The Reserve Bank of India (RBI) has denied planning any special liquidity facility for Non Banking Financial Companies (NBFCs) citing the absence of system to meet the mandates for borrowings. The apex also stated that it is for the lenders to decide on lending to the NBFCs.
“Reserve Bank’s position is that there is adequate liquidity in the system and it is for the lenders to take a view on which borrower to give money to and I do not think at this moment we are looking at a liquidity facility for NBFCs”, said RBI deputy Governor N. S. Vishwanathan during an analyst meet post the Monetary Policy Committee (MPC) meeting.
During the meet the analysts wanted to enquire regarding any modifications in the annual review process of banks or NBFCs that RBI proposes to develop, post the PMC Bank fiasco.
If yes, then will it be operational during the ongoing annual review of financial year 2019.
RBI mentioned that there will be changes in its regulatory and supervisory structure and a specialised cadre will be developed.
“RBI has decided to revamp its regulatory and supervisory structure and creating a specialised cadre. Offsite supervision as well as analytical vertical is being strengthened, and for NBFC supervision, we have strengthened all the core pillars- onsite supervision, offsite market intelligence and statutory auditor angle”, Deputy Governor M. K. Jain said.
Responding to a question on ensuring stability to the financial system in the country and curb the menace of the solvency of some of the housing finance companies, Jain said, “RBI makes periodic assessment of risk and vulnerability of the financial system to shocks emanating both from domestic and external adverse developments and takes mitigating steps to enhance its resilience. Such assessments are published twice a year in the financial stability report. The vulnerability arising out of interconnectedness between banks and non-banking financial institutions also forms part of the assessment”.
RBI recently notified a draft circular on the “Liquidity Risk Management Framework for NBFCs and Core Investment Companies (CICs)” set to be adopted by all deposit taking NBFCs; non-deposit taking NBFCs with an available asset size of 100 crore and higher for ensuring a stringent Asset Liability Management (ALM) framework in the NBFCs.
Besides, the draft proposes to start Liquidity Coverage Ratio (LCR) applicable to all deposit accepting NBFCs; and non-deposit taking NBFCs with an asset size of 5000 crore and above.
In a bid to ensuring a hassle free transition to the LCR framework, the proposal is to install it in a calibrated manner via a glide path over a period of four years commencing from April 2020 and going up to April 2024.