This website is only for informational purposes. Visitors are requested to note that the information is intended to be correct, complete, and up-to-date. Juris Corp does not warrant that the information contained on this website is accurate or complete, and disclaims any and all liability to any person for any loss or damage caused by errors or omissions, whether such errors or omissions result from negligence, accident or any other cause.

This website is not intended to be a source of advertising or solicitation. The reader must not consider the information contained herein to be an invitation for a lawyer-client relationship, must not rely on information provided herein and must seek independent advice. Transmission, receipt or use of any information on this website does not constitute or create a lawyer-client relationship. No recipients of content from this website should act or refrain from acting, based upon any or all of the contents of this website.

Furthermore, Juris Corp does not wish to represent anyone desiring representation based solely upon viewing this web site. Finally, the reader is warned that the use of e-mail for confidential or sensitive information is susceptible to inherent risks of lack of confidentiality associated with sending e-mail over the internet.

By clicking on the "I understand and agree" button below, the user acknowledges that:

  • This website is not a mode of advertisement, promotion, personal communication, or solicitation of any sort whatsoever and the user wishes to gain information about us for his/her own reasons;
  • Entering into this website does not establish a lawyer-client relationship.

We are not liable for any consequence of any action taken by the user relying on information provided under this website. In cases where the user has any legal issues, he/she must seek independent legal advice.

JC - Legal Updates - Updated norms on Bank Finance to NBFCs

Legal Updates

07 Jan 2022

Updated norms on Bank Finance to NBFCs

RBI has issued an updated master circular on bank financing to Non-Banking Financial Companies (“NBFCs”) consolidating regulations regarding financing of NBFCs by banks. This master circular is replacing the master circular issued by the RBI in 2015 (“2015 Master Circular”) on the captioned.

Some key changes are as follows:

1)   It has been clarified that Housing Finance Companies (“HFCs”) are covered under the ambit of this circular.

2)   It has been clarified that banks may take their credit decision based on usual factors in relation to Micro Finance Companies, Securitisation and Reconstruction Companies, Mutual Benefit Companies and Mortgage Guarantee Companies.

3)   In line with NBFC-Factors Directions, the minimum limit for receivable purchased/financed or income generated from factoring activity of factoring companies has been reduced from 75% to 50% for being eligible to receive bank finance.

4)   Banks are permitted to provide partial credit enhancement to bonds issued by Systemically Important Non-Deposit taking NBFCs and HFCs.

5)   Banks’ exposures to a single NBFC (excluding gold loan companies) has been increased to 20% of Tier-I capital from 10-15% of capital funds as in the 2015 Master Circular. Further, banks’ exposure to group of connected NBFCs or group of connected counterparties having NBFCs in the group, has been limited to 25% of Tier-I capital.

Reserve Bank of India - Notifications (rbi.org.in)

For any further information, please contact Mr. Ankit Sinha (ankit.sinha@jclex.com), Mr. Saurabh Sharma (saurabh.sharma@jclex.com), Ms. Rupul Jhanjee (rupul.jhanjee@jclex.com) or Ms. Teza Jose (teza.jose@jclex.com).