The RBI on Thursday increased loan exposure limit of banks to a single NBFC from 15 percent to 20 percent of its capital base.
This move will help increase credit supply to the crisis-ridden shadow banking sector.
It should be noted that the exposure limit has not been increased for gold loan companies.
According to the extant ‘Large Exposures Framework (LEF)’, banks’ exposure to a single non-banking financial company (NBFC) is restricted to 15 percent of their available eligible capital base, while general single counter-party exposure limit is 20 percent, which can be extended to 25 percent by banks’ boards under exceptional circumstances.
The central bank said in a circular “It has been decided that a bank’s exposure to a single NBFC (excluding gold loan companies) will be restricted to 20 percent of that bank’s eligible capital base,”
The government on its part has also been taking steps to increase liquidity in the NBFC sector, which was affected after default by IL&FS Group.
The liquidity crunch in the NBFC sector has hit the retail loan segment in the country leading to a slowdown in key consumer sector lending.