India's cenbank to enhance monitoring of shadow banking firms -governor

IL&FS Transportation Networks

09/06/2019 10:47

* To take steps to maintain financial stability of NBFCs if
needed
    * Will issue guidelines for liquidity risk management at
NBFCs
    * To put in place framework for closer surveillance of such
firms
    * New stressed asset rules to maintain improved credit
culture

    By Promit Mukherjee
    MUMBAI, June 9 (Reuters) - Reserve Bank of India Governor
Shaktikanta Das said the central bank would closely monitor the
health of non-banking financial companies (NBFCs) and it would
not hesitate to take corrective  measures, if needed, to address
issues in the shadow banking sector.
    "We will not hesitate to take any required steps to maintain
financial stability in the short-, medium- and long-term," Das
said in a speech on Saturday at a convocation ceremony in the
western Indian city of Pune.
    The comment comes at a time when there are fears that India
may be facing a major crisis in its shadow banking sector after
shares of Indian mortgage lender Dewan Housing Finance Corp Ltd
(DHFL)  DWNH.NS  plunged this week after two credit-rating firms
cut their view of DHFL debt to "default" levels.  urn:newsml:reuters.com:*:nL4N23C2X3
    The looming trouble at DHFL comes nine months after a series
of downgrades and defaults at another major NBFC, Infrastructure
Leasing and Financial Services (IL&FS), shook stock markets and
stoked concerns of a malaise in the sector.
    "The Reserve Bank will continue to monitor the activity and
performance of this sector with a focus on major entities and
their inter-linkages with other sectors," he said, in a speech
that was published on the RBI's website late on Saturday.
    The regulator will soon issue final guidelines for liquidity
risk management and will put in place a comprehensive
information technology framework to strengthen surveillance of
NBFCs, the governor said.
    Given the importance of NBFCs for the Indian economy, the
governor stressed the need for a higher level of supervision of
such companies to ensure solid credit growth and asset liability
management.
    Das said as part of initiatives to enhance supervision of
NBFCs, the central bank is putting in place a system to ensure
regular interaction with all stakeholders in the shadow banking
value chain such as auditors, credit-rating agencies and banks.
    The central bank on Friday issued new guidelines around the
resolution of stressed assets after India's Supreme Court in
April struck down its earlier guidelines saying it had acted
beyond its powers.  urn:newsml:reuters.com:*:nL3N21K1B7  urn:newsml:reuters.com:*:nL4N23E1YM
    The new rules "will sustain the improvements in credit
culture" and help in making India's financial system strong and
resilient, Das said on Saturday.
    Das also urged Indian public sector banks (PSBs) to not
depend solely on government capital infusions to solidify their
balance sheets.
    "Depending upon individual situations, PSBs should access
the capital market for mobilisation of capital," he said.

 (Reporting by Promit Mukherjee; Editing by Euan Rocha and
Christopher Cushing)
 ((promit.mukherjee@thomsonreuters.com; +91-22-6180-7516;
Reuters Messaging:
promit.mukherjee.thomsonreuters.com@reuters.net))