Reserve Bank not looking at liquidity facility for NBFCs: Deputy Governor

“Reserve Bank’s position is that there is adequate liquidity in the system and it is for the lenders to take a view on which borrower to give money to and I do not think at this moment we are looking at a liquidity facility for NBFCs”, RBI Deputy Governor NS Vishwanathan said in an analyst meet after the Monetary Policy Committee (MPC) meeting.

He was responding to a question that in the financial markets, there is an extreme lack of confidence to lend to below AAA names and the liquidity problems faced by such entities could create further stress on financial system, impede monetary transmission and affect growth.

Post a fraud at PMC, analysts wanted to know if there are any changes in the annual review process of banks or NBFCs that RBI proposes to make or any specified proposed changes and if that will be effective for ongoing annual review of financial year 2019. RBI said there will be revamp of its regulatory and supervisory structure and creating a specialized cadre for this.

“RBI has decided to revamp its regulatory and supervisory structure and creating a specialized cadre. Offsite supervision as well as analytical vertical is being strengthened, and for NBFC supervision, we have strengthened all the core pillars- onsite supervision, offsite market intelligence and statutory auditor angle”, Deputy Governor MK Jain said.

To a question on the steps RBI is taking to ensure stability of financial system in the country and see the solvency of some of the housing finance companies, Jain said, “RBI makes periodic assessment of risk and vulnerability of the financial system to shocks emanating both from domestic and external adverse developments and takes mitigating steps to enhance its resilience. Such assessments are published twice a year in the financial stability report. The vulnerability arising out of interconnectedness between banks and non-banking financial institutions also forms part of the assessment.”