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The dynamic nature, endless compliances, and stiff competition make it hard for most NBFCs to operate seamlessly for long. Since these firms experience myriad and delicate transactions, they are bound to abide by RBI’s stringent norms to stay transparent, legitimate, and accountable. The prudential norms regulate NBFCs for stability, solvency, and financial soundness. The norms are primarily formulated to protect NBFCs from financial haywire and insolvency.
From asset classification, maintaining transparency, and ensuring error-free bookkeeping to maintaining liquidity ratio, prudential norms for NBFC span almost every aspect that influences the working of such entities. Reserve Bank has introduced these norms to amplify the stability, solvency, and effectiveness of the NBFCs across India.
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