NBFC stocks rally as RBI unveils new banking norms

RBI on Tuesday disallowed credit enhancements in transactions where banks buy loans from NBFCs (Non-Banking Financial Company). The regulator has proposed that banks follow the pass-through certificate (PTC) route instead. Currently, most priority sector portfolio sales by NBFCs to banks are done through the credit enhancement route. "For NBFCs, if the buyouts happen through PTCs rather than assignments, capital requirements will rise Shares of non-banking finance companies (NBFCs) such as Bajaj Financer, Reliance Capital, M&M Financial Services and Srei Infrastructure Finance Ltd posted gains for the second day after the Reserve Bank of India (RBI) released draft guidelines for licensing of new banks in the private sector. The RBI has proposed new regulations for non-banking finance firms (NBFCs), mostly centered on minimizing the regulatory arbitrage opportunities available to NBFCs as compared to banks. One of the major changes proposed by the RBI is to bring the capital adequacy requirements and asset classification and provisioning norms for NBFCs in line with the banks.