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RBI relaxes rules for NBFCs to sell or securitise their loan books

Published on December 01, 2018
Reserve Bank of India (RBI) relaxed rules for Non-Banking Financial Companies (NBFCs) to sell or securitise their loan books in a bid to ease persistent stress in the sector.
RBI relaxes rules for NBFCs to sell or securitise their loan books

Details:

  • RBI has relaxed the minimum holding period (MHP) requirement for originating NBFCs, in respect of loans of original maturity above 5 years, to receipt of repayment of six monthly installments or two quarterly installments.
  • Earlier, they had to hold these assets for at least one year.
  • However, relaxation on MHP will be allowed when the NBFC retains 20% of book value of these loans.
  • RBI has also prescribed certain Minimum Retention Requirement (MRR) for NBFCs for availing the relaxed norms.
  • The relaxed dispensation will apply to securitisation/ assignment transactions carried out during six months.

One must know:

  • NBFCs loosely known as shadow banks, are facing stress on their balance sheets after debt crisis hit a large infrastructure funding company in September, triggering panic amongst investors and cash crunch in the sector.
  • Following massive volatility in financial markets, RBI and government have taken steps to ringfence the crisis and support financing needs of the sector, including providing additional liquidity to banks and credit enhancement for refinancing needs.

Question:

Q. Reserve Bank of India (RBI) relaxed rules for whom to sell or securitise their loan books in a bid to ease persistent stress in the sector?
a. Public Sector Undertakings (PSUs)
b. Non-Banking Financial Companies (NBFCs)
c. Private Sector Banks (PSBs)
d. None of the above
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