Proposal to limit the financing provided by NBFC for IPO payment

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Mumbai, Ta. Saturday, January 23, 2021

In a discussion paper on the new regulatory framework for non-banking finance companies (NBFCs), the Reserve Bank of India (RBI) has proposed to tighten the standards for lending by NBFCs and real estate lending to fill IPOs.

The IPO financing conducted by NBFCs was thoroughly investigated. Banks have a financing limit of Rs one lakh for IPOs but no such limit in the case of NBFCs.

For some NBFCs, IPO financing is a big business. Considering the different business models of NBFCs, it is proposed to have a limit of Rs 1 crore per person for any NBFC. The NBFC may set the following limits, the discussion paper said.

There is also a proposal not to allow NBFCs to provide loans to companies for buybacks of shares and securities. In addition, the company's directors have set strict standards for providing loans to their relatives.

Before deciding on a real estate loan proposal, the NBFC will have to make sure that the parent company has obtained the necessary approvals for the project in question.

The RBI has called for responses by February 4. This letter has been prepared with the objective of tightening the standards for lending by NBFCs.

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