ZEE Business
ZEE BUSINESS
हिंदी में पढ़ें  हिंदी में पढ़ें
Live TV
Live TV
  • Home
  • Personal Finance
    • PPF
    • Mutual Funds
    • Income tax
    • EPFO
    • Income Tax Calculator
    • Personal Loan Calculator
    • Car Loan Calculator
    • Home Loan Calculator
    • SIP calculator
    • SWP Calculator
    • MF Returns Calculator
    • Lumpsum Calculator
  • India
    • Companies
    • Property
    • Startups
    • Uidai
  • Economy
    • Aviation
  • Tech
    • Mobiles
    • Apps
  • Auto
    • Cars
    • Bikes
  • Markets
    • Commodities
    • Currency
  • Railways
  • World
    • Economy
    • Politics
    • Markets
  • Survey
  • videos
  • photos
  • More ...
    • VIDEOS
    • PHOTOS
BREAKING NEWS
  • AMC Sector: Growth-oriented funds lead the strong inflows in sector, says BK Securities – check key triggers
  • Q1FY23 Preview: Pharmaceutical firms likely to deliver subdued performance in domestic market, says Nirmal Bang
  • Chemical sector may report growth in operating profit both sequentially and YoY in Q1FY23 – Check details here
  • Finance Ministry empanels 12 transaction advisers for assisting in implementation of Public Private Partnership projects
  • Stock market on Monday: Market may continue its volatile trade, believes Anil Singhvi - crude, rupee movement key monitorable
Read in App
Business News » India News

RBI draft liquidity norms may put pressure on NBFCs margins: Analysts

Draft liquidity norms for the non-banking financial companies (NBFCs) announced by the Reserve Bank will put pressure on their margins and returns over the medium term.

  • Twitter
  • Facebook
  • Linkedin
  • whatapp
  • View in App
RBI draft liquidity norms may put pressure on NBFCs margins: Analysts
The norms will also be applicable for all Core Investment Companies (CICs) registered with the Reserve Bank. Photo: PTI

The draft liquidity norms for the non-banking financial companies (NBFCs) announced by the Reserve Bank will put pressure on their margins and returns over the medium term, analysts say. The proposed norms may also result into consolidation in the NBFC sector, they said. Last week, the RBI released a draft circular on Liquidity Risk Management Framework for NBFCs with an asset size of Rs 100 crore.

The norms will also be applicable for all Core Investment Companies (CICs) registered with the Reserve Bank. The draft norms said all non-deposit taking NBFCs with asset size of Rs 5,000 crore and above, and all deposit taking NBFCs irrespective of their asset size, shall maintain a liquidity buffer in terms of a liquidity coverage ratio (LCR) which will promote resilience of NBFCs to potential liquidity disruptions by ensuring that they have sufficient High Quality Liquid Asset (HQLA) to survive any acute liquidity stress scenario lasting for 30 days.

"NBFCs would have to carry low yielding assets to meet the HQLA requirement going forward, which could exert pressure on their net margins, rating agency Icra said in a report.

In a note, financial services company Jefferies India said LCR norms would affect margins and returns in the medium term, especially for housing finance companies (HFCs), given higher asset liability management (ALM) mismatch.

Tighter liquidity norms should induce stronger ALM discipline among NBFCs, it said.
The LCR norms will be implemented in a calibrated manner over a period of four years starting from April 2020 and going upto April 2024.

The LCR requirement shall be binding on NBFCs from April 1, 2020 with the minimum HQLAs to be held being 60 per cent of the LCR, progressively increasing to the required level of 100 per cent by April 01, 2024.

Icra further said most large and better managed NBFCs have upped their on-book liquidity post September 2018 and carry adequate sanctioned credit/funding lines, with which they could meet the 100 per cent LCR requirement, even after stressing the outflows by 115 per cent and inflows by 75 per cent.

"Well managed NBFCs typically maintain 1-2 months debt repayments and in some case even expected disbursements, in the form of sanctioned undrawn lines, which would support their LCR ratio," the rating agency said.

According to law firm Cyril Amarchand Mangaldas Partner, Leena Chacko, the new norms would lead to consolidation in the NBFC sector.

"There is likely to be consolidation because NBFCs with higher liabilities and lesser liquid assets will have to consolidate in order to meet the regulatory requirement," Chacko said.

It should help improve the creditworthiness of the NBFCs and ensure that they are able to meet their liabilities, she said.

Aadhar Housing Finance Managing Director and Chief Executive, Deo Shankar Tripathi, said implementation of LCR and maintaining HQLA are very important and timely steps for sound and healthy growth of NBFCs.

"However, maintaining HQLA will be some drag on the margin and growth which is already under pressure due to increase in cost of borrowing and tightness in liquidity post September 18," Tripathi said.

He said lower rated NBFCs will find it difficult to raise resources under the proposed tight liquidity and ALM management norms, which are very good for stability of the sector.

"This might lead to consolidation in highly crowded NBFC space," he said.

Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.

TAGS:
Reserve Bank IndiaNBFC
Written By: PTI
Updated: Mon, May 27, 2019
11:11 pm
New Delhi, ZeeBiz WebDesk
RELATED NEWS
Lay-offs rise as stagflation worries mount; Zee Business' research explains impact Lay-offs rise as stagflation worries mount; Zee Business' research explains impact
Credit Default Swaps Guidelines to be issued today; move to develop credit derivatives market: RBI Governor Credit Default Swaps Guidelines to be issued today; move to develop credit derivatives market: RBI Governor
Retail inflation likely marched higher in November: Reuters poll Retail inflation likely marched higher in November: Reuters poll
Amazon Pay also set to help users book deposits, even as GPay service under RBI watch Amazon Pay also set to help users book deposits, even as GPay service under RBI watch
Rules changing from January 2021:  LPG cylinder prices, GST to mobile phones, all you need to know about new things that will impact your day-to-day life Rules changing from January 2021: LPG cylinder prices, GST to mobile phones, all you need to know about new things that will impact your day-to-day life

LATEST NEWS

Why is the rupee falling? Zee Business reveals reasons

Stocks to Buy: Vikas Sethi recommends IDFC from F&O, Indo count from Cash Market; know why?

Crude oil jumps nearly 3% as supply outages outweigh recession fears

Rakesh Jhunjhunwala Stocks: Agrochemical firm Rallis India shares may surge by 23% despite pressure on margins – Here’s why?

Q1FY23 Preview: Pharmaceutical firms likely to deliver subdued performance in domestic market, says Nirmal Bang -

AMC Sector: Growth-oriented funds lead the strong inflows, says BK Securities – check key triggers

Chemical sector may report growth in operating profit both sequentially and YoY in Q1FY23 – Check details here

IBPS Clerk Recruitment 2022: Registration begins for 6000+ vacancies at ibps.in; check direct link, last date, how to apply online and more

Food labelling rules for online food delivery platforms like Zomato, Swiggy changed from today; compliance failure to invite action

YouTube's new tools to combat comment spam, account imitators

  • India News
  • World News
  • Companies News
  • Market News
  • Personal Finance News
  • Technology News
  • Automobile News
  • Small Business News
  • Income Tax Calculator
  • Live TV
  • Videos
  • Photos
  • Author
  • Rss Feed
  • Advertise with us
  • Privacy Policy
  • Legal Disclaimer

Latest Trending Updates

  • EPFO
  • Budget 2020
  • Income Tax Return
  • Auto Expo 2020
  • Home Loan
  • Business News

Trending Topics

  • Income Tax
  • income Tax Calculator
  • 7th Pay Commission
  • Reserve Bank of India
  • GST
  • Latest Business News

Follow us on

zeebiz
zeebiz

Partner Sites

  • Zee News
  • Hindi News
  • Marathi News
  • Bengali News
  • Tamil News
  • Malayalam News
  • Gujarati News
  • Telugu News
  • Kannada News
  • DNA
  • WION
© 2022. India Dot Com Private Limited. All Rights Reserved.
LIVE TV