NBFCs may shed competitive edge as SEBI tightens rules to raise capital

Lesser regulatory intervention and flush of capital helped non-bank lenders outpace industry growth in the past

The Reserve Bank of India’s (RBI’s) observation that 8-13 per cent of non-banking finance companies (NBFCs) may not be able to comply with the tight capital adequacy framework let the cat out of the bag as the perception so far was that stringent norms shouldn’t affect their business. That assumption warrants some re-thinking given that working conditions are getting tight on all parameters, the most important being sourcing of capital.

Market regulator the Securities and Exchange Board of India (Sebi) reducing the sectoral exposure of mutual funds to NBFCs, including housing finance companies, from 40 per cent to 30 per cent,