RBI will establish a specialized framework for bank and NBFC regulation.

By Abhay Harish Shah, Realty Quarter

In a statement on 21st May 2019, the Reserve Bank of India (RBI) board decided to set up a specialist overseeing and regulatory framework for the RBI with the aim of strengthening the supervision and regulation of commercial banks, urban cooperative banks and non-banking financial companies, the central bank said. The Reserve Bank of India said that it would establish a specific framework for the supervision and regulation of banks and the NBFC within the RBI.

This is important at a time when NBFCs face severe liquidity crashes as a result of the IL&FS crisis. This move is important in the future. At the meeting of the Central Board of the Apex Bank, headed by Governor Shaktikanta Das, a decision was made to establish a specialized supervisory and regulatory framework within RBI. The RBI Central Board held its 576th meeting.

The Board also examined the economic situation in which the central bank is currently working, global and internal challenges and various operating areas. The Board discussed inter alia, the mission statement and the vision statement, as well as the medium-term strategy document. In the context of the growing diversity, complexities and interconnections of the Indian financial sectors, the Board has also reviewed the existing RBI supervision structure, added the central bank. Cases relating to the management of the currency and the functions of RBI banking-for-government were also raised.

Injeti Srinivas (corporate affairs secretary) said, “Some major companies have confronted NBFC’s sector with problems of the credit squeeze, over-leveraging and misadventure”. Further, The NBFC sector is experiencing an imminent crisis. This disaster happened because there is a credit squeeze, extreme concentration, over-leveraging, huge mismatch between assets and liabilities along with some misadventures by some very large entities.