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Reserve Bank increases banks' loan exposure limit to single NBFC

The government on its part has also been taking steps to increase liquidity in the NBFC sector, which was hit after default by IL&FS Group

Press Trust of India  |  Mumbai 

NBFCs face new governance, exposure code: from licensing to CEO package

The on Thursday increased loan exposure limit of banks to a single NBFC (excluding gold loan companies) from 15 per cent to 20 per cent of its capital base, a move that will help increase credit supply to the crisis-ridden shadow banking sector.

According to the extant 'Large Exposures Framework (LEF)', banks' exposure to a single non-banking financial company (NBFC) is restricted to 15 per cent of their available eligible capital base, while general single counter-party exposure limit is 20 per cent, which can be extended to 25 per cent by banks' boards under exceptional circumstances.

"It has been decided that a bank's exposure to a single NBFC (excluding gold loan companies) will be restricted to 20 per cent of that bank's eligible capital base," the central bank said in a circular.

The government on its part has also been taking steps to increase liquidity in the NBFC sector, which was hit after default by IL&FS Group.

The liquidity crunch in the NBFC sector has hit the retail loan segment in the country leading to slowdown in key consumer sector lending.

First Published: Thu, September 12 2019. 21:30 IST
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