RBI opens more liquidity taps to NBFCs

Governor Shaktikanta Das on Wednesday said the Reserve Bank will not allow any large and systemically important entity from the troubled shadow banking space to collapse.

The comments come at a time when a large number of non-banking financiers and a few housing finance companies are facing severe liquidity issues which have been attributed to their mismanagement of the asset-liability mixes.

Das said the RBI has identified around 50-odd large NBFCs, including some housing finance companies and are being monitored now.

"It is our endeavour to ensure that there is no collapse of any large systemically important NBFCs," Das told reporters after announcing the bi-monthly policy review.

He recalled the budget announcement of the 10 per cent first-loss guarantee to state-run banks on their purchase of securitized assets of NBFCs. Along with that, the RBI announced liquidity measures to help in its implementation. These steps together could release Rs 1.3 trillion of additional liquidity to the fund-starved sector but only to better rates ones.

It can be noted that the NBFC segment has been facing trouble since the collapse of the infra-focused IL&FS on September 2018. Banks claim to have started lending but are preferring only better-rated ones.

As a result, NBFCs have gone slow on disbursements affecting overall economic growth and some have also resorted to non-core asset sales to wade through the difficult times.

Meanwhile, in the monetary policy review, the RBI has taken a slew of measures aimed at the NBFC segment. To offer additional liquidity, RBI has allowed banks to on-lend through NBFCs and making it eligible for priority sector lending.

"It has been decided to allow bank lending to registered NBFCs (other than MFIs) for on-lending to agriculture (investment credit) up to Rs 10 lakh; MSMEs up to Rs 20 lakh and housing finance companies up to Rs 20 lakh per borrower (up from Rs 10 lakh at present) to be classified as priority sector lending," it said.

It also decided to raise a bank's exposure limit to a single NBFC to 20 per cent of tier I capital of the bank from 15 per cent now to help increase credit supply to such companies.