RBI increases banks’ loan exposure limit to single NBFC

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Published: September 13, 2019 9:42:14 AM

According to the extant 'Large Exposures Framework (LEF)', banks' exposure to a single non-banking financial company (NBFC) is restricted to 15 per cent of their available eligible capital base, while general single counter-party exposure limit is 20 per cent, which can be extended to 25 per cent by banks' boards under exceptional circumstances.

RBI, bank loan exposure limit, NBFC, IL&FS Group, banking sector, credit supply“It has been decided that a bank’s exposure to a single NBFC (excluding gold loan companies) will be restricted to 20 per cent of that bank’s eligible capital base,” the central bank said in a circular. (PTI photo)

The RBI on Thursday increased loan exposure limit of banks to a single NBFC (excluding gold loan companies) from 15 per cent to 20 per cent of its capital base, a move that will help increase credit supply to the crisis-ridden shadow banking sector.

According to the extant ‘Large Exposures Framework (LEF)’, banks’ exposure to a single non-banking financial company (NBFC) is restricted to 15 per cent of their available eligible capital base, while general single counter-party exposure limit is 20 per cent, which can be extended to 25 per cent by banks’ boards under exceptional circumstances.

Also read: All banks on equal footing in amalgamation plan: Sunil Mehta, MD & CEO, PNB

“It has been decided that a bank’s exposure to a single NBFC (excluding gold loan companies) will be restricted to 20 per cent of that bank’s eligible capital base,” the central bank said in a circular. The government on its part has also been taking steps to increase liquidity in the NBFC sector, which was hit after default by IL&FS Group. The liquidity crunch in the NBFC sector has hit the retail loan segment in the country leading to slowdown in key consumer sector lending.

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