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RBI begins monitoring HFCs
Why is it in the news?
- The Reserve Bank of India (RBI) has started monitoring the of housing finance companies (HFCs) on a daily basis after the liquidity crisis hit these firms, resulting in defaults.
More in the news
- RBI will monitor the liquidity position, asset-liability gap and repayment schedules of housing finance companies (HFCs).
- Mortgage lenders are regulated by the National Housing Bank. But since the liquidity crisis of the HFCs could have a spillover effect on the other segments in the financial sector, including banks.
- The spillover effect could affect financial stability, hence it was necessary to monitor these entities on a regular basis by RBI.
- A general manager in National Housing Bank has been asked to be in regular communication with RBI.
- Context:(1) The non-banking financial sector, are in a crisis of confidence with banks having stopped lending to these entities since the debt default by IL&FS in September last year.(2) NBFCs saw their cost of funds going up sharply in the last few months.(3) This has impacted their business growth as the lenders have to cut down on their loan disbursements.(4) The move to monitor HFCs on a daily basis comes after some mortgage lenders started feeling the pressure to meet their financial obligations.
Source
The Hindu.