The troubled shadow banking sector, which has seen cost of borrowing rise, also requested the RBI to relieve lending and capital rules for banksNew Delhi: The Reserve Bank of India (RBI) Governor Shaktikanta Das met representatives of non-banking financial institutions (NBFCs) to open talks on offering more liquidity to the troubled shadow banking sector. The sequence of defaults by NBFC Infrastructure Leasing and Financial Services Ltd (IL&FS) — towards the latter part of the last year — raised further concerns over the broader risks in the financial sector after setting off declines in stock and debt markets.
After August last year, NBFCs, which has seen the cost of borrowing rise, also requested the Central bank to relieve lending and capital rules. Sources added that during the meeting in Mumbai, there were also talks of having a bi-annual meeting between the Governor and NBFC representatives.
“We discussed our problems, starting with the liquidity issues. It is not as bad as November on liquidity right now, but the costs have gone up. We hope that the costs will come down soon,” one of the attendees of the meeting said.
In recent months, government officials have also pressed the Central bank to simplify lending and capital rules for banks and provide more liquidity to shadow banks.
Das, a seasoned financial bureaucrat who was elected as the new RBI governor in December, added that NBFCs played a significant role in ensuring credit flow to the economy.
PSU Watch is a business news brand of 27 Frames Communications LLP. It places the spotlight on PSUs, Governance, Bureaucracy, Defence and Public Policy as the sector traverses through a period of radical change.