NBFCs not to make Provision for Guaranteed Portion of Loan: RBI

The Reserve Bank said non-bank financial companies ( NBFCs) do not have to make provision for guaranteed portion of loans for low income housing.

In case of NBFC-MFIs, if the advance covered by Credit Risk Guarantee Fund Trust for Low Income Housing (CRGFTLIH) guarantee becomes non-performing, no provision need be made towards the guaranteed portion, RBI said in a notification.

The amount outstanding in excess of the guaranteed portion should be provided for as per the guidelines on provisioning for non-performing advances, it added.

NBFC-MFIs may assign zero risk weight for the guaranteed portion, it said, adding, the balance outstanding in excess of the guaranteed portion would attract a risk-weight as per extant guidelines.

The CRGFTLIH for urban areas has been set up by the government in June 2012.

The corpus of the fund is Rs 1,000 crore to be contributed by Government of India, the settlor of the Trust. The government has released Rs 50 crore in 2012-13.

The fund trust is managed by the National Housing Bank.

Economic Times, New Delhi, 02-01-2014

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