NBFCs are facing asset-liability mismatches and undergoing a balance sheet adjustment. But they need more regulatory intervention, too.
JUST ABOUT A year ago, the nonbanking financial sector (NBFC) was on a tear. It was also the darling of stock markets. NBFCs were growing rapidly – in many cases faster than banks – and their chiefs were feted like star bankers. A year later, things couldn’t be more different. As the IL&FS scandal brought things to a head, banks, mutual funds and others who had been happily subscribing to NBFC commercial paper and other debt realised there was something rotten in the sector. Since then, the troubles have been multiplying.
Some of the biggest names in the NBFC universe, including Dewan Housing Finance Ltd. and Reliance Capital, have seen their reputations getting hit after debt defaults. The reason is simple. NBFCs depend on short-term funding sources such as commercial paper to raise funds that they then lend for longer term projects. The trick is to keep rolling over these debt papers, which has become difficult after the IL&FS crisis due to liquidity squeeze and perception of higher risk. Those who are holding on have been forced to bring out press releases to show they are not in trouble. Indiabulls Housing Finance, for example, has given out its cash and cash equivalent position to reassure investors and others that it is capable of meeting its commitments. The NBFC defaults have also badly hit debt funds. What was sold to risk-averse investors as a rock safe investment is turning out to be anything but that.
Bu hikaye Business Today dergisinin June 30, 2019 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Giriş Yap
Bu hikaye Business Today dergisinin June 30, 2019 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Giriş Yap
"Focus on the challenge of each customer"
SHASHANK KUMAR MD & CO-FOUNDER I RAZORPAY Razorpay is India's first full-stack financial solutions company
PEDAL ON THE FUTURE
THE MG WINDSOR EV, WITH ITS FUTURISTIC AND MINIMALIST DESIGN, COMBINES THE BEST OF BOTH WORLDS-COMFORT AND TECHNOLOGY
BREATHE EASY
Whether you're battling allergies, looking to remove pollutants, or simply want to breathe easier, the right air purifier can make a difference
The Taste of India in a Glass
FROM ROYAL LIQUEURS TO DISTILLED MAHUA, INDIAN HERITAGE ALCOHOLIC BEVERAGES ARE HAVING THEIR DAY IN THE SUN
LOOK BEFORE YOU LEAP
IN 2025, INVESTORS WILL NEED TO FACTOR IN VOLATILITY ACROSS ASSET CLASSES
MISSING ADVISORS
INDIA HAS JUST ONE INVESTMENT ADVISOR FOR NEARLY EVERY 200,000 INVESTORS. AT A TIME WHEN RETAIL PARTICIPATION IN THE STOCK MARKETS IS BOOMING, THIS ASSUMES SIGNIFICANCE
TURNING A CORNER
SHARED ELECTRIC MOBILITY START-UP YULU'S SHIFT TO SERVICING THE QUICK COMMERCE SECTOR IS HELPING IT GROW FAST. IT IS NOW FOCUSSING ON IMPROVING ROAD SAFETY FEATURES AS IT TURNS EBITDA POSITIVE
REALITY CHECK
INDIAN STOCK MARKETS PLUNGED BEGINNING OCTOBER FOR A HOST OF REASONS, INCLUDING A FALL IN FII OWNERSHIP. HOW DEEP WILL THE CORRECTION BE?
TRUMP'S TRADE TANGO
The return of Donald Trump as the 47th President of the US has put the global economy on edge. India, too, is unlikely to remain unaffected. How will policymakers meet this latest challenge?
"The essence of the Trump administration will be transactional”
Global investor, analyst, and best-selling author Ruchir Sharma decodes why Donald Trump won the elections, what India should do, the risks, and more