NBFCs urge RBI to raise ECB limit, ease loan recovery and eKYC rules

NBFCs urge RBI to raise the ECB limit, ease SARFAESI norms for small loans, expedite eKYC approvals, and relax asset classification rules for alternative vehicle financing

Non-banking finance companies (NBFCs) have urged the Reserve Bank of India (RBI) to increase the external commercial borrowing (ECB) limit in their first meeting with RBI Governor Sanjay Malhotra, according to a report by The Economic Times.

 

Currently, NBFCs can raise up to $750 million through ECBs. Industry representatives argued that a higher limit is necessary to address funding challenges. Additionally, they requested the removal of restrictions on housing finance companies, which can currently use ECB funds only for affordable housing, the news report said.

 

Calls for relaxation in asset classification 

 

NBFCs also sought easier asset classification norms for alternative vehicle financing and more flexibility in utilising the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act for recovering low-value loans. They reiterated their long-standing demand for SARFAESI provisions to apply to loans below Rs 20 lakh, the report mentioned.

 

Concerns raised by micro-finance institutions  

 

Microfinance institutions (MFIs) highlighted the need for a dedicated refinance facility, similar to the one offered by the National Housing Bank (NHB), to address short-term liquidity mismatches. They also raised concerns regarding qualifying asset criteria and limited access to bank funding for smaller microfinance firms. Malhotra assured that these issues were noted and emphasised the RBI’s commitment to continuous dialogue with industry stakeholders, The Economic Times reported.

 

Regulatory hurdles in Karnataka  

 

NBFCs flagged concerns over a new ordinance in Karnataka that requires MFIs and other lending entities to register with the district's deputy commissioner. The law grants authorities the power to cancel registrations either suo motu or based on complaints. Malhotra assured that the RBI is reviewing the evolving situation.  

 

Risk, regulations and green financing

 

Public sector NBFCs, including Power Finance Corporation (PFC) and Rural Electrification Corporation (REC), pushed for a dedicated green financing policy. Meanwhile, gold loan NBFCs sought a separate non-performing asset (NPA) classification, arguing that gold-backed loans differ from other asset classes, the report said.

 

NBFCs also proposed reduced risk weightage for loans financing alternative fuel vehicles, such as electric vehicles (EVs) and CNG-powered vehicles. They further requested that two-wheeler loans be classified as priority sector lending, even when not linked to agriculture.

 

Additionally, lenders sought expedited approvals for Aadhaar-based electronic know-your-customer (eKYC) processes, which can take years for new NBFCs due to the involvement of multiple regulatory agencies, the news report stated.