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Letter to BS: More power to RBI to regulate housing finance is welcome

The NBFCs must make arrangements to improve the liquidity position to prevent further defaults

Business Standard 

Liquidity management tool: RBI may have to balance old norms with the new
Reserve bank of India

This refers to “may get regulatory powers over HFCs” (July 3). At a time when the financial intermediaries, particularly the non-banking financial companies (NBFCs), have defaulted in honouring its financial commitments, the move to bestow more regulatory powers to the to regulate housing finance companies is welcome. The audited financial statements and the ratings assigned by the rating agencies proved untrustworthy. Investors lost a lot due to the beaten down values of the shares of many NBFCs. Lending to NBFCs by banks, especially by the state-owned ones are more likely to slip into non-performing assets (NPA).

The NBFCs must make arrangements to improve the liquidity position to prevent further defaults. It is essential to make them financially strong to continue lending. It is therefore imperative on the part of the banking regulator to open ways to enable NBFCs to have access to the banking regulator. The oversight of banks and NBFCs must be made more effective to ensure that the lending by these drivers of growth do not defeat the economic goals of the government.

Despite some improvement in the NPA level, the Insolvency and Bankruptcy Code cases waiting for resolution are still huge in number and as such, it is paramount to ensure the quality of the lending of all the financing institutions. The must get more powers to control all financers including state-owned banks and for that, the government should not hesitate to amend the relevant acts.

VSK Pillai, Kottayam

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First Published: Wed, July 03 2019. 22:24 IST