Panel to examine regulation of NBFCs

• RBI constituted a working group under the Chairmanship of Usha Thorat, Director, Centre for Advanced Financial Research and Learning (CAFRAL), to examine a range of emerging issues pertaining to regulation of the NBFCs sector.
• The NBFCs sector has undergone a significant transformation in the past few years and has come to be recognised as a systemically important element of the financial system. The recent global financial crisis has also highlighted the regulatory imperatives concerning the non-banking financial sector and the risks arising from regulatory gaps, arbitrage and systemic inter-connectedness. A need was, therefore, felt to reflect on the broad principles that underpin the regulatory architecture for NBFCs keeping in view the economic role and heterogeneity of this sector and the recent international experience, the RBI stated in a press release here.
• While examining a range of emerging issues pertaining to the regulation of the sector, the working group will focus on the definition and classification of NBFCs, addressing regulatory gaps and regulatory arbitrage, maintaining standards of governance in the sector and appropriate approach to NBFC supervision. The scope of examination will, however, be within the current legislative framework.