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'Budget ensures vigilance, short-term liquidity for NBFCs'
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SME Times News Bureau | 17 Jul, 2019
The proposed full Budget 2019-20
ensures strong vigilance and short-term liquidity for non-bank finance
companies (NBFCs) and housing finance companies (HFCs), ratings firm
India Ratings and Research said on Wednesday.
Accordingly, the
proposed Finance Bill empowers the Reserve Bank of India (RBI) to
undertake corporate restructuring of NBFCs and HFCs in public interest.
"This
could enable the RBI to act upon specified entities, enabling ring
fencing to insulate from the spill-over risk; in the current scenario
this is appropriate," the agency said in a statement.
According
to the firm, the proposed framework will help in tackling the contagion
risk by the regulator especially for extreme cases.
Apart from
the long-term regulatory empowerment of the RBI, the firm pointed out
other budgetary proposals which will ensure short-term liquidity.
"The
provision of a partial credit guarantee by the government to cover the
first loss of up to 10 per cent on the pool of assets purchased from
NBFCs by public sector banks for a period of six months could help
infuse liquidity in NBFCs.
"Additional liquidity has been made
available to NBFCs and HFCs by allowing one per cent of net demand and
time liability to be included in the liquidity coverage ratio
computation to the extent of incremental outstanding credit to NBFCs and
HFCs," the statement said.
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