Though the Budget has provided immediate relief to the NBFC sector, it has failed to tighten the systemic noose around the factors that created this crisis.
ONE OF THE MANY ISSUES THAT HAVE DOMINATED the Indian financial landscape is the credit crisis that painfully unfolded after IL&FS failed to service its debt obligations in the last quarter of 2018. The three-decade-old lending giant defaulted on a few payments and failed to service its commercial papers (CP) on the due date. A similar story unfolded at DHFL (Dewan Housing Finance), another shadow bank engaged in housing finance activities, followed by smaller names, thereby inviting a series of downgrades from the rating agencies. Although the market was rife with fears that IL&FS’s collapse would lead to a chain reaction across the NBFC space, but nothing of the sort has happened even after 10 months. It is increasingly being realised that there were company-specific reasons at play.
The IL&FS debacle has served to underline the high risks inherent in NBFC business models that rely on short-term market borrowings for long-term loans. The resulting risk aversion by lenders has landed NBFCs and Housing
Finance Corporations (HFCs) with high asset-liability mismatches in hot waters (for instance Reliance ADAG firms and DHFL). The NBFC sector plays a critical role in powering consumption and ensuring credit flow to unbanked segments and its troubles needed objective assessment and solutions.
The Budget was expected to go for structural reforms while addressing the fundamental ailments faced by some sectors, NBFCs being one of them. But it stopped short of that. Several steps have been announced but they are inadequate on some counts.
Proposals in the Budget
This story is from the July 6, 2019 edition of Businessworld.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the July 6, 2019 edition of Businessworld.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Sign In
Making India A Renewable Hub
The industry stresses on fostering public-private partnerships that can lead to the development of distributed energy infrastructure, supporting the decarbonisation efforts of clients and communities alike
Feeling The Heat
After a dream run, India's domestic transportation sector is now finding itself bogged down by demand slowdown, inventory pile-up, high fixed cost, rising petroleum and ATF prices and, of course, the unprecedented summer heat
'WE EXPECT ENGINE OF PRIVATE INVESTMENT TO GATHER PACE'
Newly appointed CII President SANJIV PURI explains to ASHISH SINHA of BW Businessworld why the Cll is optimistic about Indian industries boosting economic growth and outlines the future roadmap. Excerpts
Global Digital Platforms and Geopolitics
THE OVERWHELMING rise in the might of technology companies is a matter of universal concern – as much from the competition law and business policy angle as from the viewpoint of sovereign security.
Descriptive Designations
DESIGNATIONS are morphing more rapidly than deep fakes that go viral. At one time, most organisations had decades-old designations which gave one a clear sense of the relative hierarchical position in the organisation.
The iPhone and the Lada!
NA RECENT VISIT to Azerbaijan, I had a chance to see mud volcanoes. Seeing those eruptions, the craters, and the mud-like lava was quite an experience.
THE 'VIKAS' WISHLIST: OUR EXPECTATIONS FROM NDA 3.0
NATIONAL Democratic Alliance (NDA) 3.0 has positioned itself with ambitious pledges to revitalise the Indian economy.
Learning & Development Need to Be Unlearned First
IN ANY SPHERE OF LIFE, the importance of continuous but impactful learning and development cannot be overstated.
INDIA ON THE RISE: COULD THOSE LEFT BEHIND JOIN THE PARTY?
INDIA’S ECONOMIC RISE has been nothing short of remarkable.
DESIGN DONE RIGHT
The fifth edition of the Future of Design Summit and Awards, held on May 16 in Mumbai, brought together design enthusiasts and industry leaders to celebrate innovation and sustainability.