RBI proposes to strengthen ALM framework for NBFCs in annual report FY2019

Reserve Bank of India said that it will provide required liquidity backstop to the banks against their excess G-sec holdings.

New Delhi: The Reserve Bank of India has proposed to strengthen the asset-liability management (ALM) framework for NBFCs.

In pursuance of the announcement made in the Union Budget 2019-20, the government had rolled out a scheme offering to provide a one-time partial credit guarantee for first loss up to 10 percent to public sector banks (PSBs) for purchase of high-rated pooled assets amounting to Rs 1 trillion from financially sound NBFCs/Housing Finance Companies (HFCs). This policy measure will support NBFCs’ access to funding from the PSBs.

“On its part, the Reserve Bank will provide required liquidity backstop to the banks against their excess G-sec holdings. The Reserve Bank has also front-loaded increase in the facility to avail liquidity for liquidity coverage ratio (FALLCR) of 0.5 per cent each of banks’ NDTL scheduled for August 1 and December 1, 2019, respectively, for incremental credit given to NBFCs and HFCs, over and above credit outstanding to NBFCs and HFCs as on July 5, 2019. Dispensing with the Debenture Redemption Reserve (DRR) will also facilitate the issuance of bonds by NBFCs,” the RBI said.

Releasing its annual report FY2019, the Central Bank expressed concerns that India’s external sector outlook is vulnerable to downside risks from global developments, especially the possibility of the global downturn deepening, the uncertainty surrounding international crude oil prices and the volatility of capital flows.