RBI proposes norms to help ailing NBFCs deal with liquidity crisis

The Reserve Bank of India Friday proposed a set of guidelines for large NBFCs to help them deal with severe liquidity problems and prevent re-occurrence of IL&FS type of debt crisis. As per the proposal, a Liquidity Coverage Ratio (LCR) regime would be introduced in all deposit taking Non-Banking Financial Companies (NBFCs) and non-deposit taking shadow banks with an asset size of Rs 5,000 crore and above in a phased manner. The RBI has released a draft circular on the 'Liquidity Risk Management Framework for NBFCs and Core Investment Companies (CICs). With a view to ensuring a smooth transition to the LCR regime, the proposal is to implement it in a calibrated manner through a glide path over a period of four years commencing April 2020 and up to April 2024. "An NBFC shall maintain an adequate level of unencumbered HQLA (High Quality Liquid Assets) that can be converted into cash to meet its liquidity needs for a 30 calendar-day time horizon under a significantly severe liquidity

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