What changed
RBI clarified that the prudential norms for non-deposit taking NBFCs, specifically the concentration limits on credit/investment to a single borrower or group, apply to all standalone Primary Dealers. Additionally, investments in debentures are now to be treated as credit for the purpose of these limits.
What it means for you
Standalone Primary Dealers must now adhere to the same concentration norms as NBFCs, capping exposure to single or group borrowers. Treating debenture investments as credit tightens the effective limit, requiring PDs to reassess their portfolios. Those currently exceeding limits have a three-month window to adjust.
What you must do
- Review your current credit and investment exposures against the single/group borrower limits prescribed for NBFCs.
- Reclassify debenture investments as credit for compliance calculations.
- If exposures exceed limits, prepare a reduction plan to comply within three months from the circular date.
- Update internal risk management and reporting systems to reflect the new classification.
Who it affects
Standalone Primary Dealers, NBFCs (non-deposit taking) as reference entities
What is the key change for Primary Dealers?
RBI has explicitly stated that the prudential norms on credit/investment concentration limits, originally for NBFCs, now apply to all standalone Primary Dealers. This includes treating debenture investments as credit.
How long do PDs have to comply if they exceed limits?
Primary Dealers with investment concentration above the prescribed norms must bring them down to the required level within three months from the date of the circular.
Are debentures treated as credit or investment under these norms?
For the purpose of the concentration limits, investments in debentures are to be treated as credit, not investment.