Finance ministry, regulators discuss liquidity crunch in non-banking finance companies

New Delhi: The finance ministry officials discussed issues related to the liquidity crunch in the financial sector at a meeting on Tuesday with the country’s market regulators.

The meeting was held to discuss the ongoing funding issues faced by non-banking finance companies (NBFC) after a series of debt defaults by one of the country’s largest infrastructure funding companies in September triggered a heavy sell-off with lenders shunning the entire shadow banking sector.

The meeting of the Financial Stability and Development Council was attended by regulators including the Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority and Pension Fund Regulatory and Development Authority.

“The government has raised the issue of liquidity problems in the NBFC sector with the RBI,” a senior finance ministry official who was present at the meeting told reporters.

The crisis at Infrastructure Leasing and Financial Service Ltd (IL&FS) that has 348 subsidiaries and Rs 91,000 crore ($12.37 billion) outstanding debt had forced the government to takeover the board and appoint a new one which is expected to present its resolution plan to a company law tribunal on Wednesday.