Industry body Assocham met the Reserve Bank of India governor Shaktikanta Das in New Delhi on Friday to discuss the liquidity challenge being faced by non-banking financial companies (NBFC).
Assocham told the governor that overregulation of the sector is hampering the growth of the NBFC model of lending, PTI reported.
The trade association requested Das not to revise the current asset-liability mismatch (ALM) norms for NBFCs till the normalcy is restored. It underlined the need for a regulator that would also act as a facilitator for NBFCs.
“We reiterated our concern that while the asset side of NBFCs is subject to regulation which has been harmonised with that of banks, the liability side i.e. fundraising activity, still remains highly restricted, thereby creating a liquidity crunch for the sector,” a statement by Assocham was quoted by PTI.
Assocham requested Das for just three months minimum holding period for loans that have maturity of two-five years. The industry body also said that housing finance companies (HFC) should be given access to National Housing Finance (NHB) refinance facility.
It also requested the sectoral cap to be increased to 35% and an additional 15% on mutual funds investing in NBFCs and HFCs respectively.
Assocham further told Das that life insurance companies limit to BFSI portfolio including equity exposures may be increased from 25%, while government securities exposure limit may be reduced from 50% according to the trend in the economy.
Risk weightage for NBFCs should be reduced to 20% and 30% for AAA and AA rated companies respectively ones in accordance with the weighting to asset finance companies (AFCs) and IFCs.
Assocham also requested the RBI governor to restore the arrangement of treating bank funding to NBFCs & HFCs for on-lending to the priority sector as priority sector lending for banks.
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Source: Financial Express