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NBFCs, once the primary funding source for real estate, have been nudged by the RBI to make a comeback through a set of guidelines. They include the following:
📎 NBFCs can sanction loans after only after checking whether borrowers have obtained all necessary Government and other approvals.
📎 NBFCs should not provide loans of INR 5 crore or more to directors, MDs, Chairmen and other relatives and associated firms/entities.
📎 Loans lower than INR 5 crore, if sanctioned to such borrowers, should be reported to the board.
📎 All loans sanctioned to NBFC officers to be reported to the board.
📎 Senior officers or their committees cannot sanction loans to relatives. Only higher authorities can sanction these loans.
What it essentially boils down to
These regulations will come into force from 1st October, applying to middle and upper layer NBFCs.
The RBI has also added that the term 'loans and advances' should not cover advances/loans against life insurance, government securities, fixed deposits, stocks, etc.
What it could entail
NBFCs could make a much-needed comeback to Indian real estate, ensuring more funds for the growth of the sector. However, their only hope lies in working with reputed, organized and credible developers with a proven track record.