RBI tightens prudential norms for NBFCs; interest rate to go up

Mumbai: The Reserve Bank of India (RBI) on Monday tightened the prudential norms for non-banking financial companies (NBFCs) to protect them from any impact of possible economic downturn, a development that may push up their lending rates, reports PTI.

Under the new RBI norms, both deposit and non-deposit taking NBFCs will have to set aside 0.25% of performing loans to meet any financial exigencies.

The RBI's decision is expected to push up lending rates by NBFCs as they will be required to keep additional funds as buffer even for those loans on which interest has been paid regularly by the borrowers. According to experts, this could push interest rate by up to 25 basis points.

"In the interests of counter cyclicality and so as to ensure that NBFCs create a financial buffer to protect them from the effect of economic downturns, it has been decided to introduce provisioning for standard assets also", the central bank said in a statement.

Earlier, the NBFCs were required to set aside funds for doubtful and bad assets. These are those loans on which the interest has not been paid regularly by borrowers or defaults had been reported.

NBFCs, the notification said, "should make a general provision at 0.25% of the outstanding standard assets".

Standard assets comprise those loans on which interest has been regularly by the borrowers and the possibility of default is remote.

The notification also said the provisions on standard assets should not be reckoned for arriving at net NPAs.

The provision towards standard assets need not be netted from gross advances but shall be shown separately as 'Contingent Provisions against Standard Assets' in the balance sheet, it added.


Tulip buys data centre for Rs270 cr; to invest Rs670 cr

New Delhi: Enterprise communication service provider Tulip Telecom today said its subsidiary has bought the data centre facility in Bengaluru from SADA IT Parks Pvt Ltd (SADA) for Rs230 crore and would further invest Rs670 crore to upgrade it, reports PTI.

Tulip Telecom's arm Tulip Data Center Services Private Limited (Tulip Data Center) has bought 100% shares of SADA, which owns the data centre facility in Bengaluru, for Rs230 crore.

Besides, the company will undertake investments of another Rs670 crore in next three years to upgrade the facility, the company said.

"The company has made Rs230 crore as the upfront payment, which will come from Tulip's balance sheet, while about Rs270 crore will be generated from the data centre revenues, and about Rs400 will come from external funding for which we are in discussion with strategic investors," Tulip Telecom CEO Sanjay Jain told PTI.

The data centre, spread over 900,000 sq ft is the world's third largest of its kind, the other two being in the US.

Mr Jain said the company is looking at serving both domestic and overseas customers through this data centre.

This is Tulip's fifth data centre, with the company already operating four data centres-two in Mumbai, and one each in Delhi and Bengaluru.

Mr Jain said the data centre will have a revenue generation potential of Rs1000 crore when it reaches its peak capacity in the next three years.


Canara HSBC Oriental Bank of Commerce Life Insurance appoints John Holden as CEO

Canara HSBC Oriental Bank of Commerce Life Insurance-a joint venture between Canara Bank and Oriental Bank of Commerce, and HSBC Insurance (Asia Pacific) Holdings Ltd, said it has appointed John Holden as the chief executive officer (CEO).

He succeeds Harpal Karlcut who was responsible for the successful launch and growth of business. Mr Karlcut has now moved back to HSBC Insurance on an overseas assignment.

Mr Holden is an internationally experienced executive with a track record of developing and implementing growth strategies across business areas, geographies and cultures. He has worked with HSBC for over 26 years in banking, marketing and insurance, spending the majority of his career in the group's life, pensions and investment businesses, supporting retail, commercial and private banking propositions.

Mr Holden has spent the last 13 years in Korea, Taiwan, Malaysia, and the Middle East and has been instrumental in creating extremely successful bancassurance distribution partnerships. Prior to joining Canara HSBC Oriental Bank of Commerce Life Insurance, he was deputy president & chief operating officer of Hana HSBC Life Insurance; a 50:50 joint venture between Hana Financial Holdings and HSBC Insurance.


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