Amid growing demand for liquidity support for non-banking finance companies, the Reserve Bank of India (RBI) is unlikely to provide any special support to the sector, though it will continue to provide funds to the banking system as liquidity deficit in the system is a concern.
According to sources, the RBI is of the view that bigger NBFCs that have high ratings from rating agencies are not facing any liquidity issues. It is the mid-sized and smaller NBFCs, mostly housing finance firms, that will face some issues. According to market estimates, about ₹1.5 lakh crore of commercial paper face redemption this month, a bulk of which are issued by NBFCs.
“There is liquidity in the system. But interest rates have gone up,” said a source. Some NBFCs that are not higher-rated now have to pay higher rates to raise funds.
That better-rated NBFCs aren’t handicapped for funds was evident when Dewan Housing Finance — for example — repaid commercial paper worth ₹1,775 crore on November 5.
Another large housing finance company, PNB Housing Finance repaid ₹4,225 crore of CP in October 2018.
“RBI is the lender of last resort. When all other avenues fail, then only such an option could be explored,” the source said, indicating NBFCs are yet to explore all other options that may have turned expensive for them.
NBFCs can avail refinance facility from SIDBI or National Housing Bank and can also sell loans to banks. NHB has recently increased its refinancing limit by ₹6,000 crore-- to ₹30,000 crore-- to eligible institutions, including housing finance companies, for the July 2018-June 2019 period. Similarly, SBI trebled its loan purchase target for NBFCs to ₹45,000 crore for the current financial year.
On Monday, PNB Housing Finance said NHB has santioned ₹3,500 crore refinance facility to them.
“The NHB refinance are of a maturity of up to 15 years hence shall help further enhance our ALM… We wish to again reiterate that as on date, the company is very well placed, both on liquidity and ALM position and continue to be cautiously optimistic,” said Sanjaya Gupta, managing director, PNB Housing Finance.
The liquidity issue for NBFCs, along with other issues like capital requirement for banks and more dividend from RBI to the government, has been a bone of contention between the central bank and the Finance Ministry. The Centre has cited the never-used provision under section 7 of the RBI Act to initiate consultations with RBI. Under this section, the government can issue directions to RBI. All eyes are now on the RBI’s board meeting scheduled for November 19.
