Reserve Bank announces more measures to increase credit flow to NBFCs

Vastavam web: The Reserve Bank Friday announced more measures to increase liquidity flows to the non-banking financial companies. The RBI permitted banks to use government securities equal to their incremental outstanding credit to NBFCs, over and above their outstanding credit to them as on October 19, to be used to meet liquidity coverage ratio requirements. The move will help provide liquidity to housing finance companies (HFCs) and non-banking finance companies (NBFCs) which have come under pressure following series of default by IL&FS group companies.

This will be in addition to the existing FALLCR of 13 per cent of total deposits, and limited to 0.5 per cent of the bank’s total deposits. Liquidity coverage ratio refers to highly liquid assets that financial institutions need to hold in order to meet short-term obligations. The additional window will be available up to December 31, 2018, the notification said. Besides, it said, 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.