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Business Economy


Assocham hails RBI' steps to ease liquidity crunch at NBFCs

New Delhi, Oct 20 (UNI) The apex industry body Assocham on Saturday welcomed the Reserve Bank of India (RBI)'s move to incentivise banks to enhance their lending to non-banking finance companies (NBFCs) as a step in the right direction which would enable NBFCs to tackle the liquidity crunch.
The body said: “This shall also send a message that the recent developments do not indicate any systemic problem but it is merely a case of sentiments having gone wrong after one of the big NBFCs defaulted.”
The whole issue of asset liability mismatch was more relevant in case of long term lending companies like the housing finance companies and infra financing NBFCs.
A typical NBFC model was a retail lending model with short tenures of two to five years and small ticket sizes where asset liability mismatch was not a concern. NBFCs have shown impressive growth for the last few years maintaining a high capital adequacy ratio which is higher than the minimum prescribed levels. This growth has also been healthy as reflected in better asset quality.
The Assocham added that however, provision of a dedicated refinance window, especially, for the large number of small and medium sized NBFCs was very important to ensure future growth.
Yesterday, the RBI in a notification had said the central bank allowed banks to use government securities held by them up to an amount equal to their incremental outstanding credit to NBFCs and Housing Finance Companies (HFCs), over and above the amount of credit to NBFCs and HFCs outstanding on their books as on October 19, 2018 to be used to meet liquidity coverage ratio requirements.
This will be in addition to the existing facility to avail liquidity for liquidity coverage ratio of 13 per cent of net Demand and Time Liabilities (NDTL) and limited to 0.5 per cent of the bank’s NDTL.
The additional facility to avail liquidity for liquidity coverage ratio will be available up to December 31, this year.
The RBI had added that the single borrower exposure limit for NBFCs which do not finance infrastructure stands increased from 10 per cent to 15 per cent of capital funds, up to December 31, 2018.
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