RBI must provide more liquidity to NBFCs to boost lending: DEA Secretary

The Reserve Bank of India should provide more liquidity to non-banking finance companies (NBFCs) in a bid to boost lending, Economic Affairs Secretary Subhash Chandra Garg said in an interview to the Economic Times newspaper.

A liquidity crunch had hit India's shadow banks in September and October after a major infrastructure funding company defaulted on a series of debt obligations spreading panic among other NBFCs.

The RBI has since then been conducting open market purchase of bonds to infuse adequate cash into the banking system along with other measures to ease refinancing ability of the NBFCs.

"This situation still requires support of liquidity and we need to continue to help manage the economy in such a way, that they do get enough liquidity for at least their normal growth if not the extraordinary growth they were having," Garg said in the interview that was published on Monday.

"I hope we should be able to ensure this working with the RBI."

The government and the RBI were engaged in an unusually strong public clash since late October after a top central bank official called for greater autonomy for the bank.

Since then both the sides have calmed down with the central board which includes government nominees agreed at a meeting last week to ease capital rules of banks that will help boost lending. The next meeting is scheduled on Dec. 14.