Co-origination game-changer for NBFCs, HFCs: ShriramCity

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October 13, 2020 8:26 AM

Shriram City Union Finance (ShriramCity) has said the Reserve Bank of India (RBI)’s renewed thrust on co-origination of loans can be a game-changer for both non-banking financial companies (NBFCs) and housing finance companies (HFCs).

YS Chakravarti, MD & CEO, Shriram City Union Finance, told FE the earlier policy had been applied only to non-deposit taking NBFCs and most banks could not agree with NBFCs on the sourcing norms and the filters to be applied.

Shriram City Union Finance (ShriramCity) has said the Reserve Bank of India (RBI)’s renewed thrust on co-origination of loans can be a game-changer for both non-banking financial companies (NBFCs) and housing finance companies (HFCs).

YS Chakravarti, MD & CEO, Shriram City Union Finance, told FE the earlier policy had been applied only to non-deposit taking NBFCs and most banks could not agree with NBFCs on the sourcing norms and the filters to be applied.

“So, they were comfortable buying PSL books through the securitisation or direct assignment route. Hopefully this time, considering even deposit-taking NBFCs can participate, the market becomes much wider, and with appropriate risk sharing mechanisms this new policy can be a game-changer for both NBFCs and HFC,” he said.

Welcoming the on-tap TLTRO, he said it is now being extended for three years with flexibility to extend post a review. Earlier, TLTROs were focused on bonds and CPs, but the present one announced also can be for bank loans. “The earlier TLTRO can be subsumed into the proposed one by pre-closing earlier one and extended under the present one. So, this will make available more money to NBFCs and HFCs rated below AAA… Hope non- AAA-rated entities get access in a big way,” he said.

On rationalisation of risk weights on individual housing loans, Chakravarti said in the earlier policy, the risk weight was a function of both LTV as also the loan size. The dual checks brought in fewer loans under the lower risk weight. “Now, the RBI has removed the condition of loan size, meaning thereby as long the LTV norm is met, irrespective of the loan size, lower risk weight will apply. This will help HFCs funding premium segment housing…”

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