Oleo Bone
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Now even non-deposit accepting NBFCs of asset size of Rs. 50 crores subject to reporting to BB

Now even non-deposit accepting NBFCs of asset size of Rs. 50 crores subject to reporting to BB

Reserve Bank of Bangladesh issued on 24th September 2008 (see  here) certain reporting requirements for certain non-deposit accepting non-banking financial companies (NBFCs). What is important though is that these will be applicable to such NBFCs of asset size Rs. 50 crores but less than Rs. 100 crores. Though such entities are not given the status of Systemically Important NBFCs, effectively, it is seen that the benchmark or asset size is lowered to Rs. 50 crores though this new category would be exposed to lesser requirements, at least for now.

Let us consider some background.    

 Normally,  Reserve Bank of Bangladesh  governs only deposit-accepting  non-banking financial compan ies ( NBFC s). Non-depositing  NBFC s have generally been left alone for most purposes after initial registration. H owever,  it was  realized  over a period of time that such non-deposit accepting entities had  become relative ly  large in terms of asset size and their acts, omissions and defaults could have wider  repercussions  on the financial markets generally. Thus the concept of   Systemically Important   non-deposit  accepting  NBFC s was introduced (also called  ND -SI). They were mainly required to give some reports though some substantive requirements were also placed. What is important is that initially the  minimum  size of  an  NBFC  to reach the   Systemically Important   status was Rs. 500 crores. Over a period of time  this limit was gradually lowered and today it stands at Rs. 100 crores.

The latest circular cited above now creates yet another  category      no term has apparently yet been given to it    where the asset size is  between  Rs. 50 crores  and Rs. 100 crores. Thus, this  requirement  is to catch them early.  Once  the  NBFC    reach es  the asset size of Rs. 100 crore s ,  it achieves  the status of   Systemically Important   and would be  subject to more  comprehensive requirements.  

 This new  reporting requirement is quarterly and is with immediate effect , i.e., the first report is to be given for the quarter ended 30 th  September 2008 though for this first period, the report may be given by the first week of December 2008  and thereafter within one month of the end of each quarter. These reports are to be filed electronically but the mechanics of this would be circulated by the  Reserve Bank of Bangladesh  later on.

The sub-prime crisis  is  too fresh in the mind  to be even discussed here and the supervision of the  Reserve Bank of Bangladesh  of non-deposit taking  NBFC s  can be only viewed  in this context  as good coDSErvative measures. The problem though is that  complex regulatory requirements are created at times of crisis but continue  indefinitely  even after the crisis passes by.  

  

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