RBI Asks NBFCs to Maintain LTV Ratio of 50% on Lending Against Shares
With an aim to curb volatility in capital market, the Reserve Bank today asked NBFCs to maintain a loan-to-value (LTV) ratio of 50 per cent in case of lending against collateral of shares.
Also, they have been asked to accept only 'Group 1' securities as collateral for loans of value more than Rs 5 lakh, RBI said in a notification.
Non Banking Finance Companies lend either by way of pledge of shares in their favour, transfer of shares or by obtaining a power of attorney on the demat accounts of borrowers.
RBI said that irrespective of the manner and purpose for which money is lent against shares, default by borrowers can and has in the past lead to offloading of shares in the market by the NBFCs thereby creating avoidable volatility in market.
"NBFCs lending against collateral of shares shall... maintain an LTV ratio of 50 per cent; and accept only Group 1 securities as collateral for loans of value more than Rs 5 lakh," the notification said.
It said: "All NBFCs with asset size of Rs 100 crore and above shall report online to stock exchanges, information on the shares pledged in their favour, by borrowers for availing loans."
Currently, lending against shares carried out by NBFCs is not subject to specific instructions apart from the general prudential regulation applicable to all NBFCs.
There are anecdotal evidences of volatility in the capital market being the result of offloading of shares by NBFCs, RBI said while announcing the "minimum set" of guidelines on lending against shares.
- Encounter In Assam Was Fake, Says Top CRPF Officer
- Nepal Prime Minister Prachanda Resigns
- 'Enemy' Will Remember Pakistan's Response
- Wonderful, Precise And Very Cool: How Do Our Money Up-Chucking Machines Work?
- "I'm Only Passing Through" 10 Leonard Cohen Songs That You Must Listen To
- Blackout For NDTV Stirs The Media
- Daily Curator: The Dominion Of Misunderstood Men Over Headlines
- Daily Curator: Of Holes Being Poked Into The Bhopal Encounter And The Origins Of Chyawanprash
- Watch: Viral Video Has Man Lighting Up A Line Of Crackers Attached To His Mouth
- MOST VIEWED
- MOST COMMENTED
- What Exactly Is The Govt Celebrating? Rahul Questions 'Modi's Three Year' Festivities
- IT Dept Raids 22 Locations In Benami Land Deal Case Linked To Lalu Prasad Yadav
- Mamata Banerjee Discusses Joint Candidate for President Polls with Sonia Gandhi
- Petrol Price Cut By Rs 2.16 per Litre, Diesel By Rs 2.10