RBI gives banks more room to lend to NBFCs

MUMBAI: The Reserve Bank of India (RBI) has given banks more headroom to lend to non-banking finance corporations (NBFCs) by way of exempting those loans from one of the crucial prescriptions on liquidity requirements. Additionally, the single-borrower limit for even those NBFCs now not within the infrastructure segment has now been hiked to 15% of capital budget from the earlier cap of 10%. The relaxations are limited to up to half a per cent of the bank’s deposits and are valid until December 2018.

The relaxations have been introduced early on Friday earlier than the markets opened. Following the announcement, most sensible officers of State Bank of India stated that the bank would offer loans to quality NBFCs.

The transfer comes at a time when the credit score crunch confronted by way of the NBFC sector threatens to hit different segments as smartly.

A large chew of liquid investments by way of mutual budget is in temporary papers issued by way of finance corporations. NBFCs also are massive lenders to the small and medium endeavor (SME) segment, which is predicted to get hit.

Earlier this week, stocks of Indiabulls Housing Finance fell on fears of loan publicity to a developer SuperTech that was downgraded to default. NBFCs had been calling for a unique liquidity toughen window from the RBI, which can buy belongings from finance corporations.

In the wake of the 2008 world finance disaster, a facility to supply liquidity was created by way of the RBI through a unique goal automobile. This time around, the RBI has now not acceded to the representations from the NBFCs.
RBI gives banks more room to lend to NBFCs RBI gives banks more room to lend to NBFCs Reviewed by Kailash on October 21, 2018 Rating: 5
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