The Confederation of Indian Industry (CII) has suggested easing of certain norms for enhancing liquidity for non-banking financial companies (NBFCs) and housing finance companies (HFCs). It has suggested to ease external commercial borrowing (ECB) norms with a higher limit for investment grade-rated companies equivalent to sovereign rating up to maybe $1,500 million from the current uniform limit of $750 million for all NBFCs.
Industry body also asked for relaxation of end-use norms of ECBs for HFCs to facilitate credit flow to the entire housing finance sector. Currently, end-use is limited to affordable housing. Further, it said a framework should be defined for NBFCs and HFCs having an asset book size of more than Rs 25,000 crore being the lenders of last resort. Unlike banks, it said these types of companies do not have the repo window facility to borrow in times of need.
CII has suggested that the RBI should look at creating a separate classification within the systemically important NBFCs based on asset book size. It said NBFCs and HFCs have played a complementary role to banks in supplying credit to the underserved segments of the economy. It also noted that NBFCs and HFCs are important source of financing and will play a key role in making India a $5 trillion economy. According to the RBI data, the share of credit from banks, NBFCs and HFCs was in the ratio of 70:30 for 2018-19.