The Reserve Bank of India (RBI) has extended existing relaxations for securitization of assets by non-banking financial companies (NBFCs) till June 30, 2020. The move is expected to provide NBFCs with some more breathing space to repair their broken balance-sheets by selling assets and improving liquidity.
In November 2018, the RBI had first relaxed the minimum holding period (MHP) requirement for originating NBFCs, for loans of maturity above five years, to six months from 12 months earlier. The relaxation was originally given for six months till May 2019. The central bank then extended this relaxation till December 31, 2019. The minimum holding period is the duration for which an NBFC is required to hold the loans on its book before selling them.
These relaxations were allowed after a liquidity crisis emerged in the non-bank space in the wake of the collapse of the Infrastructure Leasing & Financial Services (IL&FS) group in 2018. So much so that NBFCs and their mortgage lending peers relied largely on securitisation deals to raise funds.