The Reserve Bank of India (RBI) released a Discussion Paper on Revised Regulatory Framework for NBFCs- A Scale-Based Approach (henceforth referred to as the discussion paper) in January 2021 for public comments. The discussion paper provides a rich background to the evolution of RBI’s approach to regulating private non-banking corporate entities and proposes a scale-based approach to regulating Non-Banking Financial Companies (NBFCs). However, it stops short of laying out the exact role that RBI envisages NBFCs play in the financial ecosystem and using that articulation to arrive at a conclusion on whether they need to be regulated and what purposes such regulation is meant to serve. It also does not comprehensively consider or lay out its vision for a comprehensive supervisory approach that can be delinked in part from the regulatory approach it wishes to adopt. In this blog post, we share our responses submitted to the RBI to the questions posed in the discussion paper, and in doing so, we attempt to provide our thoughts on these important gaps and issues.
The full response is available here.