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Indian central bank hikes banks' loan exposure limit to nonbanks

The Reserve Bank of India allows banks to lend up to 20% of their Tier-1 capital to a single nonbanking financial company, or NBFC, up from 15% previously, in a bid to improve liquidity for nonbank lenders.

The central bank said Sept. 12 that the higher exposure limit is applicable to all NBFCs except so-called gold loan companies which accept gold and jewelry as collateral.

The previous guidelines, which took effect April 1, stated that banks' exposures to a single NBFC is restricted to 15% of their capital, while general single counterparty exposure limit is set at 20% of their capital.