{"id":3846,"date":"2019-03-07T11:30:43","date_gmt":"2019-03-07T06:00:43","guid":{"rendered":"https:\/\/swaritadvisors.com\/learning\/?p=3846"},"modified":"2020-12-03T14:24:18","modified_gmt":"2020-12-03T08:54:18","slug":"nbfcs-new-governance-exposure-code","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/learning\/nbfcs-new-governance-exposure-code\/","title":{"rendered":"NBFC&#8217;s New Governance, Exposure Code: RBI to announce the changes soon"},"content":{"rendered":"\n<p class=\"has-drop-cap\">As per the recent reports of Business Standard, the RBI (<strong>Reserve Bank of India<\/strong>) is soon going to draw up a <strong>new law or regulation for Non-Banking Financial Companies (NBFCs)<\/strong>. NBFC&#8217;s new governance envisions the following modifications:<\/p>\n\n\n\n<ul><li>Limits on the NBFC licensing;<\/li><li>Curbs on the businesses of Bank-Led units;<\/li><li>Parity\/Equality in the CEO remuneration package as compared to that of the salaries of CEOs in private banks; and<\/li><li>A gradual shift to the RBS (Risk-Based Supervision) system.<\/li><\/ul>\n\n\n\n<p>Since the RBI hasn&#8217;t announced anything right now, the actuality of the news couldn&#8217;t be justified until RBI really announces something. Right now, it&#8217;s just an assumption or better we can say a proposal. Here&#8217;s our take on the <strong>new updates on NBFCs new governance<\/strong>&#8211;<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a2868046ff97\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a2868046ff97\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/learning\/nbfcs-new-governance-exposure-code\/#NBFCs_new_governance\" title=\"NBFCs new governance\">NBFCs new governance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/learning\/nbfcs-new-governance-exposure-code\/#Curbs_on_the_NBFC_licensing\" title=\"Curbs on the NBFC licensing\">Curbs on the NBFC licensing<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/learning\/nbfcs-new-governance-exposure-code\/#Limits_on_the_businesses_of_Bank-Led_units\" title=\"Limits on the businesses of Bank-Led units\">Limits on the businesses of Bank-Led units<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/learning\/nbfcs-new-governance-exposure-code\/#Parity_or_Equality_in_the_CEO_remuneration_package\" title=\"Parity or Equality in the CEO remuneration package\">Parity or Equality in the CEO remuneration package<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/learning\/nbfcs-new-governance-exposure-code\/#A_gradual_shift_to_the_RBS_Risk-Based_Supervision_system\" title=\"A gradual shift to the RBS (Risk-Based Supervision) system\">A gradual shift to the RBS (Risk-Based Supervision) system<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/learning\/nbfcs-new-governance-exposure-code\/#Our_take\" title=\"Our take\">Our take<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"NBFCs_new_governance\"><\/span><strong>NBFCs new governance<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>If we consider the <strong>proposed code<\/strong>, we can infer two things. Firstly, the RBI is going to make some stringent <strong>rules for NBFC licensing<\/strong> and businesses of bank-led units. Secondly, the <strong>Reserve Bank of India<\/strong> <a href=\"https:\/\/www.rbi.org.in\/\">[1]<\/a>  will also give exposure to <strong>NBFCs in terms<\/strong> of the CEO remuneration package.<\/p>\n\n\n\n<p>Hence, we can say that NBFCs new governance will affect the applicants of NBFCs in both ways. One side it is limiting a few things while, on other hands, it&#8217;s also providing exposure. Although nothing has been confirmed by now since Shaktikanta Das, the Governor of RBI is busy with departmental presentations. However, once the RBI rolls out the measures, NBFCs is going to experience a huge change in the licensing.<\/p>\n\n\n\n<p><br><em>Let&#8217;s discuss the upcoming changes by the RBI in detail.<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Curbs_on_the_NBFC_licensing\"><\/span><strong>Curbs on the NBFC licensing<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>NBFC licensing procedure has never been easy. The documentation process is quite tough. Although the process of <strong><a href=\"https:\/\/swaritadvisors.com\/nbfc-registration\" class=\"text-primary\">obtaining an NBFC license<\/a><\/strong> is provided on the <strong>official website of RBI<\/strong> and many others, you will always require a professional due to its critical rules.<\/p>\n\n\n\n<p>Now, it&#8217;s a matter of concern. Since there will be curbs on the NBFC license procedure, therefore, obtaining NBFC registration will be even harder now. Rest we can just assume until RBI announces something in favour.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Limits_on_the_businesses_of_Bank-Led_units\"><\/span><strong>Limits on the businesses of Bank-Led units<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Before we discuss this, it&#8217;s important to know what businesses of Bank-led units are actually. Generally, businesses of bank-led units refer to businesses carried out by the banks in which they invest in the stock market, for instance, ICICI Prudential, Focus 4, several mutual funds scheme, etc.<\/p>\n\n\n\n<p>Now, our assumption on this is that RBI could issue some <strong>codes for banks<\/strong> on carrying out activities as described above. It could come up with certain criteria which banks need to fulfil, only then they would be able to invest money in <strong>various stock markets<\/strong>.<\/p>\n\n\n\n<div class=\"read\"><p><b>Read, Also:<\/b> <mark><a href=\"https:\/\/swaritadvisors.com\/learning\/how-to-takeover-nbfc\/\">How to Takeover NBFC<\/a><\/mark>.<\/p><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Parity_or_Equality_in_the_CEO_remuneration_package\"><\/span><strong>Parity or Equality in the CEO remuneration package<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>It is believed that, in the upcoming NBFCs&#8217; new governance, the salaries of CEOs of both, that of NBFCs and private banks will be compared and brought close to each other.<\/p>\n\n\n\n<p>While looking at the current situation, you will find that the salaries of the CEO of private banks and that of NBFCs have quite a huge difference. Private banks are paying more than that of NBFCs.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"A_gradual_shift_to_the_RBS_Risk-Based_Supervision_system\"><\/span><strong>A gradual shift to the RBS (Risk-Based Supervision) system<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><a href=\"https:\/\/swaritadvisors.com\/nbfc-registration\" target=\"_blank\" rel=\"noopener noreferrer\"><img decoding=\"async\" src=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2019\/03\/Nbfc-registration.jpg\" alt=\"NBFC Registration in India\" class=\"wp-image-4036\"\/><\/a><\/figure><\/div>\n\n\n\n<p><strong>Risk-Based Supervision (RBS) system<\/strong> is a formally structured and comprehensive system that evaluates the <strong>risks of the financial institutions<\/strong> while enhancing the priority of the resolution of those risks. As per the reports, there would a gradual shift to the <strong>RBS system<\/strong>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Our_take\"><\/span>Our take<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>We assume that the forthcoming NBFCs&#8217; new governance would be pretty strategic. Since there would be equality in the salaries of NBFC&#8217;s CEO with that of the private banks, the condition of NBFC will surely improve. Rest we can wait until RBI announces something. Therefore, be updated with us, <a class=\"text-primary\" href=\"https:\/\/swaritadvisors.com\/\"><strong>subscribe to Swarit Advisors<\/strong><\/a>.<\/p>\n\n\n\n<div class=\"read\"><p><b>Also, Read:<\/b> <mark><a href=\"https:\/\/enterslice.com\/learning\/advantages-and-disadvantages-of-using-insurance-brokers\/\">Advantages and Disadvantages of using Insurance Brokers<\/a><\/mark>.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>As per the recent reports of Business Standard, the RBI (Reserve Bank of India) is soon going to draw up a new law or regulation for Non-Banking Financial Companies (NBFCs). NBFC&#8217;s new governance envisions the following modifications: Limits on the NBFC licensing; Curbs on the businesses of Bank-Led units; Parity\/Equality in the CEO remuneration package [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":3847,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[89,1],"tags":[432],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/3846"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/comments?post=3846"}],"version-history":[{"count":16,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/3846\/revisions"}],"predecessor-version":[{"id":17337,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/3846\/revisions\/17337"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media\/3847"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media?parent=3846"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/categories?post=3846"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/tags?post=3846"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}