New Delhi: The draft liquidity norms for the non-banking financial companies (NBFCs) announced by the Reserve Bank will put pressure on their margins and returns over the medium term, analysts say. The proposed norms may also result into consolidation in the NBFC sector, they said. Last week, the RBI released a draft circular on Liquidity Risk Management Framework for NBFCs with an asset size of Rs 100 crore.The norms will also be applicable for all Core Investment Companies (CICs) registered with the Reserve Bank.
The draft norms said all non-deposit taking NBFCs with asset size of Rs 5,000 crore and above, and all deposit taking NBFCs irrespective of their asset size, shall maintain a liquidity buffer in terms of a liquidity coverage ratio (LCR) which will promote resilience of NBFCs to potential liquidity disruptions by ensuring that they have sufficient High Quality Liquid Asset (HQLA) to survive any acute liquidity stress scenario lasting for 30 days. “NBFCs would have to carry low yielding assets to meet the HQLA requirement going forward, which could exert pressure on their net margins, rating agency Icra said in a report. In a note, financial services company Jefferies India said LCR norms would affect margins and returns in the medium term, especially for housing finance companies (HFCs), given higher asset liability management (ALM) mismatch.
