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IIBF NBFC study materials
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IIBF NBFC: NBFC Credit, Risk and Asset-Liability Management

IIBF NBFC · Work through your exam, one topic at a time.

All guide sections

NBFC Credit, Risk and Asset-Liability Management

What this domain tests

How credit is appraised and classified, how concentration is capped, and how liquidity and interest rate risk are measured and reported.

Credit and asset quality

  • Board-approved credit policy; appraisal, documentation and credit-bureau checks; exposure ceilings for a single borrower and a group, with higher ceilings for infrastructure lending.
  • Income recognition and asset classification: a loan is an NPA when overdue for more than 90 days; classification is borrower-wise, so if one facility is an NPA the borrower's other facilities also become NPA; income on NPAs is recognised only on receipt; upgradation only after the entire arrears of interest and principal are cleared.
  • SMA buckets (31-60 and 61-90 days overdue) are early-warning tools, not NPAs.
  • Large NBFCs report exposures of Rs 5 crore and above, including SMA/NPA status, to CRILC.
  • Co-lending with banks follows an 80:20 arrangement where the NBFC retains at least a 20% share and the borrower pays the blended rate.

ALM and liquidity

  • ALM directions apply to deposit-taking NBFCs and non-deposit-taking NBFCs above the asset threshold (Rs 100 crore): board ALM policy, ALCO, structural liquidity statements in residual-maturity buckets and tolerance limits.
  • LCR applies to NBFCs with assets of Rs 10,000 crore and above.
  • Risk governance: Risk Management Committee of the board, a Chief Risk Officer in the Upper Layer, ICAAP, stress testing and a contingency funding plan.

Worked example

A lender funds Rs 100 crore of five-year fixed-rate loans at 12% with one-year commercial paper at 8.5%. The spread looks attractive, but in the up-to-one-year bucket outflows (CP repayment) exceed inflows (loan EMIs), leaving a negative gap. Refinancing risk and rate-reset risk both sit in that short bucket, so the gap must stay within the board's tolerance limit and be backed by committed lines or securitisation.

Traps

Treating a 60-day overdue account as an NPA; upgrading a borrower after a part-payment; ignoring off-balance-sheet and committed exposures when building ALM buckets.