{"id":8226,"date":"2020-01-06T09:00:15","date_gmt":"2020-01-06T03:30:15","guid":{"rendered":"https:\/\/swaritadvisors.com\/learning\/?p=8226"},"modified":"2022-09-28T14:58:12","modified_gmt":"2022-09-28T09:28:12","slug":"the-reserve-bank-of-india-extends-nbfc-securitization","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/learning\/the-reserve-bank-of-india-extends-nbfc-securitization\/","title":{"rendered":"The Reserve Bank of India extends NBFC Securitization"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Securitization is the process wherein an entity sells its non-tradable assets in exchange for cash in the illiquid market to raise capital. Recently, the Reserve Bank of India has extended NBFC securitization for the next six months.<\/p>\n\n\n\n<p>Such a move has acted as a great relief for the existing Non-Banking Financial Companies<a rel=\"noreferrer noopener\" aria-label=\" Non-Banking Financial Companies  (opens in a new tab)\" href=\"https:\/\/swaritadvisors.com\/nbfc-registration\" target=\"_blank\"> <\/a>(NBFCs) since it is an opportunity for NBFCs to repair their broken balance-sheets.&nbsp; Also, it will help them to recover from liquidity crises by selling the assets.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3248f933755\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3248f933755\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/learning\/the-reserve-bank-of-india-extends-nbfc-securitization\/#A_Synopsis_of_the_Report\" title=\"A Synopsis of the Report \">A Synopsis of the Report <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/learning\/the-reserve-bank-of-india-extends-nbfc-securitization\/#The_reason_behind_NBFC_Securitization_Relaxation\" title=\"The reason behind NBFC Securitization Relaxation\">The reason behind NBFC Securitization Relaxation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/learning\/the-reserve-bank-of-india-extends-nbfc-securitization\/#Shaktikanta_Das_outlook_on_the_Matter\" title=\"Shaktikanta Das&nbsp;outlook on the Matter\">Shaktikanta Das&nbsp;outlook on the Matter<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/learning\/the-reserve-bank-of-india-extends-nbfc-securitization\/#The_Bottom_Line\" title=\"The Bottom Line\">The Bottom Line<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"A_Synopsis_of_the_Report\"><\/span>A Synopsis of the Report <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>Here is a sneak peek into the RBI&#8217;s decision:<sup><a href=\"https:\/\/www.rbi.org.in\/Scripts\/NotificationUser.aspx?Id=11775&amp;Mode=0\" class=\"text-primary\"><strong><em>[1]<\/em><\/strong><\/a><\/sup><\/strong><\/p>\n\n\n\n<ul><li>In November 2018, the RBI for the first time had relaxed the minimum holding period (MHP) requirement for all the originating NBFCs.<\/li><li>Thereby the MHP for loans of maturity was set above five years to six months from 12 months earlier. Originally, RBI has given NBFC securitization for six months only till May 2019.<\/li><li>However, after that, the Central Bank extended the relaxation until 31 December 2019.<\/li><li>While the Reserve of India has now decided to further extend the relaxation of NBFC&#8217;s asset securitization until 30 June 2020.<\/li><\/ul>\n\n\n\n<div class=\"shadow4\">RBI says that \u201c<em>On a review, it has been decided to extend the relaxation provided therein till 30 June 2020.&#8221; <\/em><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_reason_behind_NBFC_Securitization_Relaxation\"><\/span>The reason behind NBFC Securitization Relaxation<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The minimum holding period (MHP) stands for the duration for which an NBFC is bound to keep the loans on its book before selling them. Take a glance at the main reason to extend relaxation:<\/p>\n\n\n\n<ul><li>Such relaxations get enabled after the liquidity crisis in the non-banking sector preceding to the defaults by (IL&amp;FS)Infrastructure Leasing &amp; Financial Services in 2018.<\/li><li>It has a massive impact on <strong><a href=\"https:\/\/swaritadvisors.com\/nbfc-registration\" class=\"text-primary\">NBFCs<\/a><\/strong>. Thus, NBFCs and its mortgage lending peers extensively relied upon on securitization deals to raise money.<\/li><li>Besides a report of ICRA in October 2019 demonstrated that Non-Bank lenders had risen about \u20b92.36 trillion by securitization in between October 2018 and September 2019.<\/li><li>Therefore, the RBI got inclined to expand the relaxation period for NBFCs.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Shaktikanta_Das_outlook_on_the_Matter\"><\/span><strong>Shaktikanta Das<\/strong>&nbsp;outlook on the Matter<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Governor of Reserve Bank of India also articulated in point of view on NBFC securitization. He says:<\/p>\n\n\n\n<ul><li>RBI will monitor the liquidity circumstances of the NBFCs for at least three months. The motive of that scrutiny is to discern whether NBFCs have enough coverage for their <strong>liquidity requirements<\/strong> in the next three months or not.<\/li><li> He further says that \u201c<em>RBI wherever necessary will not hesitate to ensure that we do not enable any large or systemically essential NBFC to collapse or have any adverse impact on the economy<\/em>.\u201d <\/li><li>As per Das, the credit flow has slowly revived in the NBFC sector, and the efficient ones get access to funds from the market at pre-IL&amp;FS rates.<\/li><li>Moreover, he showcases the present day scenario of the market which differentiates between the good and the not-so-good NBFCs.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_Bottom_Line\"><\/span>The Bottom Line<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<div class=\"shadow4\">The extension of relaxation for NBFC Securitization shall be a ray of hope for all inadequate NBFC. Non-Banking Financial Companies can now improve liquidity by selling their assets. Additionally, RBI has continually monitored the top 50 NBFCs regularly. On this matter, Shaktikanta Das proclaims that &#8220;RBI will deep dive into the balance sheets, books, and other numbers of these 50 NBFCs which represent about 75% of the sector.&#8221;<\/div>\n\n\n\n<div class=\"read\"><p><b>Also, Read:<\/b> <mark><a href=\"https:\/\/swaritadvisors.com\/learning\/what-are-the-latest-trends-in-nbfc-business-model\/\">Latest Trends in NBFC Business Model<\/a><\/mark>.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Securitization is the process wherein an entity sells its non-tradable assets in exchange for cash in the illiquid market to raise capital. Recently, the Reserve Bank of India has extended NBFC securitization for the next six months. Such a move has acted as a great relief for the existing Non-Banking Financial Companies (NBFCs) since it [&hellip;]<\/p>\n","protected":false},"author":10,"featured_media":8244,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[89,544],"tags":[563],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/8226"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/comments?post=8226"}],"version-history":[{"count":37,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/8226\/revisions"}],"predecessor-version":[{"id":19058,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/8226\/revisions\/19058"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media\/8244"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media?parent=8226"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/categories?post=8226"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/tags?post=8226"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}