What changed
RBI increased the minimum Net Owned Fund (NOF) requirement to Rs 200 lakh for all deposit-taking NBFCs, effective from June 17, 2008. Existing NBFCs with NOF between Rs 25 lakh and Rs 200 lakh must freeze current deposit levels and reduce public deposits to either 1.5 times NOF (for AFCs with investment grade rating and 12% CRAR) or equal to NOF (for others) by March 31, 2009.
What it means for you
This move strengthens the financial stability of deposit-taking NBFCs by ensuring higher capital adequacy. NBFCs with lower NOF face tighter deposit caps, potentially limiting their growth and requiring capital infusion or business restructuring.
What you must do
- Verify your NBFC's current NOF and ensure it meets the Rs 200 lakh minimum; if below, freeze deposits immediately.
- Calculate revised public deposit ceilings based on your NBFC category (AFC, LC, IC) and compliance with CRAR and credit rating requirements.
- Submit a statutory auditor's certificate certifying NOF once Rs 200 lakh is achieved.
- Apply to RBI for case-by-case dispensation if unable to meet the March 31, 2009 deadline.
- Monitor deposit levels closely to avoid breaching the new caps and prepare for potential capital augmentation.
Who it affects
All deposit-taking NBFCs, Asset Finance Companies (AFCs), Loan Companies (LCs), Investment Companies (ICs), NBFCs with NOF below Rs 200 lakh
What is the new minimum NOF for deposit-taking NBFCs?
The minimum Net Owned Fund (NOF) is now Rs 200 lakh for all deposit-taking NBFCs, as per RBI notification dated June 17, 2008.
What happens if my NBFC has NOF below Rs 200 lakh?
If your NBFC has NOF between Rs 25 lakh and Rs 200 lakh and is eligible to accept public deposits, you must freeze deposits at current levels and reduce public deposits to the revised ceiling (1.5 times NOF for eligible AFCs, or equal to NOF for others) by March 31, 2009. Failure may require applying to RBI for dispensation.
Are there any exceptions for AFCs with good credit ratings?
Yes, AFCs with minimum investment grade credit rating and CRAR of 12% and having NOF more than Rs 25 lakh but less than Rs 200 lakh can accept public deposits up to 1.5 times their NOF, while other NBFCs are capped at equal to NOF.