Lok Sabha Question No. 133 (STARRED), answered on 2019-07-01
Subject: Liquidity Crisis in NBFCs
Ministry: FINANCE
Asked by: Ravneet Singh

## GOVERNMENT  OF INDIA MINISTRY  OF FINANCE DEPARTMENT  OF FINANCIAL  SERVICES

## LOK SABHA

## STARRED QUESTION NO: *133 TO BE ANSWERED ON THE 1 st  JULY, 2019/ASHADHA 10, 1941  (SAKA)

## Liquidity  Crisis in NBFCs

## *133:  SHRI RAVNEET SINGH BITTU:

Will  the Minister  of FINANCE  be pleased to state:

- (a) whether   the  Government   proposes  to  solve  the  liquidity crisis   being faced  by   the NBFCs in the country;
- (c) whether   the  Government   proposes  to  strengthen   the  Reserve   Bank of  India  in dealing  with  the NBFCs  by  amending  the Banking  Regulation  Act,  1949, if so, the details  thereof  and if not,  the reasons  therefor;  and
- (b) if so, the details  thereof  including  the measures  taken  by  the Government  to address the issue;
- (d) whether   the  Government   plans  to  recapitalise   the  struggling   NBFCs   such  as IL&FS/DHFL  and if so, the details  thereof?

## ANSWER To be answered by

(S mt. Nirmala  Sitharaman)

## FINANCE  MINISTER

- (a) to (d): A statement  is laid  on the Table  of the House.

Statement  as referred  to in reply  to parts (a) to (d) of Lok Sabha Starred  Question no. *133  for  answer on 01 st July,  2019/Ashadha  10  (Saka), 1941  regarding 'Liquidity Crisis in NBFCs' by SHRI RAVNEET SINGH BITTU, Hon'ble Member of Parliament

(a) to (d): Non-Banking  Finance  Companies  (NBFCs)  are regulated  and supervised  by  the Reserve  Bank of India (RBI) as per powers  vested in it under  the provisions  contained  in Chapter  IIIB of the Reserve  Bank of India Act,  1934. RBI has informed  that  it is closely monitoring  the liquidity position  of the NBFCs  and will  continue  to monitor  the activity and  performance   of  the  NBFC   sector  with   a  focus  on  major entities   and  their   interlinkages  with  other  sectors.  RBI has further  informed  that  with  a view  to strengthen  the NBFCs and  maintain   stability   of  the  financial   system,   RBI  has  been  taking   necessary regulatory  and supervisory  steps.

As per RBI inputs,  a number  of measures  have been taken  to improve  the liquidity for NBFCs including, inter alia, the following:

- (ii) RBI permitted  special  dispensation  to banks  up until  31 st   March 2019, whereby their   incremental   credit   to  NBFCs   and  HFCs   after  October   19,  2018,  could   be treated  as high  quality  liquid  assets for calculation  of Liquidity Coverage  Ratios.
- (i) Open  market operations were  conducted, in addition to regular Liquidity Adjustment  Facility  auctions,  to inject  liquidity in financial  markets.
- (iii) The single-borrower  exposure limit  for NBFCs  that  do not finance  infrastructure was increased  from 10 percent  to 15 percent  of capital funds, up to 31 st   March 2019.
- (v) RBI reduced the minimum  average maturity  requirement  for External  Commercial Borrowings  in the infrastructure space raised by  eligible  borrowers  from  five years to three  years.
- (iv) Banks  were   permitted   to  provide   partial   credit   enhancement   for  non-deposit accepting systematically-important NBFCs  registered with RBI and  HFCs registered  with  NHB  as per guidelines.
- (vi) To  encourage   NBFCs   to  securitise/assign   their   eligible   assets,  the  Minimum Holding   Period   requirement   for  originating NBFCs   was  relaxed   till   December 2019.
- (viii) NBFCs  with  assets over Rs. 5,000 crore  have been asked to appoint  a Chief  Risk Officer  to improve  the standards  of risk  management.
- (vii) NBFCs were provided  regulatory  concessions  to enable restructuring of  MSME loans.

Government   has  received   a  proposal   from   RBI  to  strengthen   RBI's  regulatory and supervisory  powers  under the Reserve  Bank of India Act,  1934, and the same is under consideration.

Government,   from  time   to  time,   infuses  capital in  public   sector   NBFCs   based  on  an objective  assessment of requirements. There   is  no  proposal   under consideration  of the Government  to recapitalise  private  NBFCs.