Mumbai: At a time when non-banking financial companies (NBFCs) have increased securitisation of their loans to tide over the current liquidity and asset-liability mismatch crisis, the Reserve Bank of India (RBI) on Thursday eased norms for such transactions for the next six months. The RBI on Thursday reduced the minimum holding period for over five-year loans given by non-banking entities to six months from a year, in order “to encourage NBFCs to securitise their eligible assets”, it said in a release.
This may be in the form of six monthly instalments or two quarterly instalments. Earlier, the minimum holding period for over five-year loans was 12 monthly instalments or four quarterly instalments. “The above dispensation shall be applicable to securitisation/assignment transactions carried out during a period of six months from the date of issuance of this circular,” it said.
However, to ensure non-banking entities securitise quality loans, the central bank has increased the minimum retention requirement for such securitisation transactions to 20 per cent of the book value of the loans being securitised, or 20 per cent of the cash flows from the assets assigned. Currently, the minimum retention requirement for loans with maturity of over 24 months is 10 per cent of the book value of the loans being securitised.
Ample liquidity
Meanwhile, Satish Marathe, the government-nominee member on the central board of the Reserve Bank, said on Thursday that barring the gems & jewellery sector, there is no liquidity crisis for any segments in the economy. He also said the spike in the cost of funds is due to an increased risk perception, and not due to lack of liquidity in the system. “Concerns were being expressed about lack of liquidity, but no one is shouting for liquidity today,” Marathe, who comes from the co-operative banking sector, said.
