RBI finally listens, gives another liquidity boost to NBFCs; relaxes asset securitisation norms

By: | Updated: November 29, 2018 7:42 PM

India's NBFCs, loosely known as shadow banks, are facing stress on their balance sheets after a debt crisis hit a large infrastructure funding company in September.

India's NBFCs, loosely known as shadow banks, are facing stress on their balance sheets after a debt crisis hit a large infrastructure funding company in SeptemberIndia’s NBFCs, loosely known as shadow banks, are facing stress on their balance sheets after a debt crisis hit a large infrastructure funding company in September

India’s central bank on Thursday relaxed rules for non-banking financial companies (NBFCs) to sell or securitise their loan books, in a bid to ease persistent stress in the sector. NBFCs can now securitise loans of more than five-year maturity after holding those for six months on their books, the Reserve Bank of India said.

Earlier, they had to hold these assets for at least one year, a banker said. However, the relaxation on the minimum holding period will be allowed when the NBFC retains 20 percent of the book value of these loans, the RBI said.

India’s NBFCs, loosely known as shadow banks, are facing stress on their balance sheets after a debt crisis hit a large infrastructure funding company in September, triggering panic amongst investors and a cash crunch in the sector.

Following the massive volatility in the financial markets, the RBI and the government have taken steps to ringfence the crisis and support financing needs of the sector, including providing additional liquidity to banks and credit enhancement for refinancing needs.

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