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.