In light of the growing involvement of non-banking financial companies (NBFCs) in the financial system, the Reserve Bank of India (RBI) issued a set of standards for provisioning for standard assets by large NBFCs on Monday.

The central bank defined rates of provision for outstanding loans given by 'NBFC-Upper Layer' in a circular issued on Monday. Individual housing loans and loans to Small and Micro Enterprises (SMEs) have a provision rate of 0.25 percent, whereas housing loans extended at teaser rates have a provision rate of 2 percent. After one year from the day on which the rates are raised, the latter will drop to 0.4%.

The provision rate for Commercial Real Estate - Residential Housing (CRE - RH) is 0.75 percent, while it will be 1 percent for CRE other than residential housing. The RBI further stated that the rate of provision for restructured loans will be determined by the applicable prudential rules.

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