RBI is not in favor of individual credit to the NBFC
The Reserve Bank is not in favor of providing personal loan to the NBFC sector because there is a fear that they will default on the commercial papers As the NBFCs are cash-strapped
Industry players and government NITI Aayog made a case for giving credit window for non-banking financial companies (NBFCs) facing liquidity by following default by a companies IL&FS since September 2018.
Many NBFCs like DHFL and Indiabulls Finance, came under severe liquidity pressure compelling them to bring down their reliance on commercial papers.
There are concerns that NBFCs may loose money which will lead to default.
According to the sources, RBI is of the view that the first window is not required as per accounting.
The RBI feels that the cash crunch is not a sector-specific phenomenon but limited to a few NBFCs which have leveraged due to lending.
About Rs 1 lakh crore of commercial papers increased by NBFCs from investors will come up for redemption in the next three months.
CPs are debt instruments issued by companies to raise funds for a period of up to one year.
There is a fear that they will default on the CPs As the NBFCs are cash-strapped.
The sources also said the RBI board during the two-day meeting ended on Tuesday took stock of the NBFC sector.
The central bank is keeping the liquidity of these firms every month and recently asked NBFCs assets over Rs 5,000 crore to appoint a chief risk officer.
The primary role of the risk officer is identified by the CRO shall vet mitigation of risks and all credit products control risks.