The new year could see the RBI taking steps to strengthen the asset-liability management framework of non-banking finance companies and putting in place a new remuneration policy for directors of private sector banks.

The debt default of IL&FS had raised questions about the asset-liability management framework of shadow banks. There have been concerns that the reliance on short-term funds could lead to an asset-liability mismatch.

In October, RBI deputy governor Viral Acharya had asked NBFCs to focus more on raising funds through modes such as equity and other means of long-term finance, instead of short-term instruments.

The current ALM guidelines are applicable to non-deposit taking NBFCs with an asset size of Rs 100 crore and above and to those deposit-taking companies which have a deposit base of Rs 20 crore and above.

“ALM guidelines as prescribed for the sector relate to three pillars — ALM information systems, ALM organisation (including setting up of an asset liability committee and its composition) and ALM process… However, the instructions are less detailed compared to that for banks.

“Further, ALM instructions for registered Core Investment Companies are minimal. The Reserve Bank intends to strengthen the ALM framework for NBFCs on lines similar to that for banks and harmonise it across different categories of NBFCs,’’ the RBI said in its report on banking trends.

“The inherent strength of the NBFC sector, coupled with the RBI’s continuing vigil on the regulatory and supervisory front, will ensure that the growth of the sector is sustained and liquidity fears are allayed,” the report said.

According to the report, the NBFC sector, with a size of around 15 per cent of the commercial banks’ combined balance sheet, has been growing robustly in recent years.

To-do list

• Strengthen the asset liability management framework of NBFCs
• Reliance on short-term funds is risky
  
• ALM rules for NBFCs are less detailed compared to banks. Instructions for Core Investment Companies are minimal