In exercise of the powers conferred by clause b of sub section 1 of Section 45 IA of the Reserve Bank of India Act

## Report on Reserve Bank of India Notification DOR.CRE.060.CGMMM/2022 **1. Executive Summary:** This report analyzes Reserve Bank of India (RBI) Notification No. DOR.CRE.060.CGMMM/2022, dated March 17, 2022, which amends regulations concerning the Net Owned Fund (NOF) requirements for specific categories of Non-Banking Financial Companies (NBFCs). The core purpose of this amendment is to increase the minimum NOF required for NBFC-Investment and Credit Companies (NBFC-ICCs), NBFC-Micro Finance Institutions (NBFC-MFIs), and NBFC-Factors. A key finding is the establishment of a glide path for existing NBFCs to meet the new NOF requirement. **2. Introduction:** This report provides an overview and analysis of RBI Notification No. DOR.CRE.060.CGMMM/2022. The analysis is based solely on the information contained within the provided text of the notification. The report aims to inform the affected industry (NBFCs) about the changes mandated by this notification. **3. Policy Overview:** This notification constitutes an amendment to existing regulations concerning NBFCs, specifically focusing on their Net Owned Fund (NOF) requirements. * **Core Objective(s):** Based on the text, the core objective is to increase the minimum Net Owned Fund required for specific categories of NBFCs: NBFC-ICCs, NBFC-MFIs, and NBFC-Factors. **4. Background and Rationale:** This notification amends the existing regulation by increasing the minimum NOF requirement for particular types of NBFCs. The likely reason for this amendment is to strengthen the financial health and stability of these NBFCs by ensuring they have a larger capital base. This may be in response to perceived risks or vulnerabilities within these sectors, or as a proactive measure to support their continued growth and stability. **5. Key Provisions / Changes:** This notification introduces specific changes to the NOF requirements for NBFC-ICCs, NBFC-MFIs, and NBFC-Factors. * **Specific Part Changed:** The amendment changes the minimum NOF requirement for the specified NBFC categories. * **New Rule/Provision:** The new rule establishes a minimum NOF of ten crore rupees for NBFC-ICCs, NBFC-MFIs, and NBFC-Factors to commence or continue business from October 01, 2022. * **Difference/Effect of Change:** The original NOF requirement is not stated in the text, however, the notification provides a glide path for existing NBFCs with less than ten crore rupees NOF as of October 22, 2021, implying that the previous requirement was lower. This change mandates that these NBFCs increase their NOF to meet the new threshold of ten crore rupees within a specified timeframe. The glide path allows for a phased increase: * NBFC-ICCs, NBFC-MFIs and NBFC-Factors must achieve an NOF of 5 or 7 crore rupees (depending on type and location) by March 31, 2025. * All affected NBFC types must achieve an NOF of 10 crore rupees by March 31, 2027. **6. Target Audience and Stakeholders:** The direct target audience and stakeholders are: * Non-Banking Financial Companies (NBFCs) * Specifically: * NBFC-Investment and Credit Companies (NBFC-ICCs) * NBFC-Micro Finance Institutions (NBFC-MFIs) * NBFC-Factors * Existing NBFCs of these types with a certificate of registration as of October 22, 2021, and having an NOF of less than ten crore rupees. **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** The Reserve Bank of India (RBI) is the responsible body for implementing and enforcing this notification. The Department of Regulation within the RBI's Central Office is likely involved. * **Timelines/Procedures:** * The new NOF requirement of ten crore rupees is effective from October 01, 2022, for new NBFCs. * Existing NBFCs have a "glide path" to meet the new requirement, with deadlines of March 31, 2025, and March 31, 2027, to reach specified NOF levels. * The text does not specify the exact procedures for demonstrating compliance, but it can be assumed that NBFCs will be required to report their NOF to the RBI periodically. **8. Expected Outcomes / Impact of Changes:** The likely intended outcome of these changes is to: * Strengthen the capital base of NBFC-ICCs, NBFC-MFIs, and NBFC-Factors. * Enhance the stability and resilience of these institutions to withstand economic shocks. * Promote greater confidence in the NBFC sector among investors and the public. * Potentially lead to consolidation within the sector as smaller NBFCs may find it challenging to meet the increased NOF requirement. **9. Conclusion:** RBI Notification No. DOR.CRE.060.CGMMM/2022 represents a significant change in the regulatory landscape for NBFC-ICCs, NBFC-MFIs, and NBFC-Factors. The increase in the minimum NOF requirement underscores the RBI's commitment to ensuring the financial soundness of the NBFC sector. Affected NBFCs need to understand the requirements and adhere to the specified glide path to ensure compliance. The policy will likely result in a stronger, more resilient, and potentially more consolidated NBFC sector.

Key Entities Referenced