Economic package: Successful implementation of support measures for NBFI will be key, says Fitch Ratings
Fitch Ratings on Wednesday said support measures announced by the government for non-banking finance companies seek to ease borrower strain and boost funding conditions for NBFIs, but successful implementation will be the key
New Delhi: Fitch Ratings on Wednesday said support measures announced by the government for non-banking finance companies seek to ease borrower strain and boost funding conditions for NBFIs, but successful implementation will be the key.
In a statement Fitch said, NBFIs will continue to face considerable risks to their asset quality and liquidity even as the economy reopens gradually and banks - the major source of incremental NBFI funding - will remain cautious in the face of looming asset quality pressure.
— CNBC-TV18 (@CNBCTV18Live) May 20, 2020
The government last week announced a Rs 75,000 crore support package for NBFIs.
This includes a Rs 30,000 crore special liquidity scheme for non-banking finance companies, housing finance companies and micro-finance institutions that are finding it difficult to raise money in debt markets and also a Rs 45,000 crore partial credit guarantee scheme 2.0 for those with low credit rating to help them extend a loan to individuals and MSMEs.
Fitch said Indian non-bank financial institutions' (NBFI) funding and liquidity will continue to face pressure despite a pick-up in loan collections.
"Additional support initiatives announced by the Indian government last week could help to address some earlier policy gaps, but successful implementation will be key and India has a mixed record on this front," Fitch said.
It expects collections for the next few months to continue to fall well short of pre- Coronavirus repayment schedules even though NBFI loan receipts should improve from April''s depressed levels as coronavirus -related curbs are gradually eased.
"The government''s latest measures seek to ease borrower strain and boost funding conditions for NBFIs. A fully guaranteed Rs 3 trillion ($40 billion) loan scheme for micro, small and medium enterprises aims to encourage lenders to continue funding these more-vulnerable entities, while a modest NBFI debt guarantee plan could help smaller but creditworthy non-bank lenders," it added.
Fitch said the success of these schemes will rest on implementation details that are yet to be released as well as lowering the risk aversion among banks as they are the key intermediaries in the sector.
"Pandemic-related liquidity support measures to date have had limited success in improving funding conditions for the NBFI sector," it added.
Fitch took negative action on rated Indian NBFI portfolio in late March to reflect the sector's vulnerability to a coronavirus -related downturn. Since then, loan collections have taken a hit amid the extended economic shutdown.
Fitch-rated NBFIs have retained sufficient funding access consistent with their rating levels over the period, and recent developments are net positive for the sector.
"However, conditions remain fragile, and Fitch will continue to monitor underlying developments closely as we look to address the Negative Watches on our Indian NBFI ratings over the coming months," the statement added.
Gita Gopinath, chief economist of the IMF, said that compared to their July forecast, the global growth projection for 2021 has been revised down marginally
The official said with 2,840 patients getting discharged from hospitals in the last 24 hours, the number of recovered cases rose to 63,88,899
According to the BMC official, with 31,969 COVID-19 tests conducted in the last 24 hours, their cumulative number climbed to 1,05,34,673