RBI rules out asset quality review of NBFCs for now

Mumbai, August 19 

Even as he reiterated the regulatory resolve to not let any large NBFC fail, RBI Governor Shaktikanta Das today ruled out ordering an asset quality review of the systematically important shadow banks for now.

The over 12,000-odd non-banking financial institutions, coupled with their housing finance peers, collectively control a quarter of the credit market, have been under severe stress following the bankruptcy of one of the largest players IL&FS group last September.

The IL&FS Group owes close to Rs 1 trillion to the system and more than half of that is to banks, mostly state-owned ones. Its failure has made banks highly risk averse to the NBFC sector, leading to a severe liquidity crunch.

The group is not only under bankruptcy process now but also under many a probe, including by the ED, CBI and the SFIO.

Addressing the press on the sidelines of the national banking conference being organised by the industry body Ficci, Das ruled out ordering an asset quality review of the large NBFCs, saying the RBI is not thinking about conducting one for now as it had done for the banks in late 2016 and early 2017, under which it identified 40 largest stressed accounts and asked banks to send for bankruptcy resolution.

“At the moment there is no such proposal to have an asset quality review on NBFC but while saying that let me also add that 500-odd NBFCs and HFCs are closely being monitored by us and our monitoring and supervision include all aspects of their functioning, including their capital adequacy, stability, their cash inflow, outflow,” Das told reporters.

He said the RBI is keeping a close watch on the interconnectedness of banks and NBFCs and reiterated that the monetary authority will not let any of the top 50-odd NBFCs to fail. — PTI