RBI Seeks Details On NBFCs’ Supply Chain Finance Products

Supply chain finance is provided by NBFCs as term loans, with durations ranging from 30 to 180 days, where each loan tranche is considered a separate term loan within the overall credit limit set by the NBFC for the borrower

Most MSME are not capital intensive models but require working capital and based upon initial credit data the working capital is then provided

This facility is mostly used by MSMEs with seasonal or cyclical business patterns

The Reserve Bank of India (RBI) has asked for the details on the supply chain finance products offered by non-banking financial companies (NBFCs) in a bid to ensure compliance.

Business Standard reported, citing industry sources that the RBI’s department of supervision (DoS) has notified several prominent shadow banks that they may need to revise their offerings.

Supply chain finance is provided by NBFCs as term loans, with durations ranging from 30 to 180 days, where each loan tranche is considered a separate term loan within the overall credit limit set by the NBFC for the borrower.

This facility is mostly used by MSMEs with seasonal or cyclical business patterns.

The finance industry development council is hence demanding a meeting to look into the issue.

Most MSME are not capital intensive models but require working capital and based upon initial credit data the working capital is then provided.

This development comes at the time when the RBI on Friday (August 16) modified the master directions (MD) for NBFC-P2P lending platforms.

The central bank has also directed NBFC-P2P lending platform to disclose the “fees liable to be charged, ab initio, i.e., at the time of lending itself”. It has also prohibited “matching/ mapping the participants within a closed user group, whether sourced through an outsourced agency or otherwise”.

The latest directions come at a time when the central bank has undertaken sweeping reforms to streamline the P2P lending space. In May this year, the RBI issued guidelines barring P2P lending platforms from entering into default loss guarantee (DLG) agreements with NBFCs.

According to an Inc42 report Q4 2023, fintech funding in India experienced a decline of 12% compared to Q4 2022 amounting to $413 Mn and the market size is  expected to reach over $208 Bn by 2030.