NBFCs with big realty loans must rebalance books: RBI

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  1. The Reserve Bank of India(RBI) has asked non-banking finance companies(NBFCs) to bring down their lending to the real estate sector.
  2. In the finance sector,the National Housing Bank has also been keeping a watch on lending to real estate sector by finance companies.Banks too have scaled down their lending to this segment.
  3. Despite facing a credit crunch,some NBFCs are still seeking to raise funds to on-lend to real estate projects which were stuck for want of additional funding. 
  4. These projects will now have to look for other lenders as the RBI does not want this risk to be passed onto banks’ balance sheets.The fear is that the troubled projects could multiply the problem for the financial sector as banks and HFCs are already exposed to them through under-construction home loans.
  5. Meanwhile,industry association FICCI has said in a report that they have observed a significant decline in bank credit to NBFCs which was considered to be the key channel for funding requirement.This can be attributed to factors such as rise in non-performing assets,coupled with increasing losses in the real estate industry.