RBI Plans Liquidity Buffer at Shadow Banks to Aid Stressed Sector
The Reserve Bank of India said it planned to implement LCR, a liquidity buffer, 'in a calibrated manner' over four years starting from April 2020.
Bengaluru: The Reserve Bank of India (RBI) on Friday proposed introducing a liquidity coverage ratio (LCR) for large non-banking finance companies (NBFC) to help tackle liquidity problems in the sector.
The central bank said it planned to implement LCR, a liquidity buffer, "in a calibrated manner" over four years starting from April 2020.
The LCR is proposed for all deposit taking NBFCs, and non-deposit taking NBFCs with an asset size of 50 billion rupees ($720 million) and above.
NBFCs will have to maintain minimum high quality liquid assets of 100% of total net cash outflows over the following 30 calendar days.
Sources told Reuters this week that the central bank was concerned about liquidity issues facing some of the so-called shadow banks such as mortgage or auto lenders and wants to ensure the problems do not become a systemic issue.
The collapse of the Infrastructure Leasing and Financial Services (IL&FS) last year triggered a series a defaults across the shadow banking sector, as borrowing costs for the sector surged.
Get the best of News18 delivered to your inbox - subscribe to News18 Daybreak. Follow News18.com on Twitter, Instagram, Facebook, Telegram, TikTok and on YouTube, and stay in the know with what's happening in the world around you – in real time.
Recommended For You
- Your Apple iPhone And iPad Will Get iOS 13.1 And iPadOS Sooner Than Expected
- Rashami Desai to Marry Boyfriend Arhaan Khan Inside Bigg Boss 13 House: Report
- After Amitabh Bachchan, Akshay Kumar Accused of Supporting Aarey Forest Destruction
- If Your iPhone Has a True Depth Camera, You Can Now Take 3D Selfies on Snapchat
- Cristiano Ronaldo Says Sex with Girlfriend is Better Than his Best Ever Goal