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4) The recent developments in the Indian economy call for a unified regulator for NBFCs. Analyze.(250 words)

Topic- Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

4) The recent developments in the Indian economy call for a unified regulator for NBFCs. Analyze.(250 words)

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Why this question

The article examines the need for an independent and unified regulatory regime for NBFCs. In the context of several crisis hitting Indian NBFCs, it is important to examine the issue in detail.

Directive word

Analyze-here we  have to examine methodically the structure or nature of the topic by separating it into component parts, and present them as a whole in a summary.

Key demand of the question.

The question wants us to dig deep into the recent developments in the NBFCs sector in the Indian economy and bring out as to why there is a need for a unified regulator.

Structure of the answer

Introduction- write a few introductory lines about the  recent crisis being faced by the NBFC sector in India. E.g Infrastructure Leasing & Financial Services (IL&FS) crisis of last October and the DHFL crisis.

Body-

Discuss in points as to why there is a need for a unified NBFC regulator in India. E.g

  • India has 10,000 active NBFCs that are regulated by the Reserve Bank of India (RBI), of which some 275 are systemically important (SI).
  • Non-deposit taking systemically important entities, tagged with the alphabet soup acronym NBFC ND-SI, are those with a threshold asset size greater than ₹500 crore—asset finance companies, asset reconstruction companies, infrastructure finance companies, and microfinance companies are among the various types that make up the broad group of NBFCs.
  • Peer-to-peer (P2P) lending companies are the newest set to join this group.
  • Indian non-banks are governed by a regulatory hodgepodge of RBI, the Securities and Exchange Board of India (Sebi), the Insurance Regulatory and Development Authority (Irda), NHB, the ministry of corporate affairs (for nidhi companies) and state governments (for chit funds).
  • Cooperation is on an ad hoc basis and often post-event.
  • The commission chaired by former justice B.N. Srikrishna recommended that Sebi, Irda, the Pension Fund Regulatory and Development Authority and the Forward Markets Commission (since merged with Sebi) be merged under one regulator to be called the Unified Financial Authority.
  • The FSLRC recommended that micro-prudential regulation (health of individual firms) be conducted through a non-sector specific approach.

Conclusion– based on your discussion, form a fair and a balanced conclusion on the given issue.

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