+
RBI to introduce new norms on directors loans, NPA divergence
Real Estate

RBI to introduce new norms on directors loans, NPA divergence

The Reserve Bank of India’s (RBI) April 19 move to introduce norms on directors’ loans along with non-performing asset (NPA) divergence reporting will raise the corporate governance standards of non-banking finance companies (NBFCs) and lead to investor confidence in the NBFC sector.

NBFCs classified under the upper and middle layer will be required to tighten their credit policy on loans to directors and entities in which their shareholders, directors, or other stakeholders have interest, Investment Information, and Credit Rating Agency of India Limited (ICRA) said in a note dated April 21. Unless approved by the Board, NBFCs shall not grant loans and advances aggregating Rs 5 crore to these investors and officials, as per the new norms.

Similarly, all loans less than Rs 5 crore extended to directors and other senior employees will also have to be reported to the Board and sufficiently disclosed in annual financial statements.

Director of financial institutions at India Ratings & Research, Pankaj Naik, told the media that for the overall NBFC sector, these are structural changes that would boost the governance framework providing healthy growth for the sector.

The RBI has also instructed NBFCs in the upper and middle layer categories to make divergence reporting in case the additional provisioning requirements assessed by RBI or National Housing Bank (NHB) surpass 5% of the reported profits before tax and impairment loss on financial instruments for the assessed period.

NBFCs will also have to make divergence reporting if the additional gross NPAs identified by the regulator surpass 5% of the reported gross NPAs for the period.

These limits are tighter than those of banks where the thresholds are 10% and 15%, respectively, on additional provision and additional gross non-performing assets (GNPA) assessed by the RBI for the reference period, said A M Karthik, vice president & sector head of the financial sector ratings at ICRA.

He said that the grown disclosure requirements are positive from a transparency perspective and can help enhance lender and investor confidence.

Image Source

Also read: New rules of RBI for microlenders to help widen profits: Crisil

The Reserve Bank of India’s (RBI) April 19 move to introduce norms on directors’ loans along with non-performing asset (NPA) divergence reporting will raise the corporate governance standards of non-banking finance companies (NBFCs) and lead to investor confidence in the NBFC sector. NBFCs classified under the upper and middle layer will be required to tighten their credit policy on loans to directors and entities in which their shareholders, directors, or other stakeholders have interest, Investment Information, and Credit Rating Agency of India Limited (ICRA) said in a note dated April 21. Unless approved by the Board, NBFCs shall not grant loans and advances aggregating Rs 5 crore to these investors and officials, as per the new norms. Similarly, all loans less than Rs 5 crore extended to directors and other senior employees will also have to be reported to the Board and sufficiently disclosed in annual financial statements. Director of financial institutions at India Ratings & Research, Pankaj Naik, told the media that for the overall NBFC sector, these are structural changes that would boost the governance framework providing healthy growth for the sector. The RBI has also instructed NBFCs in the upper and middle layer categories to make divergence reporting in case the additional provisioning requirements assessed by RBI or National Housing Bank (NHB) surpass 5% of the reported profits before tax and impairment loss on financial instruments for the assessed period. NBFCs will also have to make divergence reporting if the additional gross NPAs identified by the regulator surpass 5% of the reported gross NPAs for the period. These limits are tighter than those of banks where the thresholds are 10% and 15%, respectively, on additional provision and additional gross non-performing assets (GNPA) assessed by the RBI for the reference period, said A M Karthik, vice president & sector head of the financial sector ratings at ICRA. He said that the grown disclosure requirements are positive from a transparency perspective and can help enhance lender and investor confidence. Image Source Also read: New rules of RBI for microlenders to help widen profits: Crisil

Next Story
Infrastructure Urban

Naidu Seeks Rs 563 Crore For AP Sports Infrastructure

Andhra Pradesh Chief Minister N Chandrababu Naidu has sought Rs 563 crore from the Centre to boost sports infrastructure in the state, including Rs 538 crore for stadium development and Rs 25 crore to host the Khelo India Martial Arts Games 2025. Naidu made the request during a meeting with Union Youth Services and Sports Minister Mansukh Mandaviya in New Delhi on Wednesday.The CM urged early completion of Khelo India infrastructure projects in Tirupati, Rajahmundry, Kakinada, and Narasaraopeta, and called for an international-standard badminton training centre and a national aquatic sports hu..

Next Story
Infrastructure Transport

Tough Bidding Norms Slow NHAI Road Project Awards

Stringent bidding rules imposed by the Ministry of Road Transport & Highways (MoRTH) have led to a slowdown in project awards by the National Highways Authority of India (NHAI), despite a robust Rs 3.5 trillion pipeline. According to an HDFC Securities report, the shift to more cautious developer models now favours firms with strong balance sheets, as tighter qualification norms limit aggressive bidders.The revised norms mandate additional performance security, targeting the exclusion of players that previously submitted low bids—often 25 to 40 per cent below NHAI cost estimates—raisin..

Next Story
Infrastructure Transport

Mumbai Gets Coastal Nod for Next Promenade Phase

As Mumbai prepares to open two major sections of its expansive seafront promenade this week, the city’s civic authority has secured a key coastal clearance to advance further construction. The Maharashtra Coastal Zone Management Authority (MCZMA) has approved the commencement of work on the segment between Haji Ali and Baroda Palace, with tendering expected soon after project cost assessments.The promenade, stretching 7.5 km in length and 20 metres wide, is being designed as a flagship open space for walkers, joggers, and cyclists. Two critical stretches—2.75 km from Tata Garden to Haji Al..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Talk to us?