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To ensure that the financial system does not face any liquidity constraints in the wake of the recent ripple effect of the debt default crisis at IL&FS, the Reserve Bank of India has upped banks' single borrower exposure limit for NBFCs (non-banking finance companies), which do not finance infrastructure, from 10 per cent to 15 per cent of capital funds, up to December 31, 2018.
This move should be seen in the backdrop of NBFCs, especially housing finance companies, facing liquidity pressure due to strain in their exposure to commercial real estate projects.
Further, the central bank also said banks' will be permitted to reckon Government securities held by them up to an amount equal to their incremental outstanding credit to NBFCs and Housing Finance Companies (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 (facility to avail liquidity for liquidity coverage ratio) within the mandatory SLR (statutory liquidity ratio) requirement.
The aforementioned relaxation will be in addition to the existing FALLCR of 13 per cent of NDTL (net demand and time deposits or deposits), and limited to 0.5 per cent of the bank’s NDTL.
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