MFIs go slow on lending as NBFCs hold on to cash

The squeeze in the liquidity by the NBFCs is continuing to affect microfinance operations which are not in the city.
Because of this effect, the microfinance companies which rely on the NBFCs for their fundings, are not disbursing funds, and some say the disbursement has dropped 30 to 50% in October. 
The microfinance institution network (MFIN) is planning to meet the NBFCs in next week to plea for releasing funds which will cover their working capital up to 50 to 60%. The money borrowed by the MFIN from NBFCs is at a higher rate than the banks.
Mr. Kumar, the MD of Credit access Grameen, said that they have raised the concerns to the RBI and will also talk to the NBFCs for not stopping the funds for the NBFC-MFIN ties because they belong to a low-risk category in terms of asset-liability mismatch. He also urged that he will plea to the members to do more securitization in order to erase all of the obstructions to the liquidity flow.
Some of these MFI firms are trying to borrow the money at the higher rates to cover up their needs. According to the Managing Director of Kolkata based Uttrayan Financial Services, the rates at which they are borrowing money from one of the NBFC 50 basis point higher than the usual because others have stopped releasing funds. A basis point means 0.01 percentage point. 
The large NBFCs-MFIN tie-ups with a diversified source of fundings are doing much better.  
Others firms are conserving funds so that they don’t have to stop their businesses. The Chief Executive of the Fusion Microfinance, one of the top 10 firms in terms of gross loan portfolio, said that they are trying to keep more cash in the balance sheet so that they can avoid the loan brakes in the loan disbursements.