RBI relaxes securitisation norms for NBFCs till June 30

The Reserve Bank of India (RBI) has relaxed its guidelines on securitisation transactions for non-banking finance companies (NBFCs) till June 30.

"On a review, it has been decided to extend the relaxation provided therein till June 30," the central bank said in a statement.

Instructions to NBFCs for all other governing securitisation and direct assignment transactions remain unchanged, it added.

The notification, 'Relaxation on guidelines to NBFCs on securitisation transactions' dated December 31, further extends the relaxations which were originally issued on November 29, 2018 till May 29, 2019, and then till December 31, 2019. It has now been extended to June 30.

The notification has extended the minimum holding period (MHP) requirement for NBFCs to raise funds via loan securitisation, which will help the sector overcome the liquidity shortage.

It will primarily benefit housing finance companies (HFCs) and NBFCs, offering mortgage loans where the tenure is typically more than five years. Accordingly, these entities can raise more funds through the securitisation route, which will provide them with additional liquidity.

NBFCs and HFCs are facing a crisis of confidence following the default by IL&FS in late-August, which led to its takeover by the government. This, in turn, led to a liquidity crunch in the sector.