rbi: Grant loans to real estate sector after ensuring govt approvals for project: RBI to NBFCs

The Reserve Bank on Tuesday said that while sanctioning loans to the real estate sector, non-banking finance companies (NBFCs) will have to ensure that borrowers get permission from the government and other regulatory authorities for their projects. Further, the regulator said that NBFCs should not extend loans and advances aggregating Rs 5 crore and above to their own directors including the Chairman and Managing Director or their relatives and other related entities.

The rules will come into effect from October.

In a notification on revised regulatory restrictions on NBFCs while granting loans and advances, the RBI said that proposals for credit facilities of less than Rs 5 crore to these borrowers may be sanctioned by the appropriate authority in NBFCs, but the matter should be referred to the Board. gave information.

“While evaluating loan proposals involving real estate, NBFCs shall ensure that the borrowers have obtained prior permission for the project from the government/local government/other statutory authorities, wherever required,” it said.

RBI he said.

With regard to lending to senior officers of an NBFC, it said that such loan should be sanctioned by the Board and no senior officer or any committee of any senior officer shall sanction loan to the relation of that senior officer.

Such loan should be sanctioned by the next higher sanctioning authority, it said.

Further, the RBI said that the term ‘loans and advances’ should not include loans or advances against government securities, life insurance policies, fixed deposits, stocks and shares.

These guidelines, effective from October 1, 2022, are applicable to Medium Layer (ML) and Upper Layer (UL) NBFCs.

Base Level (BL) NBFCs are non-deposit taking entities with asset size of less than Rs 1,000 crore; ML is not accumulating with asset size of Rs 1,000 crore and above; ULs are those which are specifically identified by RBI to raise regulatory requirement.

An NBFC may also be classified as a ‘top layer’ if the RBI is of the opinion that the UL has substantially increased the potential systemic risk from the specific NBFC.

For base level NBFCs, they will have a board-approved policy on lending to directors, senior officers and relatives of directors and entities where directors or their relatives hold a major stake.

The Board-approved policy should include a limit beyond which loans to these individuals will be reported to the Board.

The regulator has also asked NBFCs to disclose the total amount of such loans and advances sanctioned in their annual financial statements.

“These guidelines will be effective from October 1, 2022,”


Regulatory restrictions were necessitated due to the contribution of NBFCs to support genuine economic activity and their role as a complementary channel to banks as well as credit intermediation.

Over the years, the sector has grown significantly in terms of size, complexity and interconnectedness within the financial sector.

Many entities have grown and become systemically important and hence there is a need to align the regulatory framework for NBFCs keeping in view their changing risk profiles, RBI said in its ‘Revised Regulatory Framework for NBFCs’ in October 2021. said.

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