Move to tackle liquidity crunch

The Real Estate and Financial sectors have welcomed the Reserve Bank of India’s proactive attempt to boost credit flows to Non-Banking Financial Companies (NBFCs).

“We welcome the RBI’s move, which will encourage banks to enhance their lending to NBFCs and enable NBFCs tackle the liquidity crunch,” said Raman Aggarwal, Chairman, Finance Industry Development Council, in a statement on 19 Oct 2018.

Aggarwal said the whole issue of asset-liability mismatch is more relevant in the case of long-term lending companies like housing finance companies. A typical NBFC model is a retail lending model with short tenures of two to five years, and small ticket sizes where asset-liability mismatch is not a concern.

The RBI move would send the right signal that there is no systemic problem but merely a case of sentiments having gone wrong, he said.

Welcoming the move, Shobhit Agarwal, MD & CEO – ANAROCK Capital, said “Banks are already grappling with the problem of NPA, and have consciously reduced their exposure towards real estate.

“The current IL&FS crisis has further complicated the liquidity crisis in the system and every lender is taking extra precautions while disbursing capital to NBFCs and HFCs, including banks. In the current background where real estate sales have been extremely slow and a substantial amount of projects are running behind schedule, banks might not be willing to lend to NBFc and HFCs, said Shobhit Agarwal.

However, the NBFCs with strong track records might certainly get some respite from the banks, he pointed out.

It is estimated the RBI move could provide up Rs.50,000 crore to the sector which is trying to refinance maturing commercial paper and short-term loans. fiinews.com