NBFCs, on the other hand, would profit more from the Rs 70,000 crore recapitalisation of state-owned banks, according to the study, because it will increase their capacity to lend more. According to a survey, the government’s steps to provide partial credit guarantees to public sector banks on asset purchases from NBFCs would only relieve funding pressure in the short term. The government declared in the budget that it would offer a one-time six-month partial credit to public sector banks over the first loss of up to 10% to purchase high-rated pooled assets of financially-sound NBFCs totalling Rs 1 trillion during the current financial year. The step, however, does not fix investors’ long-term concerns regarding NBFCs’ exposure to distressed real estate, as a survey released on Thursday by rating agency Fitch.
“The insurance policy provides more than adequate protection against normal risks. Up to Rs 1 trillion in issuance would be covered by the government. This should cover their liquidity needs for around six months, according to our calculations, “According to the agency.
It noted that the provision only applies to financially stable NBFCs, implying that more flawed institutions of funds. Wholesale financiers, smaller NBFCs, and fintech have had the most difficulty obtaining even bank funds. In contrast, large NBFCs continue to have good access to funding, although at a rising cost, according to the study.The government has mentioned a six-month timeframe, but it is unclear if this refers to the duration of the scheme or the duration of coverage for each transaction, according to the report.” A guarantee for first six months after a sale will do nothing to attract buyers,” the agency said. “We, therefore, expect that the guarantee would extend for the entire life of the assets purchased.”
NBFCs, on the other hand, will gain more from the Rs 70,000 crore recapitalisation of state-owned banks, according to the study, because it will increase their capacity to lend more. Potential asset-quality analysis of wholesale non-banking lenders could improve investor trust in the NBFC market, resulting in greater transparency and more stringent capital requirements.”However, suppose an asset-quality analysis reveals significant under-reporting of NPAs, such as banks. In that case, it can end up bringing things to a head by demonstrating to investors which companies have the most severe problems,” it said. While no review has been verified, market speculation about the possibility that one has grown as housing finance companies has moved under the RBI’s regulatory umbrella, according to the report.
