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PTI | Mumbai | Updated: 05-12-2018 16:44 IST | Created: 05-12-2018 16:44 IST

Measures over the last two months

have eased liquidity for NBFCs and there is no necessity for

the RBI to extend help to the crisis-hit sector as a lender of

last resort, deputy governor Viral Acharya said Wednesday.

The central bank is guided by the principle of

addressing system-wide liquidity requirements, Acharya said,

enlisting the measures undertaken since problems started with

the non-banking finance companies (NBFCs).

"The RBI also stands ready to be the lender of last

resort but that is provided conditions warrant that sort of an

extreme measure. In our assessment, there is no such necessity

at the present," he said at the customary press conference

after the fifth bi-monthly policy review.

Acharya said the "sound health" of the economy, where

the credit growth is comfortably above the nominal GDP growth

with a fair distribution across sectors, make the RBI

confident that such support will not be required.

The RBI has also augmented system-wide liquidity

through various moves, he said.

According to reports, the government has been wanting

measures like a special liquidity window for the NBFCs, which

employ crores of people. There was no mention of the NBFC

sector in a press statement issued by the regulator after a

marathon board meet last month.

Acharya said the RBI has been watching developments on

this front since late-August and has also been in touch with

Sebi to understand the potential redemptions.

It can be noted that the IL&FS crisis burst out in

late August, and the worries quickly spread to other NBFCs and

the possible asset liability mismatches that they may face,

which had made investors cagey.

Giving details of the measures undertaken, Acharya

said banks can raise more against the collateral of government

securities for onlending to NBFCs and housing finance

companies (HFCs) and the concentration limits have also been


"RBI has also taken measures to facilitate asset and

risk transfers within the financial system. This can be

considered as reintermediation across financial players or

risks. We believe this is healthy for financial stability

overall," he said.

Measures on partial credit enhancement (PCE) to aid

bond raising by NBFCs and also liberalisation on the

securitisation front are a part of these measures, he said.

"Our assessment is that these measures have

collectively eased the funding stress in a steady manner over

the past two months. They have given the NBFCs and HFCs time

and the opportunity to make their own balance sheet

adjustments on both assets and liabilities side," he said.

In comments directed at analysts who have wondered the

efficacy of some of the moves, he explained these measures

were chosen from the full "set of available options" based on

an analysis of the reasons behind the funding stress for NBFCs

and HFCs.

Acharya said it was the recognition of asset quality

issues in the banks, which led to a greater play by the NBFCs

in the financial system.

Rating agency Crisil Wednesday said NBFCs' asset

growth is expected to halve to around 10 per cent in the

second half of the current fiscal on difficulties in getting

funding for the sector.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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