RBI cancels licences of 35 NBFCs for regulatory violations
- RBI cancelled registration of 35 NBFCs for non-compliance.
- The companies failed to meet regulatory requirements under the RBI Act.
- The move is part of RBI's ongoing efforts to strengthen the NBFC sector.
The Reserve Bank of India has cancelled the registration of 35 Non-Banking Financial Companies (NBFCs) for failing to comply with regulatory norms. The central bank announced the action on Sunday, citing violations of the Reserve Bank of India Act, 1934.
These companies were found to have contravened directions issued by the RBI. The exact nature of the non-compliance has not been detailed by the central bank. However, such actions are typically taken when NBFCs fail to meet capital adequacy requirements, submit regular returns, or follow fair practice codes.
Regulatory crackdown intensifies
The move is part of a broader regulatory push to clean up the NBFC sector. Over the past year, the RBI has stepped up surveillance of shadow banks after several high-profile defaults rattled investor confidence.
Industry experts say the cancellations are a necessary step. An analyst tracking the sector noted that the RBI is weeding out entities that do not adhere to norms, which improves the health of the financial system.
Impact on customers and markets
Customers of these 35 NBFCs may face disruption. Outstanding loans and deposits with these firms are now in limbo. The RBI has not yet issued any specific guidelines on how existing contracts will be handled.
Market participants expect minimal systemic impact. The total assets under management of these firms are likely to be small compared to the larger NBFCs. The broader sector remains well-capitalised, analysts said.
What comes next
The cancelled firms have been directed to cease all lending and deposit-taking activities immediately. They must also surrender their certificates of registration to the RBI.
These companies may appeal the decision under the provisions of the RBI Act. But the central bank's action underscores that there will be no leniency for persistent violators.
Observers say more such cancellations are likely in the coming months as the RBI continues its cleanup drive. Investors and depositors are advised to verify the registration status of their NBFCs on the RBI website.