Earlier this month, the housing finance regulator National Housing Bank (NHB) had decided to increase the refinance limit from Rs 24,000 crore to Rs 30,000 crore in order to help alleviate the liquidity crunch that the sector is facing. With this development, the NHB on Saturday claimed to have sanctioned Rs 19,990 crore till date to 19 eligible institutions, including 14 housing finance companies (HFCs), thereby indicating that a things haven’t escalated to a liquidity crisis among the non-banking finance institutions.
NHB, the wholly-owned subsidiary of the Reserve Bank of India, is the principal agency to promote Housing Finance Institutions, currently numbering 97, and extend financial support to eligible institutions. As a regulator, it also monitors the liquidity position of HFCs regularly.
“They [NHB] have already disbursed around Rs 9,000 crore and assured [the government] that there are no systemic concerns,” a senior government official told The Economic Times. Furthermore, the NBFCs and banks have reportedly told the government that they do not fear any liquidity crisis. Significantly, only one HFC may have some issue, but they did not reveal its name.
On Friday, Finance Minister Arun Jaitley met the heads of several top public sector banks to take stock of the liquidity situation, especially for NBFCs. Besides officials from the FinMin, key executives from SBI, Punjab National Bank, Bank of Baroda, Union Bank, and Bank of India were present in the meeting.
According to the daily, the lenders have assured the government that they will continue to refinance NBFCs. The country’s largest bank, State Bank of India, has said it could buy NBFC assets up to Rs 45,000 crore. NHB meets about 4% of the capital needs of NBFCs.
Moreover, just 10 days ago, the apex bank allowed the banks to use government securities equivalent to their incremental credit to NBFCs for a three-month period to meet their liquidity coverage ratio requirements. Moreover, the single borrower exposure limit for NBFCs that do not finance infrastructure stands increased from 10% to 15% of capital funds, up to December 31, 2018.
This is “over and above the amount of credit to NBFCs and HFCs outstanding on their [banks’] books as on October 19, 2018,” the RBI had said. The provision is expected to allow banks to free up Rs 50,000-60,000 crore of liquidity, which banks can lend to NBFCs till year-end. So perhaps the SBI has hit the nail on the head by saying “the concerns in the market may be a little overblown” in its latest Ecowrap report.
Edited by Sushmita Choudhury Agarwal