Public sector banks have sanctioned support to non-banking finance companies (NBFCs) and housing finance companies (HFCs) amounting to a total of Rs 4.14 trillion, including Rs 0.97 trillion for pool-buyouts of assets of NBFCs/HFCs between October 1, 2018 and September 30, 2019, Parliament was informed on Tuesday.
As per Reserve Bank of India (RBI), the NBFC sector faced liquidity stress following default by a large NBFC on account of which stress was particularly felt in the third quarter of the fiscal 2018-19, the government said.
"During the period October 1, 2018 and September 30, 2019, public sector banks have sanctioned support to NBFCs/HFCs amounting to a total of Rs 4.14 trillion , including Rs 0.97 trillion for pool-buyouts of assets of NBFCs/HFCs," Finance Minister Nirmala Sitharaman told Rajya Sabha in a written reply.
The RBI had said that the NBFC sector witnessed a growth of 20.6 per cent in credit outstanding during fiscal 2018-19 as against an increase of 17.9 per cent during 2017-18.
The Minister said that the RBI has informed that it is closely monitoring the liquidity position and performance of the NBFC sector with a focus on major entities and their inter-linkages with other sectors.
In addition, RBI has said that a few NBFCs that had a business model of borrowing short and lending for the long term, faced asset-liability mismatches as the confidence of lenders and markets had declined, although the better-performing companies continued to raise funds without any difficulty.
The central bank has taken number of other measures to support NBFCs and to increase credit flow, including open market operations, besides regular liquidity adjustment facility auctions, to inject liquidity in financial market.
Moreover, special dispensation was given to banks up until March 31, 2019, whereby their incremental credit to NBFCs and Housing Finance Companies (HFCs) after October 19, 2018, could be treated as high-quality liquid assets for calculation of liquidity coverage ratios.
The single borrower limit on exposure to NBFCs not financing infrastructure in the bank's books was increased from 10 per cent to 15 per cent till March 31, 2019. Securitisation guidelines for NBFCs have also been relaxed by lowering the minimum holding period requirements for eligible loan assets till December 31, 2019.
Banks were permitted to provide partial credit enhancement to bonds issued by NBFCs and HFCs, thereby increasing their ability to borrow in the market.
Besides, the government has also launched a Partial Credit Guarantee Scheme for purchase of pooled assets of NBFCs, the statement said.
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