See funding environment for NBFCs remaining benign for some time: JPMorgan

Finance Minister Arun Jaitley on Wednesday said the government would take all the necessary steps to boost the Indian economy. So, it is likely that the government may look at steps to strengthen bank balance sheets by recapitalising public sector undertaking (PSU) banks.

The above news led to rise in bond yields and corporate paper yields, which led to non-banking financial companies (NBFCs) trading down. Would this change JPMorgan's view on NBFCs?

However, Seshadri Sen of JPMorgan does not think one day of movement in yields would impact the overall profitability of NBFCs and therefore, it does not change their view on NBFCs. Moreover, with the abundance of liquidity in the system, the funding environment for NBFCs would likely remain benign for some time to come, he said.

According to him, lot of NBFCs also have the power to pass on small changes in the cost of funds. However, one has to be selective in NBFCs and that it is not a sector one can secularly look at, he said, adding that the winners in the space are so strong that they may be able to withstand a bit of incremental competition from the PSU Banks (in case they are recapitalized and would compete in the lending category).

So, even if recapitalisaiton of PSU Banks takes place, it may not be a major game changer for NBFCs.