Mumbai: The Reserve Bank of India (RBI) said late on Friday it would allow banks to partially stand-in as guarantors for some bonds issued by some non-banking financial companies (NBFCs) and housing finance companies, in a move aimed at easing a liquidity crunch in the sector.
The RBI said the partial credit enhancement would only be allowed to refinance existing debt of the NBFCs and HFCs, provided the bonds issued by them have a tenor of not less than three years.
A string of defaults at IL&FS have triggered sharp falls in Indian stock and debt markets amid fears of contagion within the rest of the country’s financial sector.
Last month, the Indian government took control of IL&FS to protect the financial system and markets from potential collapse, and replaced its board. The new board submitted a plan to revive the debt-laden firm this week.
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