RBI relieves NBFCs while helping realty

The apex bank has allowed NBFCs to securitise loans of more than 5-year maturity if the loans were held for over six months on their books. This relaxation will provide extra liquidity to the NBFC sector.

Earlier, the non-banking financial companies (NBFCs) were required to hold these loans for at least one year. Reserve Bank of India (RBI) has relaxed the Minimum Holding Period (MHP) requirement for the originating NBFCs with respect to loans with over 5 years of maturity. This means, these loans now require a minimum number of six instalments to be paid before securitisation, which was 12 earlier or two quarterly instalments, which was four earlier.

The only rider is, RBI is allowing the securitisation of these loans when the NBFC retains 20 per cent of the book value of these loans. Also, the move is a temporary measure that will be valid for six months. But the NBFCs will be raising additional funds through the securitization route and gain extra liquidity.

This move is expected to help the real estate sector as the housing loans are short duration loans. Also, the housing and commercial real estate sector contribute to approximately 40 per cent of the total NBFC portfolio. 

Reacting to this relaxation of norms, NBFCs stock experienced an uptick on Friday. Major NBFC stocks HDFC, DHFL, Bajaj Finance, Bharat Financial Inclusion, M&M FinServ, Indiabulls Housing Finance and Repco Home Finance moved up more than 1 to 8 per cent on Friday.