look news india
New Delhi: Rating agency Fitch said regulatory measures on non-banking financial companies (NBFCs) may increase near-term trading volatility for some entities. Industry risks can be mitigated by the Reserve Bank's efforts to strengthen corporate governance and risk management.
Regulations in the financial sector are not always interpreted consistently and implementation varies across companies. The sector is growing rapidly but the move could make financial oversight more challenging and contribute to compliance and governance deficiencies, Fitch said in a statement.
A series of enforcement actions on banks and NBFCs over the past two years have increased regulatory risks for the sector. In March, the RBI asked IIFL Finance Ltd to stop new gold-backed loans and related off-balance sheet funding transactions.
RBI had recently said that NBFCs should pay Rs. The existing regulatory limits on disbursement of cash loans below Rs 20,000 should be followed. On these normal cash transactions Rs. Rs 200,000 as compared to the higher limit adopted as the limit by some lenders.
Many NBFCs have historically displayed high risk tolerance, including rapid growth, elevated leverage and low liquidity buffers. Such practices contributed to the failure of NBFCs in 2018-2019. After that, many finance companies took steps to cut short-term funding, raise capital, and reduce risky assets.