NBFCs obtain twin elixirs

NEW DELHI: Non-banking to finance The companies, which have been pressured by liquidity after the collapse of ILu0026FS, have twin lifetimes of the government and the RBI. The Budget's decision to subject it to stricter regulation of the RBI, which now has powers to fire a NBFC board, has also been hailed, as it seems to inspire confidence among lenders.

The government has decided to provide a partial guarantee (for defaults of up to 10%) to banks that buy up to 1 lakh crore of NBFC loans. The RBI, meanwhile, has announced that it will provide the required liquidity support to banks against their excess G-sec. holdings . This will allow banks to take advantage of Additional liquidity of Rs 1.34,000 crores.

The biggest boost for the sector was the recognition by the to finance minister that the sector plays a crucial role in sustaining consumption demand as well as in capital formation. “NBFCs that are fundamentally sound should continue to get funds from banks and mutual funds without being unduly risk-averse,” said Sitharaman, who also announced measures to strengthen regulatory control over the sector.

The decision to move the NBFCs to more regulation of the RBI is very positive, as it will give a better legitimacy to the sector and increase confidence, said Dinanath Dubhashi, MD, Lu0026T Finance.