Even if NBFCs are able to raise funds, it will mostly be used to repair balance sheets and refinance liabilities. It will take at least 12 months for NBFCs to be back on the lending track.
The rating for long term debt program was downgraded to Care D from Care BBB+ due delays in debt servicing. It fell by over 15% to record its worst fall since October 2018.
Considering the impact on the banking sector, RBI needs to issue the operational and other guidelines for both banks and NBFCs so as to enable them to make the transition to Ind AS.
Moneycontrol's Vaibhavi Khanwalkar does a 3 Point Analysis on the risks of moving the banks out of PCA.
According to a release, NBFCs categorized as Asset Finance Companies (AFC), Loan Companies (LCs) and Investment Companies (ICs), will be merged into a new category called NBFC - Investment and Credit Company.
CPs are unsecured money market instruments issued by corporates to raise short-term funds and are usually for a period up to one year
The share of bank credit to NBFCs has been the highest in the December 2018 quarter.
The non-banking finance company recently got approval from its board to raise up to Rs 10,000 crore via public issue of bonds.
As we enter 2019, the macroeconomic set-up is turning favourable for India. As macros improve and earnings of corporate lending banks return to normal, a marked revival in growth of the corporate earnings is expected to finally manifest in 2019.
Apart from IT and Consumer, improvement in liquidity situation could be positive for the BFSI sector, but bond yield could rise because of higher fiscal deficit which will be negative for NBFCs.
This will be part of the asset-liability management (ALM) norms for the sector that RBI is working on to make these financing companies more dynamic in reporting liquidity
Current valuation prices in most concerns making it a worthy long term bet
The CRISIL report said revival in residential realty is likely to be gradual and prices are expected to remain under pressure on account of slowdown in volumes due to on-going liquidity concerns.
RBI's relaxation would primarily benefit HFCs where the loan tenure is typically more than 5 years with greater proportion HFCs’ loan book now becoming eligible for securitisation.
A day before, the infrastructure conglomerate announced that it has received more than a dozen EoIs for the proposed stake sale of its two arms -- IL&FS Securities Services Ltd and ISSL Settlement & Transaction Services Ltd
Improvement in the macro environment does have a positive impact on equities. Easing of crude oil prices, stability in rupee and its possible fallout on monetary policy has aided sentiments.
Sakshi Batra does a 3 Point Analysis on the current funding situation, its likely impact on growth, asset quality and profitability of housing finance companies.
The National Housing Bank wants to confirm that companies have enough funds for repayment and disbursements
His comments come in the backdrop of the friction between the Centre and RBI over the liquidity issue.
The regulator may also mandate liquid funds to mark-to-market their investments in securities with maturities of 30 days or more
In October, the rollover rate of CPs issued by these 50 largest NBFCs was only around 40 percent of the average monthly issuances between June and August 2018
Apart from liquidity issues, at present, the NBFC industry is also grappling with concerns around the recovery of cash flow in their business. Some banks have also withdrawn their already-sanctioned limits to curtail further financing due to fears of them defaulting.
A PCE enhances the credit rating of bonds enabling the NBFCs to raise more resources from the bond market at lower borrowing costs
There seems to be no end to the acrimony between the government and the central bank, which has taken centrestage amid the ongoing liquidity crisis in NBFCs.