deposit taking. out of the remaining 11, 788 non – deposit taking nbfcs, there are many nbfcs who do not access public funds and so are not interlinked. these do not pose much risk to financial stability. hence, a simplified regulatory framework will suit them. 11. today, there are various types of nbfcs and regulation varies depending on the type of nbfcs. this has unnecessarily complicated the structure. as a precursor to let nbfcs undertake any of the permitted activities, than be constrained by the specific segment of registered activity, we thought it fit first to harmonise the regulations among various types of nbfcs so that no regulatory arbitrage will be possible. thus harmonisation with banks has also been warranted for those nbfcs which are in good competition with banks. 12. thus the approach for redesigning the regulation has been “ a lighter regulatory framework on nbfcs other than for those with large asset sizes and deposit accepting, harmonisation of regulation across various types of nbfcs, harmonisation with that of banks to some extent for nbfcs with large asset sizes, and for all deposit accepting nbfcs, creating a level playing field that does not unduly favour or disfavour any institution and to provide adequate time to manage transition ”. let me now explain the changes in more detail. harmonising minimum capital requirement 13. harmonising the minimum capital requirement for all nbfcs at ₹200 lakh. the minimum capital requirement of ₹200 lakh was set in from april 1999. however, there are several thousand legacy nbfcs registered prior to this date, the capital of which is below this level. with the changed profile of nbfcs, their entry into newer businesses, the capital of ₹200 lakh in itself is grossly inadequate. the general increase in the price level since 1999 by itself would call for an increase in the capital requirements necessary to function as nbfcs. besides, as the usha thorat committee has pointed out that any financial intermediary must necessarily invest in technology to be efficient and competitive and reap economies of scale, all of which requires enhancement of capital. a higher capital requirement also ensures that serious players enter this space. besides, registration with the bank confers a legitimacy to the nbfc as a regulated entity and gives a sense of comfort to the lenders to the nbfcs. it is therefore necessary to

cost for borrowers of nbfcs and it will lead to recall of loans, repossession of the assets, etc. these fears are all baseless. what are we telling the nbfcs? we are saying that you be truthful, when you prepare your balance sheets. if a loan is non - performing i. e. if an instalment or interest payment is not received even after a reasonable period after the due date, you cannot recognise income out of that loan. thus, what we are bringing is an accounting discipline, so that all stakeholders know the real financial position of an nbfc. be it the depositor who keeps a deposit with an nbfc or be it an investor or prospective investor of the nbfc when it raises funds from the market, or be it a bank which finances an nbfc, all of them need to know the real financial position of the nbfc ’ s assets. these irac norms i. e. the income recognition and asset classification norms are thus an accounting requirement ; these in no way curtail the nbfcs ’ right to extend further / adequate time to the borrowers who are viable. these norms do not require that these loans / assets classified as npas should be recalled or repossessed. that is a call the nbfcs will take, based on their assessment about the possibility of repayment, and the probability of default, not on the mere fact that these are classified as npas. 31. i understand that several members of the industry have already factored these changes and suitably, that too voluntarily, moved towards a 150 days or a 120 days asset classification norm. also it may be borne in mind that the revised rules have been made applicable to only systemically important nbfcs, that too as per the new definition and for deposit accepting nbfcs in line with the bank ’ s mandate of financial stability and depositor protection. besides, ample time of 3 years has been given for compliance, which is likely to cushion impact on profitability. as on date, as i said earlier, out of the total 12, 029 registered nbfcs, only 190 nbfcs which are systemically important, non - deposit taking nbfcs and only 241 deposit taking nbfcs will be required to comply with these requirements. 32. on reduction in deposit acceptance, i would like to clarify that these have not been reduced but merely aligned to the industry practice.