Fear of Transparency and Efficiency

Why RBI made it hard for NBFC's and  UCB's?

How NBFC's make more profit than banks?

RBI Implemented a new harder regulatory system for NBFC's due to its fear of transparency and enormous profit.

ENHANCING THE QUALITY OF NBFC's(Non-Banking Financial Company) & UCB's(Urban Cooperative Bank).

As NBFC's offer credit to people at low-interest rates thus, people tend to borrow more money from NBFC's than banks that's why NBFC's make humongous/huge sum of profits.

One method through which RBI curtail NBFC's profit is LTV-Loan To Value should not increase by 60% that means the mortgage should not be more than 60% of the asset. Sadly, after this check, NBFC's profit fell by 20%. NBFC's should not accept deposits for the short term(less than 12 months) and not more than 60months(5yrs).

Recently RBI called up for RBIA-Risk-Based Inter Audit. As per the report, RBI gave a statement that NBFC's & UBC's should build up their capacity, should be supervised as to safeguard the interest of the depositors from frauds and failures.

RBI says cooperative banks need not pay out dividends.

I think in order to discourage people from going to NBFC's, RBI has implemented these measures as NBFC's makes more profit and to save its depositors from risk and ensure transparency and efficiency.

Good day!

FinBolts...