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    RBI Circular on FALLCR Against Credit Disbursed to NBFCs and HFCs

    December 28, 2018

    RBI issued a circular that extends, to March 31, 2019, the Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR) against credit disbursed to non-banking financial companies (NBFCs) and Housing Finance Companies (HFCs).

    Banks have been permitted to reckon government securities as Level 1 High Quality Liquid Assets (HQLA) under FALLCR within the mandatory statutory liquidity ratio requirement up to 0.5% of the bank’s Net Demand and Time Liabilities (NDTL) in respect of their incremental lending to NBFCs and HFCs after October 19, 2018. This facility was available up to December 31, 2018. Additionally, the single borrower limit for NBFCs (not financing infrastructure) has been increased from 10% to 15% of capital funds till December 31, 2018. To further facilitate banks to lend to NBFCs and HFCs as indicated, it has been decided to extend the aforesaid facilities up to March 31, 2019.

    The circular also noted that with effect from April 01, 2019, banks shall be guided by the instructions contained in circular dated December 01, 2016 in terms of which banks’ exposures to a single NBFC shall be restricted to 15% of their eligible capital base (tier 1 capital).

    Keywords: Asia Pacific, India, Banking, Liquidity Risk, Basel III, LCR, HQLA, FALLCR, NBFC, HFC, Statutory Liquidity Ratio, RBI

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