NEW DELHI: The liquidity problem faced by the non-banking financial sector (NBFC) was flagged at the Financial Stability Development Council (FSDC) meeting in New Delhi on Tuesday which was attended by Finance Minister Arun Jaitley and Reserve Bank governor Urjit Patel along with all the four deputy governors and other ministry officials.
“The government has flagged its concern that the NBFC crisis should not spill over to other sectors. On its part, RBI has assured that the liquidity problem in NBFCs is not as severe as is being projected, barring few sectors, and assured the government that it is already doing whatever it can,” sources said after the meeting, which went on for almost two hours.
The meeting was also attended by the Sebi Chairman, and heads of other regulators like PFRDA, IRDAI, the Secretary, Department of Economic Affairs, Secretary Department of Financial Services, Principal economic Advisor Sanjeev Sanyal and Chairman of the Insolvency and Bankruptcy Board (IBBI). While the meeting, which started with a presentation by Sanyal on the macroeconomic situation, also discussed cyber-security in financial markets, it did not discuss non-performing assets.
Interestingly, the finance minister also extended an invitation to the RBI team for an upcoming event on MSMEs.Meanwhile, industry experts say that things have improved on the ground for NBFCs, with banks willing to buy loan books. A senior official with a housing finance company said that banks have been selectively looking at the issue and that deals were taking place. “Compared to the situation earlier this month, liquidity situation has eased, but can’t say it is 100 per cent normal,” he said.
Most private banks have said in recent weeks that they are comfortable lending to NBFCs depending on their risk profiles. Niche NBFCs like Manappuram Finance had said last week that they have been able to access Commercial Paper (CP) as well bank credit lines. They have also been trying to access public issue to raise money.