Lok Sabha Question No. 295 (STARRED), answered on 2019-12-09
Subject: Support to NBFCs
Ministry: FINANCE
Asked by: Raghu Ramakrishna Raju Kanumuru

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## LOK SABHA STARRED QUESTION NO. *295

ANSWERED ON-9.12.2019

## SUPPORT TO NBFCs

*295: SHRI KANUMURU RAGHU RAMA KRISHANA RAJU:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Government has taken a decision to come to the rescue of stressed NonBanking Financial Companies (NBFCs) suffering from financial crisis;
- (b) if so, the details thereof;
- (c) whether it is true that the Government is planning to come up with a single window system to deal with the NBFCs that are on the verge of insolvency and if so, the details thereof; and
- (d) the measures being taken by the Government to protect them?

## ANSWER

THE FINANCE MINISTER

(SMT. NIRMALA SITHARAMAN)

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

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## Statement as referred to in reply of Lok Sabha Starred Question no. *295 for answer on 9 th  December, 2019/Agrahayana 18, 1941 (Saka) regarding ' Support to NBFCs ' by SHRI KANUMURU RAGHU RAMA KRISHANA RAJU, Hon'ble Member of Parliament

(a) to (d): NBFCs have played a significant role in credit delivery to small businesses and retail borrowers. A number of measures have been taken to support NBFCs, including, inter alia , the following:

- (i) During  the  period  from  October  2018  to  November  2019,  Public Sector Banks have sanctioned support to NBFCs amounting to a total of ₹ 4.47 lakh crore, including ₹ 1.28 lakh crore for buy-outs of asset pools of NBFCs.
- (ii) Open market operations have been conducted, in addition to regular Liquidity  Adjustment  Facility  auctions,  to  inject  liquidity  in  financial markets.
- (iii) RBI has asked NBFCs with assets over Rs. 5,000 crore to appoint a Chief Risk Officer to improve their standards of risk management.
- (iv) RBI  has  permitted  a  special  dispensation  for  banks,  whereby  their incremental credit to NBFCs after 19.10.2018 could be treated as highquality liquid assets for calculation of liquidity coverage ratio.
- (v) Banks  have  been  permitted  to  provide  partial  credit  enhancement  to bonds issued by NBFCs -Non-Deposit-taking Systemically Important  registered  with  RBI  and  Housing  Finance  Companies (HFCs) registered with the National Housing Bank, thereby increasing their ability to borrow in the market.
- (vi) RBI reduced the minimum average maturity requirement for External Commercial Borrowings in the infrastructure space by eligible borrowers from five years to three years.
- (vii) Risk  weights  as  per  credit  agency  assigned  ratings  have  been  made applicable  to  bank  exposures  to  NBFCs  other  than  NBFC -Core Investment Companies, thereby facilitating flow of credit to well-rated NBFCs.
- (viii) Securitisation guidelines for NBFCs have been relaxed by lowering the minimum  holding  period  requirements  for  eligible  loan  assets  till 31.12.2019.
- (ix) Bank credit to NBFCs other than NBFC -Micro-Finance Institutions for on-lending to agriculture, micro and small enterprises, and housing has been made eligible for classification as priority sector up to a limit of five percent of individual bank's total priority sector lending and up to Rs. 10 lakh per borrower for agriculture, up to Rs. 20 lakh  per  borrower  for  micro  and  small  enterprises,  and  up  to  Rs.  20 lakh per borrower for housing.
- (x) Single-borrower  exposure  limit  for  NBFCs  that  are  not  financing infrastructure has been increased from 15% to 20% of tier-I capital of the bank.
- (xi) Scheduled  commercial  banks  other  than  Regional  Rural  Banks  and Small  Finance  Banks  have  been  allowed  to  engage  with  NBFC -Non-Deposit-taking  Systemically  Important  to  co-originate  loans  for creation of priority sector assets.
- (xii) Government  has  launched  a  Partial  Credit  Guarantee  Scheme  for purchase of pooled assets of NBFCs.

The Reserve Bank of India Act, 1934 has been amended to vest Reserve Bank of India (RBI) with the powers to, inter alia ,  to undertake resolution of stressed NBFCs through amalgamation, reconstruction or splitting of viable and unviable businesses into separate units. Further, in exercise of powers under sections 227 and 239 of the Insolvency and Bankruptcy  Code,  2016,  Government  has  notified  the  Insolvency  and  Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to  Adjudicating  Authority)  Rules,  2019,  providing  a  generic  framework  for  insolvency and liquidation proceedings of financial service providers. Further, in consultation with RBI, Government has notified that the resolution and liquidation proceedings of NBFCs with  asset  size  of  Rs.  500  crore  or  more,  as  per  last  audited  balance-sheet,  can  be undertaken in accordance with the provisions of the said Code and Rules.

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