ASSOCHAM wants refinance window

The ASSOCHAM welcomes Reserve Bank of India’s (RBI) move to incentivize banks to enhance their lending to NBFCs as a step in the right direction which would enable NBFCs to tackle the liquidity crunch.

This shall also send a message that the recent developments do not indicate any systemic problem, but it is merely a case of sentiments having gone wrong after one of the big NBFCs defaulted, it noted.

The whole issue of Asset liability mismatch is more relevant in case of long-term lending companies like the Housing Finance companies and Infra Financing NBFCs.

A typical NBFC model is a retail lending model with short tenures of 2 to 5 years and small ticket sizes where asset liability mismatch is not a concern.

NBFCs have shown impressive growth for the last few years maintaining a high capital adequacy ratio which is higher than the minimum prescribed levels. This growth has also been healthy as reflected in better asset quality.

However, provision of a dedicated refinance window, especially, for the large number of small and medium sized NBFCs is very important to ensure future growth, said ASSOCHAM. fiinews.com