RBI tightens norms for lending against shares
21/08/2014 17:42
Reserve Bank of India prescribed rules including loan-to-value ratio for non-banking finance companies (NBFCs) to lend against shares. Banking regulator took this step to avoid volatility in capital market triggered by offloading of shares by NBFCs, RBI said in a press release. Under new rules, finance companies will have to keep Loan to Value (LTV) ratio of 50 per cent in loans given against shares. NBFCs have in place their own internal controls for lending against shares including a loan to value (LTV) ratio. But there are anecdotal evidences of volatility in the capital market being the result of offloading of shares by NBFCs, RBI said in statement. RBI said finance companies can accept only group I securities as collateral for loans of value more than Rs 5 lakh and it would review this norm. NBFCs with asset size of Rs 100 crore and above will have to report on-line to stock exchanges, information about shares pledged in their favour, by borrowers for availing loans.
21/08/2014 17:42
Reserve Bank of India prescribed rules including loan-to-value ratio for non-banking finance companies (NBFCs) to lend against shares. Banking regulator took this step to avoid volatility in capital market triggered by offloading of shares by NBFCs, RBI said in a press release. Under new rules, finance companies will have to keep Loan to Value (LTV) ratio of 50 per cent in loans given against shares. NBFCs have in place their own internal controls for lending against shares including a loan to value (LTV) ratio. But there are anecdotal evidences of volatility in the capital market being the result of offloading of shares by NBFCs, RBI said in statement. RBI said finance companies can accept only group I securities as collateral for loans of value more than Rs 5 lakh and it would review this norm. NBFCs with asset size of Rs 100 crore and above will have to report on-line to stock exchanges, information about shares pledged in their favour, by borrowers for availing loans.
