RBI issues guidelines for NBFCs to open Branches in India, Understand role of NOF in this
The Reserve Bank of India (RBI) has issued guidelines for NBFCs to open branches in the country. As the latest RBI guidelines released today i.e. 15 April, if the NOF is up to ₹ 50 crore or NBFC has a credit rating below AA then it may open a branch or appoint agents within the State where its registered office is situated.
If the NOF of NBFC is more than ₹ 50 crore and its credit rating is AA or above, then it may open a branch or appoint agents anywhere in India.
What is NOF?
Net Owned Funds (NOF) shows the actual capital available with a company. Only those NBFCs are granted registration by the RBI that have a minimum NOF of ₹10 crore and an NBFC must have NOF of more than ₹50 crore if it wants to open branches anywhere in India.
➡️ NBFC Loan EMI Calculator: Calculate EMI Easily
Why RBI changed the rule?
This new rule means that the stronger NBFCs can open branches anywhere in India. Recently, around 200 NBFCs have closed in India. Experts say that the RBI should be more flexible in controlling NBFCs otherwise, NBFCs will not be successful in India. This new rule aims to provide more freedom to stronger NBFCs.
NBFCs cannot accept demand deposits. NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation (DICGC) is not available to depositors of deposit taking NBFCs. These are some of the important reasons of failure of NBFCs in India, as per experts. It’s expected that RBI may relax more rules for NBFCs in future.
➡️ NBFC Loan EMI Calculator: Calculate EMI Easily
