Cantre has announced that the Reserve Bank of India will now be the regulator of housing finance Companies (HFCs). The HFC were regulated by the National Housing Bank. It aims to strengthen oversight of the shadow banks and improve their access to funding by providing guarantees for purchases of their assets.
The government has announced to provide a one-time partial credit guarantee for loan losses to state banks if the bank buy Rs.1 trillion ($14.6 billion) of high-rated pooled assets of non-banking finance companies (NBFCs).
Why the Change?
The move comes after the crisis emerged in 2018 when Infrastructure Leasing & Financial Services (IL&FS) defaulted on a series of debt obligations. After the crisis, the banks and mutual funds have reduced their exposure to the industry, causing shadow lenders to restrict new loans.
The RBI has proposed plans to tighten NBFCs’ liquidity coverage ratios and asset-liability management. RBI also resisted to provide a separate liquidity window for NBFCs that demands from within the industry. RBI has also decided to take more steps to monitor NBFCs closely.