RBI announces more steps to increase liquidity flows to non-banking financial companies

Mumbai: The Reserve Bank of India (RBI) on 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 19 October, 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.

Representational image. Reuters

Representational image. Reuters

"... banks will be permitted to also reckon Government securities held by them up to an amount equal to their incremental outstanding credit to NBFCs and HFCs, over and above the amount of credit to NBFCs and HFCs outstanding on their books as on 19 October, 2018, as Level 1 HQLA under FALLCR within the mandatory SLR requirement," RBI said in a notification.

This will be in addition to the existing FALLCR of 13 percent of total deposits, and limited to 0.5 percent 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 31 December, 2018, the notification said.

Besides, it said, the single borrower exposure limit for NBFCs which do not finance infrastructure stands increased from 10 percent to 15 percent of capital funds, up to 31 December,  2018.

The RBI has been taking series of steps to infuse liquidity in the system. It has also been undertaking open market operation at regular intervals to add liquidity.

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Updated Date: Oct 19, 2018 12:37 PM

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