RBI governor Shaktikanta Das meets NBFC representatives, seeks suggestions on improving credit flow

Mumbai: Representatives of the troubled shadow banking sector met Reserve Bank governor Shaktikanta Das on Wednesday and are understood to have discussed a host of issues surrounding liquidity, which they have been struggling with since the IL&FS crisis broke out late August last.

There has also been a suggestion to have a bi-annual meeting between the governor and the representatives of the sector which is most likely to be implemented, sources said.

"We discussed our problems, starting with the liquidity issues. It is not as bad as November on liquidity right now, but the costs have gone up. We hope cost will come down soon," one of the attendees of the meeting.

Das, who has been meeting all the key stakeholders, including banks and MSME representatives, after taking charge last month, told the meeting that NBFCs play a significant role in credit flow to the economy, sources said.

He also sought suggestions on how to improve the credit flow, they said, adding no assurances were offered at the meeting.

 RBI governor Shaktikanta Das meets NBFC representatives, seeks suggestions on improving credit flow

Shaktikanta Das, RBI Governor. Reuters image.

Some NBFCs are said to have requested the monetary authority to allow them to access public deposits, which can give them access to funds, sources said, adding to take care of security, a minimum bar on the asset under management was suggested.

It can be noted that the NBFC sector has been facing problem since infra focused lender IL&FS started defaulting on loans in late August. The non-payment led to worries over other NBFCs and an aversion of both equity investors as well as others like MFs which used to provide them with finance.

The infra lender owes over Rs 55,000 crore to banks out of its over Rs 94,000 crore of group level debt.

In what seemed to aggravate the problems, the then RBI management under Urjit Patel refused to meet them and also refused any immediate relief through a special window, making them go to the government in New Delhi for help.

The RBI diagnosed the problem as one which emanates from asset liability mismatch, wherein some NBFCs, especially those having long-term assets, were funding them through short-term borrowings.

As the interest rates increased, NBFCs were unable to rollover their short-term borrowings without disturbing their margins, resulting in the problems.

Starting with the state-run bank chiefs, Das has met representatives of private sector lenders and small businesses as well.

 

 

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Updated Date: Jan 10, 2019 08:01:42 IST