RBI turns up heat on NBFCs and the race for Neelachal Ispat

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Editor's note: Advait here. After banks, the Reserve Bank of India has now turned its attention to non-banking financial companies, or NBFCs, and has set a deadline for them to take corrective action. Some big names in the non-bank lending space are already sweating. But is this a backward-looking exercise? Separately, a question is being raised as the race for Neelachal Ispat Nigam heats up. Why are steelmakers desperate to buy a loss-making, state-owned entity? Read on. Big NBFCs told to clean up NBFCs are in for tough times. On Tuesday, the Reserve Bank of India came out with a prompt corrective action, or PCA, framework to rein them in. The RBI is clear that it doesn’t want an NBFC financial crisis and so is extending oversight. In essence, PCA is an enforcement mechanism where the RBI places restrictions on a financial institution in terms of lending, capital deployment and operations because of weak metrics. PCA was first introduced in December 2002 to rein in banks, and on occasion the RBI has sanctioned fragile banks. Except after the bad loan crisis of …