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The current liquidity crisis in India has become a bone of contention between the Reserve Bank of India (RBI) and the government. Chart: Currency
Mumbai: The liquidity crisis, which has become a bone of contention between the Reserve Bank of India (RBI) and the government, stems from banks' reluctance to lend to non-bank financial corporations (NBFC), according to bankers Mint According to the chief financial officer of one of the major public sector banks, lenders are hesitant to grant loans to some NBFCs because of a perception of increased risk to the sector. In the long run, banks have become more cautious in lending.
"We are monitoring how these NBFCs are managing the pressures on commercial paper repurchases and this will be a crucial criterion for granting additional loans," said the CFO.
Commercial banks have three k exposure indices to a NBFC: subscribe to their commercial paper, sanction a loan or line of credit and buy back existing loans from them. According to data from the RBI, outstanding bank loans to the entire sector amounted to £ 27.01 billion as at 28 September, up 2.6% from at the same time of the previous year. Loans to NBFCs amounted to ¥ 5.46 billion in the same fortnight, up 41.5 percent from the same period last year. This is the latest disaggregated sectoral data available from RBI.
The data compiled by Bloomberg indicated excess liquidity in the first half of August and a deficit in the second half of the year. However, since October 8, the liquidity of the system is in deficit, the deficit having increased to 1 463 000 billion pounds on October 22 and stabilizing at 1 155 938 billion October 30.
A press release from the central bank, dated October 1, he had said: "At his previous press conferences held after monetary policy, the Reserve Bank of India (RBI) had telegraphed that the liquidity of the system would become a deficit in the second half of the year and that the changing liquidity conditions would determine its choice of instruments for the transitional and sustainable management of liquidity.
The central bank injected into the system a series of open market operations (OMOs). Earlier this month, the group announced OME purchases of CHF 36,000,000 and reached its target in three tranches during the month. RBI also announced another ₹ 40,000 crore on the same trip in November. The monetary policy of the RBI has decided to adopt a neutral liquidity position. RBI wants the money rates on calls to be closer to the repo rate.
A chief executive officer and chief executive officer of a medium-sized bank said that, on condition of anonymity, the bank did not lend to finance NBFCs after the IL & FS crisis. He said the bank was not opposed to loans to NBFCs, but that she had taken a calibrated approach to the sector.
"Our bank only lends to NBFCs that finance short-term badets and housing, a more secure clbad," the bankers said. . Other than that, this prompted the banks to authorize the transfer of funds to NBFCs. It allowed the banks to use government securities as high quality liquid level 1 badets equivalent to the additional loans the bank granted to NBFCs and HFCs after 19 October. This will reduce the mandatory liquidity coverage ratio requirements for banks and they will have more funds to lend. In addition, RBI has allowed banks to lend up to 15% of their equity to a single NBFC that does not have infra financing, compared with 10% previously. The measurements are available until 31 December of this year.
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However, RBI disputed the central point of view that NBFCs are facing a liquidity crisis. The Mint reported on October 31 that at the meeting of the Financial Stability and Development Council (FSDC), officials at the Ministry of Finance had asked RBI not to let the liquidity situation in the term loan companies become unusable. to other sectors. RBI responded that credit growth was robust and that there was no evidence to suggest that NBFCs were facing a liquidity problem.
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