RBI raises cap on exposure to single NBFC to 20%; lower risk weight for consumer loans may cut capital needs by 12,500 cr.
The on-going liquidity crunch faced by non-banking finance companies (NBFCs) has made the Reserve Bank of India (RBI) to take further measures to increase credit flow to the sector.
The central bank has decided to increase the cap on a bank’s exposure to a single NBFC to 20% of its tier-I capital from 15% now.
Further, RBI has decided to give ‘priority sector’ tag for banks lending to NBFCs, for on-lending to farm, small and medium enterprises and housing sector.
Banks have been allowed to lend to the NBFCs for on-lending to the agriculture sector up to 10 lakh, up to 20 lakh to micro and small enterprises, and for housing, up to 20 lakh per borrower. These will be classified as priority sector lending.
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