Stricter Regulations for Shadow Banks


Stricter Regulations for Shadow Banks

The Reserve Bank of India (RBI) is likely to propose stricter regulatory norms for shadow banks in order to strengthen solvency and sustainability of a sector that has been showing signs of stress in recent years.

An official said, “As a security, to ensure sustainability and also to ensure liquidity for NBFCs, SLR and other steps, like CRR are being contemplated,”

The RBI is expected to set out its proposals in a discussion paper next week and recommend that bigger Non-Banking Finance Companies (NBFCs), or shadow banks, maintain a Statutory Liquidity Ratio (SLR).

However, currently, banks are mandated to maintain SLR or the minimum percentage of deposits that they must hold in the form of liquid cash, gold or government securities at 18 percent.

The RBI could also suggest large NBFCs be required maintain a cash reserve ratio (CRR) which currently stands at 3%, below the usual 4% level, due to the ongoing pandemic and will be reversed after 31st March 2021.

“Cost of compliance to rules and regulations should be perceived as an investment as any inadequacy in this regard will prove to be detrimental,” RBI Governor Shaktikanta Das said in a speech recently referring to increased regulation in recent years for banks and shadow banks.

Source: – RBI likely to propose stricter regulations for shadow banks: Report

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