According to sources, the Indian central bank won’t exempt shadow banks from bad loans.
Reuters sources say India’s central bank won’t exclude “shadow banks” from harsher bad-loan restrictions. This would terminate non-banks’ advantage over banks.
NBFCs have urged the RBI to exempt smaller loans from new restrictions starting next month.
As of March 2021, when the RBI had the most recent data, India had 10,000 shadow banks with assets of 54 trillion rupees ($680 billion). Several of the largest shadow banks are included.
Related: Asian currencies were quiet before the U.S. payrolls report, and the Indian rupee rose on a rate hike.
Under the new laws, shadow banks must report problematic loans daily instead of monthly. Non-performing loans become performing once arrears are settled.
A businessperson who has met with the RBI stated, “We’ve asked for a few tweaks, but they’ve declined.”
The central bank didn’t immediately comment when asked.
Asian trade documents suggest shadow banks sought $250,000 loans to be exempt. They called for looser accounting regulations and more time to implement the changes.
“We expect bad loans to rise 80-100 basis points across the board for NBFCs,” said the CEO of a shadow bank. Some corporations may experience a 200-point rise.
Industry officials warn it might increase the number of problematic loans at some institutions, requiring them to set aside more money to cover them.
Shadow banks also asked the RBI to lower the number of problematic loans for which they don’t need court authorization to confiscate, manage, or sell the loan’s collateral.
If NBFCs don’t strengthen their collection practises and enforce customer discipline, it could lead to high-stressed loans for a long time, which would affect their balance sheet.
Related: Reuters poll, the Indian rupee will trade at a historic low in 3 months.
Shadow banks requested this modification in July for loans over 100,000 rupees ($1,250), up from 2 million rupees. Their average loan size is smaller than banks’, they noted.
The RBI may also reject this plea, say insiders.
$1 = 79.5625 Indian rupees
