RBI extends relaxed norms for NBFC loan securitisation till 31 December to help sector overcome liquidity shortage

The RBI on Wednesday extended minimum holding period requirement for NBFCs to raise funds via loan securitisation to help the sector overcome liquidity shortage

Press Trust of India May 30, 2019 14:27:32 IST
RBI extends relaxed norms for NBFC loan securitisation till 31 December to help sector overcome liquidity shortage
  • Non-banking financial companies (NBFCs) have been permitted to securitise loans of over five-year maturity after holding them for six months on their books

  • Earlier, they were supposed to hold it for at least a year

  • As per the earlier notification issued by the Reserve Bank of India in November, the dispensation was valid till May, 2019

Mumbai: The RBI on Wednesday extended minimum holding period requirement for NBFCs to raise funds via loan securitisation to help the sector overcome liquidity shortage.

Non-banking financial companies (NBFCs) have been permitted to securitise loans of over five-year maturity after holding them for six months on their books.

Earlier, they were supposed to hold it for at least a year.

RBI extends relaxed norms for NBFC loan securitisation till 31 December to help sector overcome liquidity shortage

Representational image. Reuters.

As per the earlier notification issued by the Reserve Bank of India in November, the dispensation was valid till May, 2019.

On a review, it has been decided to extend the dispensation provided therein till 31 December, 2019, RBI said in a notification issued on Wednesday.

The relaxation in minimum holding period (MHP) criteria will primarily benefit housing finance companies and NBFCs, offering mortgage loans where the tenure is typically more than five years.

Accordingly, these entities can raise more funds through the securitisation route, which will provide them with additional liquidity.

NBFCs and HFCs are facing a crisis of confidence following the default by IL&FS in late-August, which led to its takeover by the government. This, in turn, led to a liquidity crunch for the sector.

The move to extend the dispensation should be seen in the context of the RBI not willing to open a separate liquidity window for NBFCs, so that they can overcome liquidity mismatches, and the apparent reluctance of banks to extend partial credit enhancement facility to NBFCs for raising funds via bonds, an analyst said.

Updated Date:

also read

RBI has 'major concerns' about cryptocurrencies, but no change in position, says Shaktikanta Das
Business

RBI has 'major concerns' about cryptocurrencies, but no change in position, says Shaktikanta Das

The RBI governor's clarification on cryptocurrencies comes less than a week after it set aside a 2018 circular banning their trade

Sensex, Nifty surge to record highs ahead of RBI's monetary policy decision today
India

Sensex, Nifty surge to record highs ahead of RBI's monetary policy decision today

The BSE Sensex opened strong and finished at 382.95 points higher at 52,232.43. Similarly, NSE Nifty soared 114.15 points to end at its lifetime peak of 15,690.35

RBI keeps policy rate unchanged after six consecutive meetings; cuts growth forecast to 9.5%
Business

RBI keeps policy rate unchanged after six consecutive meetings; cuts growth forecast to 9.5%

MPC decided to maintain the status quo, that is keeping benchmark repurchase (repo) rate at 4%. Consequently, the reverse repo rate will also continue to earn 3.35% interest for banks