NBFCs should give loans to the real estate sector only after getting all necessary government approvals: RBI

Mumbai, Apr 19 (PTI) The Reserve Bank of India (RBI) on Tuesday said that non-banking financial companies (NBFCs) should lend to the real estate sector only after they have got all the necessary approvals for their projects.

RBI made it clear that NBFCs will need to ensure approval of their projects from the government and other regulatory authorities before sanctioning loans.

Apart from this, the RBI also said that NBFCs should not give loans of Rs 5 crore and more to their directors, including their chairman and managing director or their relatives and related entities.

These rules will come into effect from October.

In a notification issued on revised regulatory restrictions on NBFCs for lending, the central bank said that for loans of less than Rs 5 crore, these borrowers can be sanctioned through appropriate authority but the matter will be taken up with the board of directors. Will need to bring

“The NBFCs, taking into account the loan applications of the real estate sector, shall ensure that the borrowers concerned get the necessary approvals from the government/local authority/other statutory authorities for their projects,” the RBI said.

The apex bank said that the loan can be sanctioned under normal circumstances but disbursement will take place only after the borrower has obtained necessary approvals from the government/other statutory bodies for his project.

These guidelines will come into effect from October 1, 2022 and will be applicable to medium tier (ML) and high level (UL) NBFCs.

Basic level (BL) NBFCs are those which do not accept deposits and have assets less than Rs 1,000 crore. On the other hand, mid-level NBFCs also do not accept deposits but have an asset size of Rs 1,000 crore or more. At the same time, high-end NBFCs are those which have been identified by the Reserve Bank for increasing regulatory requirements.