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Last Updated : Oct 11, 2018 02:41 PM IST | Source:

More public sector banks may buy asset portfolios from NBFCs: Sources

A top govt official, however, told Moneycontrol that the decision to purchase such assets from NBFCs rests with the respective bank boards.

Nikita Vashisht @nikita_vashisht
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More public sector banks could take up assets in non-banking finance companies (NBFCs) as an "opportunistic" step in the sector, senior government officials said on October 11.

"Many banks are looking at taking up assets of NBFCs," said a top government official.

He said that banks have realised that there is "opportunity" in taking these "secured assets".

Country's largest public sector bank, State Bank of India, said on October 10 that it would do additional portfolio purchases in the range of Rs 20,000 - Rs 30,000 crore.

"The bank had initially planned for a growth of Rs 15,000 crore through portfolio purchase during the current year which is now being enhanced," SBI said in a statement.

Portfolio purchase from NBFCs is, generally, a route for banks to meet its regulatory requirement for priority sector lending. NBFCs, on the other hand, find easy buyers for such sell-offs when they are looking at selling their assets after holding them for a long time.

Another official, however, told Moneycontrol that the decision to purchase such assets from NBFCs rests with the respective bank boards.

"SBI was interested (in asset portfolio purchase)... Some of the other banks are also interested... Ultimately, it is up to them to take the decision," he said adding that banks are only "taking back" what was taken away from them by NBFCs.

"Remember, until last year, credit books for NBFCs were rising and reversing for banks... So what they are doing now is only taking back that credit share," he said.

In FY18, while loan books of NBFCs grew 21.2 percent, bank loans grew 10.3 percent.

According to a Credit Suisse note, 41 percent of borrowings of NBFCs are maturing in the next six months and "any liquidity pressures will only add to the refinancing risk of these instruments".

Government, however, considers that such steps from banks will help ward off fears of impending liquidity crunch in the sector. Alarm bells rang after one of the NBFCs, Infrastructure Leasing and Financial Services (IL&FS), defaulted on multiple debt obligations.

"Indian banks have starting taking over some of the assets of NBFCs... So, we are hoping there won't be any liquidity crunch now. NBFCs are better off now," the official said. "".

According to government sources, Centre is optimistic about NBFCs after it took "timely action" by putting in place new board for IL&FS.

"The government took the right step and has appointed the right board which has taken full charge," sources said.

On October 1, government superseded the board of IL&FS and appointed a six-member board with Uday Kotak as the non-executive chairman.

The other members on the IL&FS board are former Executive Vice Chairman of Tech Mahindra Vineet Nayyar, former Sebi Chairman G N Bajpai, ICICI Bank Non-Executive Chairperson GC Chaturvedi, and IAS officer Malini Shankar, and retired bureaucrat Nand Kishore.
First Published on Oct 11, 2018 02:33 pm
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