NEW DELHI: Persistent demands to provide a lifeline of liquidity to Non Banking Finance Companies (NBFC) has led to an initial assessment of its financial health — Reserve Bank of India, in consultation with the Central government, would do the review, sources said.Liquidity concerns of NBFCs has been one of the core issues on which the central bank and Finance Ministry came to a head and the issue is yet again expected to take the centre stage, when RBI’s Central Board meets again on December 14.
“...The review will be done in consultation with the government. It will help both the RBI and the government to have a ready data on NBFCs and based on that, further roadmaps can be decided,” a senior Finance Ministry official said, adding, “The purpose of the exercise is that there will be one data with both the government and the RBI, so that it is easier for both of them to take unified decisions. The issue will be discussed in detail when the RBI Board meets next.”
While the government has been strongly putting its demand with many of the ministers, apart from the Finance Minister himself, citing instances of slowing bank credit stifling economy, RBI has been maintaining silence on the issue. But it has kept a watchful eye on the liquidity situation and said it is ready to take measures when required.
In the last one month, the RBI took several steps to address the liquidity issue. On Monday, RBI relaxed hedging rules for external commercial borrowings by infrastructure firms, in addition to some recent measures on tenure. It has also allowed partial credit enhancement facility for NBFCs by banks and incremental credit carved out of the banks’ liquidity coverage ratio. The move, taken in consultation with the government, was aimed at improving credit flow to the domestic market via local credit and borrowing in foreign currency market.