Page 9 - Banking Finance June 2020

RBI CORNER

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RBI forms panel to check said it has cancelled the certificate of Vydianathan Ramaswamy, Director,
registration of 14 non-banking financial Ratings, Brickwork Ratings, observed
private banks' structure companies (NBFCs). that the limited participation by banks

RBI has constituted an internal work- Primus Capital Private Limited (For- in TLTRO 2.0 clearly highlights their
ing group to review the guidelines on merly known as Rapid Growth Capital reluctance to lend to small- and mid-
ownership and corporate structure for size NBFCs and MFIs in the current situ-
Services Private Limited), Bharat Fi-
Indian private sector banks. The cen- ation.
tral bank said it was doing so to align nance and Industries Limited, Signa- He emphasised that limited participa-
regulations to meet the requirements ture Finance Private Limited, Dee Bee tion by banks means there is no imme-
of a dynamic banking landscape chang- Leasing and Hire Purchase Pvt Ltd,
Jindal Finlease Pvt Ltd, and B L S Invest- diate liquidity relief to NBFCs and MFIs,
ing continuously.
ments Pvt Ltd, are among the NBFCs especially the smaller ones.
RBI said it has constituted an internal whose certificate of registration were Given the lack of risk appetite in banks,
working group to review the guide- cancelled by the RBI. Ramaswamy felt that a structure with
lines on the ownership and corporate partial credit guarantee (PCG) by the
structure for private sector banks.
RBI gets 'lukewarm' re- Government of India, similar to the
PCG scheme launched last year for
9 NBFCs surrender regis- sponse for availing liquidity securitisation, may be the only viable

tration RBI got lukewarm response from banks option to ease the liquidity challenges
for availing three-year liquidity at the of NBFCs.
Nine NBFCs, including Reliance Net and
maiden auction under the Targeted
Nischaya Finvest Private Limited, have NBFCs and MFIs are facing stretched
Long-Term Repo Operations (TLTRO)
surrendered their certificate of regis- 2.0. The auction proceeds are specifi- liquidity conditions, given that banks
tration, RBI said. are very selective while giving morato-
cally meant for deployment in the debt
Penrose Mercantiles Ltd, Manohar Fi- papers of small- and midsize non-bank- rium to these entities, whereas the
nance India Ltd, Chandelier Tracon Pvt ing finance companies (NBFCs) and former have already approved loan
Ltd, and Sanghi Hire Purchase Ltd are microfinance institutions (MFIs). moratorium to most of their borrow-
among the NBFCs which have surren- ers, he added.
As against the notified amount of Rs.
dered their certificates.
25,000 crore, the RBI received 14 bids RBI issues Fair Practice
With surrendering the certificates, the aggregating Rs.12,850 crore. Given
companies cannot transact the busi- the tepid response from banks, the Code guidelines for ARC
ness of a non-banking financial institu- central bank said it will review the auc- In lieu of probability of rise in NPA due
tion. tion results and take a view in the to the pandemic, the RBI has an-
In another statement, the central bank matter. nounced guidelines for "Fair Practices

BANKING FINANCE | JUNE | 2020 | 9