More clarity on shadow banking

New regulations for stressed NBFCs harmonise with those for banks

On Tuesday, the Reserve Bank of India (RBI) outlined a new framework for shadow banking in India that was meant to ensure that non-banking financial companies or NBFCs are subject to stringent supervision when their key financial ratios decline. Essentially, deposit-taking NBFCs and those with systemic impact will now be subject to a prompt corrective action (PCA) framework similar to that for scheduled commercial banks, which will allow various controls to be imposed. These controls will, in a graded manner, prevent NBFCs from taking on more risk and control their promoters’ behaviour. The RBI has previously moved to streamline the