The Reserve Bank of India (RBI) plans tougher rules for takeovers involving non-banking financial companies (NBFCs).
In its latest effort to boost transparency and strengthen its grip on the alternative lenders that account for a large part of the domestic shadow-banking sector, the RBI said any purchase of a stake of 26 per cent or more in a company, or a change in more than 30 per cent of its directors, would need the central bank’s permission.
The RBI also said in its circular that the source of funds behind new investors in any NBFC will have to be disclosed.
It also asked for an undertaking that the new proposed investors are not associated with any existing but unregistered body that accepts public deposits.
NBFCs play a critical role in extending credit to areas where traditional finance cannot reach in a country where only just over half of the population has access to the mainstream banking system.
However, controlling these NBFCs has been made a key priority for the RBI, given their size and reach.