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NBFCs facing liquidity crunch call for ease in securitisation norms

The NBFC sector wants securitisation guidelines to be amended to do away with the prescribed minimum holding period and minimum retention requirement.
NBFCs are demanding relaxation of securitisation norms to ease funding woes and to defer the rules on working capital loans which they say are compounding their problems inflicted by the credit squeeze. The NBFC sector wants securitisation guidelines to be amended to do away with the prescribed minimum holding period and minimum retention requirement. The sector wants minimum holding period for loans with maturity of 2-5 years be reduced from 6 months to 3 months. On December 5, RBI issued a circular asking for compulsory bifurcation of the working capital for borrowers enjoying an aggregate fund-based working capital finance of Rs 150 crore and above from the banks. In a letter to RBI governor, the NBFC sector has asked for a year delay in implementation of the new working capital norms keeping in mind the criticality of the sector for its role of catering to the credit needs of the micro, small and medium enterprise (MSME) class, especially at a time when the sector continues to face a liquidity crunch. 
Also, NBFCs want the sub-limit or the loan component within the working capital facility to be re-instated automatically upon maturity to ensure continuation of the working capital facility. This would ensure that just paying the interest on the loan would suffice once the loan matures; the principal can be paid off when the NBFC collects enough funds from its receivables. NBFCs want the pricing for the loan component to be based on its tenor linked with respective period MCLR and tenor premium of the bank. Securitisation provides liquidity to NBFCs and enables banks to build their loan books aggressively in addition to meeting their priority sector lending targets.
The Economics Times, 14th May 2019


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