NBFCs are comfortably poised to comply with the regulations.

"Many NBFCs have raised capital before and during pandemic, leading to an improvement in their capital buffers, and carried excess expected credit loss provisions to navigate the pandemic impact on asset quality."

"However, any increase in the asset quality challenges in form of slippage from the restructured book and book benefitted through 'Emergency Credit Linked Guarantee Schemes' will led to NBFCs turning cautious in terms of increasing provisions to maintain the risk threshold within the permitted limits on the asset quality side."

According to Ind-Ra, this PCA framework will bring greater clarity in terms of the regulator's approach on NBFCs breaching threshold limits on capital buffers or facing heightened credit risk.
 
Print the Page
Add to Favorite
 
Share this on :
 

Please comment on this story:
 
Subject :
Message:
(Maximum 1500 characters)  Characters left 1500
Your name:
 

 
  Customs Exchange Rates
Currency Import Export
US Dollar
66.20
64.50
UK Pound
87.50
84.65
Euro
78.25
75.65
Japanese Yen 58.85 56.85
As on 27 Apr, 2022
  Daily Poll
COVID-19 has directly affected your business
 Yes
 No
 Can't say
  Commented Stories
 
 
About Us  |   Advertise with Us  
  Useful Links  |   Terms and Conditions  |   Disclaimer  |   Contact Us  
Follow Us : Facebook Twitter