NBFC subsidiaries will not be able to do business in the same business, RBI is working on bringing a plan

Subsidiaries of non-banking financial companies (NBFCs) will no longer be able to engage in the same business. RBI is working on bringing such a plan soon. These rules are already applicable for banks. Now, NBFCs will also be brought under this purview to prevent conflicts of interest when two companies get involved in the same business.

According to Amar Ujala Sources, RBI is discussing this proposal with some NBFCs. Guidelines are expected to be issued soon. The central bank has been cautious about the possible turmoil in this sector. It has warned NBFCs that it will not hesitate to take action against companies that distribute loans recklessly. The RBI is concerned that practices like fake business to attract more customers can lead to complex loan structures. This can increase the risks.

According to Amar Ujala Sources, RBI's new directive can mainly affect big gold finance companies. Their microfinance branches give gold loans. In the last few years, this industry has distributed loans heavily. Due to this aggressive expansion, the regulator has also taken strict action. Only after this, many banks like HDFC and Axis have had to look for partners to buy their consumer loan subsidiaries.