How RBI is rescuing NBFCs amid rising liquidity woes

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New Delhi: The Reserve Bank of India’s (RBI) move to ease liquidity norms for NBFCs or non-banking financial corporation and HFCs comes as a huge relief to the industry and banks will now be able to lend more to such NBFCs. The move is estimated to fetch NBFCs an estimated Rs 50,000 crore in lending.

The apex bank has directed banks to increase their exposure to NBFCs that do not finance infrastructure to 15 per cent from the existing 10 per cent, allowing more breathing space to NBFCs. The top bank’s move to ease liquidity norms comes after the recent episode involving infrastructure financing major IL&FS.

Sanjay Chamria, MD, Magma Fincorp, said that RBI’s move will surely ease up liquidity for the NBFCs in the banking system and added that the private banks will now be able to leverage the additional window of liquidity to help NBFCs.

He, however, was of the view that the single client exposure limit may have to be rolled back to 10 per cent gradually in 2019. “RBI may need to clarify whether the higher single-client exposure up to 15% taken till December 31, 2018, could be extended thereafter,” he said.

An analyst said that the move will only benefit some NBFCs like HDFC but confirmed that the LCR relaxation capped at 0.5 per cent will translate to a Rs 50,000 crore headroom for NBFC lending.

This is one of the latest steps taken by the apex bank to infuse more liquidity into NBFCs. The RBI had earlier told that NBFCs should focus on long-term funds rather than trying to accelerate profitability with short-term funds that are likely to become unstable.

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