Compliance and Regulatory Framework
What the exam tests
Compliance questions test the statutory and regulatory perimeter around NaBFID: the NaBFID Act, RBI's AIFI framework, company law, AML/KYC, FEMA and insolvency. Expect rule application to a fact pattern, not recitation.
Core rules and concepts
- NaBFID is a statutory DFI under the NaBFID Act, 2021; RBI regulates it as an AIFI. Its board, audit, disclosures and returns follow the Act, RBI directions and the Companies Act, 2013.
- Prudential framework: capital adequacy, income recognition, asset classification, provisioning, exposure limits and large-exposure monitoring.
- NPA rule: a loan is generally classified non-performing when principal or interest is overdue more than 90 days; income recognition then follows RBI norms.
- AML/KYC: customer due diligence, beneficial ownership, transaction monitoring, STR filing and record retention under PMLA and RBI KYC directions.
- Cross-border funding: FEMA governs external commercial borrowing, guarantees and foreign investment; check eligibility, all-in cost ceiling and reporting.
- Insolvency: IBC proceedings, claims filing and resolution timelines affect recovery assumptions.
Worked example
A borrower with ₹100 crore outstanding is 100 days overdue on interest. Because the 90-day threshold is crossed, classify the account as NPA, stop accruing interest income, report the classification, and test provisioning and exposure limits. If the borrower is admitted to IBC, file the claim with the resolution professional and revise recovery estimates; do not continue to accrue contractual interest as income.
Traps
Do not assume AIFI status exempts NaBFID from KYC, AML or FEMA. Do not use 180 days for NPA. Do not treat board approval as a substitute for RBI or FEMA approval. Do not ignore related-party and large-exposure limits.