Stimulus measures can only prop up segments under distress; safe reopening of economy key to NBFIs recovery: Fitch

In a statement on the stimulus measures announced by Finance Minister Nirmala Sitharaman, Fitch said the 100 percent guarantee for MSME loans and farm support schemes were the two main highlights from the announcements.

Press Trust of India May 15, 2020 07:05:06 IST
Stimulus measures can only prop up segments under distress; safe reopening of economy key to NBFIs recovery: Fitch

New Delhi: Fitch Ratings on Thursday said the safe reopening of economy will be key to recovery of non-bank financial institutions (NBFIs).

In a statement on the stimulus measures announced by Finance Minister Nirmala Sitharaman, Fitch said the 100 percent guarantee for MSME loans and farm support schemes were the two main highlights from the announcements.

“Both are fairly significant in size and will help to support the more vulnerable borrower segments for the NBFIs. The NBFC/MFI debt guarantee schemes target the right issues but are not large enough to address the sector's funding strains,” it added.

Stimulus measures can only prop up segments under distress safe reopening of economy key to NBFIs recovery Fitch

Representational image. Getty Images

The government on Wednesday announced about Rs 6 lakh crore package comprising Rs 3 lakh crore of collateral-free loans for small businesses and a Rs 30,000 crore lifeline to non-bank and housing finance companies.

On Thursday, it announced a Rs 3.16 lakh crore package comprising free foodgrains for migrant workers, Rs 2 lakh crore concessional credit to farmers and working capital for street vendors in a bid to help those hit hard by the nationwide lockdown.

“Ultimately, however these measures can only serve to prop up the segments that are under distress. The safe reopening of the economy more than anything else will be the key to recovery for the NBFIs,” Fitch said.

A nationwide lockdown to contain the spread of COVID-19 disease is in place since 25 March. The lockdown date has been extended twice and will now scheduled to end on 17 May.

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