RBI fine-tunes capital norms for non-bank companies

Mumbai: The Reserve Bank of India (RBI) has fine-tuned the capital norms for NBFCs, allowing revaluation of reserves from property to be counted as tier-1 capital instead of tier-2. It also permitted calculation of earnings subject to deductions of dividend based on past years.

"Revaluation reserves arising out of change in the carrying amount of an NBFC's property consequent upon its revaluation in accordance with the applicable accounting standards may, at the discretion of the NBFC, be reckoned as CET1 capital at a discount of 55%, instead of as Tier 2 capital under extant regulations," the RBI said in a statement. These changes will be subject to meeting certain conditions that include rules such as that the property is held for own use, that the non-bank lender is able to sell the property readily at its own will, and that the revaluation reserves are disclosed separately in the financial statements.

The regulator also released prudential guidelines on exposure norms aimed at addressing credit risk concentration in top tier NBFCs.