The Reserve Bank of India has planed tougher rules for takeovers involving non banking financial companies (NBFCs), all the substantial deals seek its prior approval.

“The RBI has been continuously trying to strengthen this sector so that this should not be a back yard for people we don’t know,” said Sanjay Agarwal, the managing director of Au Financiers India, a Rajasthan based NBFC.

There are around 12,000 NBFCs registered with the RBI which largely offers loans.

The RBI in its circular said that the source of funds behind new investors in any NBFC will have to be disclosed.

It also asked for an undertaking that the new proposed investors are not associated with any existing but unregistered body which accepts public deposits.