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- SBI has purchased asset portfolios from Non Banking Finance Companies (NBFCs) worth Rs. 45000 crore thus offered required liquidity support.
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- It will help the bank to expand its loan portfolio and meet its priority sector targets in areas as farm sector, SME infrastructure and the social sector.
- NBFCs has been facing liquidity crunch in the wake of default by IL&FS and the dissolution of its board.
- NBFC role
NBFCs have come to play a far more important role in India’s financial sector over the past few years due to NPA issues.
- At the time of crisis, NBFCs have filled this void. This is proved by the fact that bank lending to these institution make up 19% of overall credit.
- 6. NBFC regulation
RBI has been regulating over 1100 such firms of which 249 are non-deposit taking but systematically important.
- RBI’s recent observation about the sector is quite strong but there are risks like rollover of short-term borrowings.
- Co-origination of loans
It seems that SBI decided to buy NBFCs portfolios in the wake of recent announcement by RBI about co-origination of loans- which are aimed at leveraging the reach of NBFCs while helping banks meet their priority sector targets, with joint involvement of both in lending and sharing.
