What changed
The minimum CRAR for NBFC-ND-SI is raised from 10% to 12% by March 31, 2009, and further to 15% by March 31, 2010. New disclosure norms require balance sheet reporting of CRAR, direct and indirect real estate exposure, and asset-liability maturity patterns from the year ending March 31, 2009. Asset Liability Management (ALM) reporting requirements are introduced for NBFC-ND-SI with asset size of Rs 100 crore or more, with specific reporting and liquidity management guidelines.
What it means for you
Banks lending to or investing in NBFC-ND-SI will see stronger capital buffers, reducing counterparty risk. The higher CRAR and ALM norms aim to curb systemic risk from leveraged borrowing and maturity mismatches. Lenders must reassess credit limits and pricing for NBFC-ND-SI as these entities face tighter regulatory compliance and potential capital constraints.
What you must do
- Review exposure limits to NBFC-ND-SI in light of their phased CRAR increase to 15% by March 2010.
- Update credit risk assessment models to incorporate enhanced disclosure data on real estate exposure and asset-liability maturity.
- Monitor NBFC-ND-SI compliance with ALM reporting requirements to gauge liquidity risk.
- Advise treasury and credit teams on the systemic importance of NBFC-ND-SI under the revised framework.
Who it affects
All non-deposit taking NBFCs with asset size of Rs 100 crore and above (NBFC-ND-SI), Banks with credit exposure to NBFC-ND-SI, Regulatory compliance teams at NBFCs and banks, Risk management departments
What is the new CRAR requirement for NBFC-ND-SI?
NBFC-ND-SI must achieve a minimum CRAR of 12% by March 31, 2009, and 15% by March 31, 2010, up from the earlier 10%.
What additional disclosures are required from NBFC-ND-SI?
From the year ending March 31, 2009, NBFC-ND-SI must disclose in their balance sheet: CRAR, direct and indirect exposure to real estate, and the maturity pattern of assets and liabilities.
Why did RBI introduce these norms?
To address systemic risk from highly leveraged borrowings and reliance on short-term funds by NBFCs, and to align regulation with international developments for systemically important financial entities.