ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The Department of Non-Banking Supervision (DNBS) is entrusted with the responsibility of regulation and supervision of Non-Banking Financial Companies (NBFCs) under the regulatory-provisions contained under Chapter III B and C and Chapter V of the Reserve Bank of India Act, 1934 .

Detailed explanation-2: -The Reserve Bank has been given the powers under the RBI Act 1934 to register, lay down policy, issue directions, inspect, regulate, supervise and exercise surveillance over NBFCs that meet the 50-50 criteria of principal business.

Detailed explanation-3: -Recently, the RBI has proposed a strict regulatory framework for the NBFCs by creating a four-tier structure with a progressive increase in regulation intensity. RBI has also proposed the classification of non-performing assets of base layer Non-Banking Financial Institutions from 180 days to 90 days overdue.

Detailed explanation-4: -Regulation of NBFCs are regulated by SEBI while the Nidhi and Chitfund companies are regulated by Department of Company Affairs. Housing finance companies are regulated by National Housing Bank.

Detailed explanation-5: -The RBI is a regulator of banks but is also the dominant owner of the largest commercial bank. Such close links were considered essential for effective coordination in financial sector as part of the early endeavours of planned development and the channeling of credit.