RBI monetary policy aims to boost confidence in NBFCs

Reserve Bank of India

The Reserve Bank of India (RBI) in its monetary policy has brought out several measures in order to revive the confidence in the well-functioning companies in the Non-banking Finance Company (NBFC) sector.

Reserve Bank of India

The RBI has brought a single-borrower exposure limit for the banks that are lending to the NBFCs to 20 percents of the capital of the lender’s as compared to the 15 percent earlier. The apex bank has also recognised banks that are lending to register NBFCs for the selected purposes as the priority sector lending.

“The increase in the on-lending cap for priority sector advances for home loans from Rs 10-lakh loan ticket to Rs 20-lakh ticket will encourage banks to lend more to housing finance companies. This will further, boost lending by HFCs in the affordable housing segment,” said LIC Housing Finance MD & CEO Siddhartha Mohanty told Economic Times.

“Permitting banks to on-lend through NBFCs for priority sector lending would make this transmission faster and more efficient. This also would significantly improve the MSME functioning in the current environment and ultimately contribute to faster growth of the economy,” said Shriram Transport Finance MD & CEO Umesh Revankar. He said that the move was timely as the overall demand picks up after the festival of Ganesh Chaturthi, which falls in September.

The segments will include the NBFCs that lend for investment credit in agriculture upto Rs 10 lakh, or micro, small and medium enterprises (MSMEs) upto Rs 20 lakh, and housing upto Rs 20 lakh per borrower. At present, bank loans to NBFCs for housing is reckoned as a priority sector, but only for loans upto Rs 10 lakh

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