It had allowed banks to use government securities equal to their outstanding credit to non-bank lenders- NBFCs and HFCs, over and above their outstanding credit to them as on October 19, to be used to meet liquidity coverage ratio (LCR)requirements. LCR are highly liquid assets that banks and financial institutions hold to meet their short term obligations. The Reserve Banks had relaxed these norms to help NBFCs get liquidity support from banks.
Under the Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR), the banks were allowed to reckon government securities as liquid assets within the mandatory statutory liquidity ratio (SLR) needs upto 0.5 per cent of the bank’s deposits for incremental lending to NBFCs and HFCs after October 19, 2018. This facility was initially available up to December 31, 2018 will now be extended to March 31, 2019.
Also single borrower limit for NBFCs (not financing infrastructure) has been increased from 10 per cent to 15 per cent of capital funds till December 31, 2018. “In order to further facilitate banks to lend to NBFCs and HFCs , it has been decided to extend the aforesaid facilities upto March 31, 2019” the Reserve Bank has said in a notification on Friday.