RBI allowed banks to provide PCE to NBFC bonds

Posted on:03 Nov 2018 12:22:48
RBI allowed banks to provide PCE to NBFC bonds
03 November 2018 Current Affairs:

The Reserve Bank of India (RBI) permitted banks to provide Partial Credit Enhancement (PCE), or a partial guarantee, to bonds issued by systematically important Non-Banking Financial Companies (NBFC) and Housing Finance Companies (HFC). The move is to enhance their liquidity position. 

It also said that the bonds backed by PCE from banks should only be utilised for refinancing the existing debt of the NBFC-ND-SIs/HFCs. Banks should introduce appropriate mechanisms to ensure that the end-use condition is met. The exposure of a bank by way of PCEs to bonds issued by each such NBFC-ND-SI/HFC shall be restricted to 1% of capital funds of the bank within the extent single/group borrower exposure limits.


The Reserve Bank of India (RBI) permitted banks to provide Partial Credit Enhancement (PCE), or a partial guarantee, to bonds issued by systematically important Non-Banking Financial Companies (NBFC) and Housing Finance Companies (HFC). The move is to enhance their liquidity position. 

It also said that the bonds backed by PCE from banks should only be utilised for refinancing the existing debt of the NBFC-ND-SIs/HFCs. Banks should introduce appropriate mechanisms to ensure that the end-use condition is met. The exposure of a bank by way of PCEs to bonds issued by each such NBFC-ND-SI/HFC shall be restricted to 1% of capital funds of the bank within the extent single/group borrower exposure limits.


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