Rashesh Shah sees credit growth of NBFCs stabilising between 15-18% over next few years

Rashesh Shah, chairman and CEO of Edelweiss Financial Services, spoke to CNBC-TV18 about the growth worries in the NBFC market and liquidity concerns.

With regards to the debt markets, he said, "There is always liquidity crunch in the last week of September and March, when a lot of banks and corporates who invest into liquid funds, mutual funds (MF) they withdraw money. So commercial paper (CP) unwinding happens."

"The CP market will be there but will be smaller," he said. "The total CP market for NBFCs, which was around Rs 2.5 lakh crore, will stablilse around Rs 1.5 lakh crore."

According to Shah, "In the last 3-4 years, the best part of bank portfolios was exposure to NBFCs, which were growing at 25-30 percent in the last five years."

"However, going forward NBFCs credit growth will likely stabilize between 15-18 percent, for the next few years, said Shah. Meanwhile, asset quality of NBFCs will remain intact but there will be liability crunch, which could slowdown growth but margins and asset quality will improve," said Shah.

When asked how Edelweiss growth be impacted in second half, he said, "We would hold lot more cash, scale back some of the books and will hold around 15 percent of the balance sheet as liquidity cushion."

“So people will hold more liquidity, not disburse in hurry, which could automatically moderate growth down but I don’t see pricing issues,” he said.

When asked if the new rules were needed in terms of caps for MF investment sector, he said yes and added, "We also need rules for ALM management of NBFCs, he added. We have to learn from this mistake that CP market can be uncertain and people have to be prepared for that."

Source: CNBC-TV18