Large NBFCs to maintain 50% LTV ratio for loan against shares

The Reserve Bank on Friday said NBFCs with asset size of over Rs 100 crore will have to maintain a loan-to-value (LTV) ratio of 50 percent in case of lending against collateral of listed shares.

Mumbai: The Reserve Bank on Friday said NBFCs with asset size of over Rs 100 crore will have to maintain a loan-to-value (LTV) ratio of 50 percent in case of lending against collateral of listed shares.

But the condition of maintaining 50 percent LTV ratio does not apply in case of lending against unlisted shares, it added.

LTV refers to the proportion of loan that can be given against the market value of shares.

The RBI said LTV ratio of 50 percent has to be maintained at all times by the NBFCs with an asset size of Rs 100 crore and above.

"Any shortfall in the maintenance of the 50 percent LTV occurring on account of movement in the share prices shall be made good within 7 working days," it said.

RBI further said only Group 1 securities would be accepted as collateral for loans of value more than Rs 5 lakh, "is applicable only where the lending is done for investment in the capital market".

As part of risk management system, SEBI categories securities into groups 1, 2 and 3 for imposition of margins based on their liquidity and volatility.