As sell-off in NBFC companies led by Indiabulls Housing Finance triggered stock market loss on Friday, RBI in view of the situation eased liquidity norms for NBFCs while at the same time increasing the limit for lending to such companies until December 31, 2018.
After October 19, 2018, RBI has allowed banks to use G-securities as level 1 high quality liquid asset (HQLA) at par with bank's incremental lending to HFCs and NBFC companies. Further there will be a cap to it at 0.5% of the net demand and time liabilities or total deposits of banks.
The measure is expected to boost lending to NBFCs by as much as Rs. 59,000 crore. In the current scenario, when credit growth as its slowest place, banks have placed a total of over 29% in g-securities as against the mandated statutory liquidity ratio pegged at a minimum of 19.5%.
Also, banks have been given permission to lend up to 15% of their funds to a single NBFC company in contrast to 10% earlier. The RBI said in this regard, "The single borrower exposure limit for NBFCs which do not finance infrastructure stands increased from 10% to 15% of capital funds, up to 31 December 2018".
However, banks assess the current problem with NBFCs more of a risk perception exercise than as a regulatory incentive. And further view, the current crisis at NBFC companies to recede by December and until then wishes banks to help these companies mitigate short-term crisis..