RBI increases the bank loan exposure limit to a single NBFC

MUMBAI: The Reserve Bank of India (RBI) increased on Thursday loan exposure limit from banks to just one NBFC (excluding gold loan companies) from 15% to 20% of its capital base, a measure that will help increase the supply of credit for the shadow banking sector in crisis.

According to the extant 'large exposures framework (LEF)', banks' exposure to a single non-banking financial company (NBFC) is restricted to 15 per cent of their available eligible capital base, while general single counter-party exposure limit is 20 per cent, which can be extended to 25 per cent by banks' boards under exceptional circumstances.

It has been decided that a bank's exposure to a single NBFC (excluding gold loan companies) will be restricted to 20 per cent of that bank's eligible capital base, the central bank said in a circular.

The government on its part has also been taking steps to increase liquidity in the NBFC sector, which was hit after default by ILu0026FS Group.

The liquidity crunch in the NBFC sector has hit the retail loan segment in the country leading to slowdown in key consumer sector lending.