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Rule relief for NBFCs for selling loan books

Relaxation on the minimum holding period will be allowed when the NBFC retains 20% of the book value of these loans
NBFCs can now securitise loans of more than five-year maturity after holding those for six months on their books, the Reserve Bank of India said.
NBFCs can now securitise loans of more than five-year maturity after holding those for six months on their books, the Reserve Bank of India said.
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Our Special Correspondent   |   Mumbai   |   Published 29.11.18, 09:09 PM

The Reserve Bank of India (RBI) on Thursday relaxed rules for non-banking financial companies (NBFCs) to sell or securitise their loan books, in a bid to ease persistent stress in the sector.

NBFCs can now securitise loans of more than five-year maturity after holding those for six months on their books, the Reserve Bank of India said. Earlier, they had to hold these assets for at least one year, a banker said.

However, the relaxation on the minimum holding period will be allowed when the NBFC retains 20 per cent of the book value of these loans, the RBI said.

Securitisation is a process by which an asset (loans or advances) is converted into debt securities and sold to investors. These instruments are called pass-through certificates. It thus enables an entity to raise funds.

The country's NBFCs, loosely known as shadow banks, are facing stress on their balance sheets after a debt crisis hit IL&FS in September, triggering panic among investors and a cash crunch in the sector.



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