RBI and NBFC

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This statement is referring to the Net Owned Fund (NOF) requirement for certain categories of Non-Banking Financial Companies (NBFCs) in India, as per regulatory guidelines from the Reserve Bank of India (RBI). Breakdown of the Statement:

1. NBFC-P2P → Peer-to-Peer Lending NBFCs
   • These are platforms that facilitate direct lending between individuals without traditional financial intermediaries.
2. NBFC-AA → Account Aggregators
   • These entities enable data sharing between financial institutions with customer consent but do not hold public funds.
3. NBFCs with No Public Funds and No Customer Interface
   • These are NBFCs that do not take public deposits and do not directly interact with customers (e.g., some investment holding companies).

Meaning of the Statement:

• The minimum Net Owned Fund (NOF) requirement for these specific categories of NBFCs will remain Rs. 2 Crore, despite any changes in NOF requirements for other NBFCs.
• NOF is the capital that an NBFC must maintain to ensure financial stability and compliance with RBI regulations.

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NBFC-P2P (Peer-to-Peer Lending NBFCs)


NBFC-P2P refers to Non-Banking Financial Companies – Peer-to-Peer Lending Platforms. These are entities that operate digital platforms where individuals or businesses can lend and borrow money directly, without involving traditional banks or financial institutions. Key Features of NBFC-P2P:

1. Intermediary Role
   • NBFC-P2Ps act as a platform that connects lenders and borrowers.
   • They do not lend their own money or accept deposits.
2. Regulated by RBI
   • The Reserve Bank of India (RBI) regulates NBFC-P2Ps under the Master Directions for NBFC-P2Ps issued in 2017.
3. Net Owned Fund (NOF) Requirement
   • The minimum NOF required for NBFC-P2Ps is ₹2 Crore.
4. Loan Limits & Restrictions
   • A single lender cannot lend more than ₹50 lakh across all P2P platforms.
   • A single borrower cannot borrow more than ₹10 lakh.
   • The exposure of a single lender to a single borrower is capped at ₹50,000.
   • The maximum loan tenure is 36 months (3 years).
5. Revenue Model
   • NBFC-P2Ps earn by charging processing fees to borrowers and service fees to lenders.
6. Risk & Transparency
   • P2P lending platforms do not provide guarantees or assurances on returns.
   • They only facilitate transactions and perform credit assessments on borrowers.

How NBFC-P2P Works:

1. Lenders & Borrowers Register → Users sign up on the platform.
2. Credit Assessment → The platform assesses the borrower’s creditworthiness.
3. Listing & Matching → Borrowers list their loan requirements; lenders choose whom to fund.
4. Loan Disbursement → The platform facilitates loan agreements between parties.
5. Repayment & Collection → Borrowers repay the loan with interest, and lenders receive returns.

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NBFCs with No Public Funds and No Customer Interface


This refers to Non-Banking Financial Companies (NBFCs) that operate without taking public funds and without directly interacting with customers. Breakdown of the Term:

1. No Public Funds
   • These NBFCs do not accept deposits from the public.
   • They also do not borrow from banks, financial institutions, or external commercial sources that are linked to public money.
   • Their funding sources are typically promoters’ funds, private equity, or internal accruals.
2. No Customer Interface
   • They do not deal directly with retail customers or the general public.
   • They do not provide loans, credit facilities, or financial services to individuals or businesses in a direct manner.

Examples of Such NBFCs:

1. Investment Holding Companies
   • These NBFCs invest in stocks, bonds, or other NBFCs but do not raise public money or interact with customers.
   • Example: A corporate group having an NBFC solely to manage internal financial transactions.
2. Internal Group Finance Companies
   • Some companies set up an NBFC to manage intra-group financing without external borrowings or customer-facing services.
3. Special Purpose Vehicles (SPVs)
   • SPVs created for structured finance transactions (like securitization of loans) can be NBFCs without public funds or customer interactions.

Why Does This Category Exist?

• The RBI applies lighter regulations to these NBFCs because they do not pose risks to public funds.
• They are not subject to the stricter capital and compliance requirements applicable to customer-facing NBFCs.

Regulatory Benefits:

• The Net Owned Fund (NOF) requirement remains ₹2 Crore, unlike other NBFCs where it might be higher.
• They face fewer compliance burdens than deposit-taking or customer-facing NBFCs.

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