RBI extends relaxed norms for NBFC loan securitisation till Dec 31

The RBI on Friday (June 7) extended minimum holding period requirement for NBFCs to raise funds via loan securitisation to help the sector overcome liquidity shortage.

Non-banking financial companies (NBFCs) have been permitted to securitise loans of over five-year maturity after holding them for six months on their books. Earlier, they were supposed to hold it for at least a year. As per the earlier notification issued by the Reserve Bank of India in Novermber, the dispensation was valid till May, 2019.

On a review, it has been decided to extend the dispensation provided therein till December 31, 2019, RBI said in a notification issued on Friday. The relaxation in minimum holding period (MHP) criteria will primarily benefit housing finance companies and NBFCs, offering mortgage loans where the tenure is typically more than five years.

Accordingly, these entities can raise more funds through the securitisation route, which will provide them with additional liquidity. NBFCs and HFCs are facing a crisis of confidence following the default by IL&FS in late-August, which led to its takeover by the government. This, in turn, led to a liquidity crunch for the sector.

The move to extend the dispensation should be seen in the context of the RBI not willing to open a separate liquidity window for NBFCs, so that they can overcome liquidity mismatches, and apparent reluctance of banks to extend partial credit enhancement facility to NBFCs for raising funds via bonds, an analyst said.