The Reserve Bank of India is closely monitoring the activity, performance and developments in the non-banking finance company (NBFC) sector, including housing finance companies (HFCs), in the wake of the sector plunging into turmoil following debt defaults by IL&FS and some of its subsidiaries and liquidity issues being faced by DHFL.

Ensure financial stability

RBI Governor Shaktikanta Das observed that banks have significant exposure to HFCs that are regulated by the National Housing Bank. He added that the RBI is mandated to look after the financial stability of the entire economy.

“We are also monitoring major entities in this universe of NBFCs and HFCs. And the individual entities themselves are resorting to various measures using market mechanisms to mobilise additional liquidity and additional resources to meet their liabilities and commitments,” said Das.

The Governor emphasised that the RBI remains committed to ensure that the country has a robust, well-functioning NBFC sector.

“The RBI will not hesitate to take whatever steps are required to ensure that the financial stability is not adversely impacted in any manner by any development. With regard to long-term financial stability, I would not like to see financial stability in a compartmentalised manner as short-term, medium-term and long-term. We look at the overall financial stability,” explained Das.

To a specific question whether the RBI will extend support NBFCs in view of the challenges they are currently facing, he underscored that the RBI will take necessary steps as and when required. “We are monitoring the situation very closely. The periodicity of NBFC supervision, which was about 18 months earlier, now has been reduced to 12 months. So, every year, there is an inspection of NBFCs. Major entities are also being very closely monitored by the RBI. So, RBI will not delay in taking action if and when such action is required,” said Das.

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