RBI to allow banks to lend more to NBFCs that don't finance infrastructure

To help stem liquidity crisis, the Reserve Bank of India on Friday increased lenders' single borrower exposure limit for non-banking financial companies (NBFCs) which do not finance infrastructure, to 15 per cent of capital funds. The limit has been raised from 10 per cent and is effective up till December 31, the Reserve Bank of India said in a notification. 

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 October 19, 2018, as Level 1 HQLA (high quality liquid assets) under FALLCR within the mandatory SLR requirement," RBI said.

This will be in addition to the existing FALLCR of 13 per cent of net demand and time liability (NDTL), and limited to 0.5 per cent of the bank's NDTL, the central bank said.

On September 27, RBI had said banks could avail of higher liquidity with effect from October 1 as it has enhanced the "Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR)" from the existing 11 per cent to 13 per cent of their deposits.

This comes at a time when the liquidity crunch at NBFCs has compounded worries for the market as investors fear the situation may tighten further.