Advertisement
Tuesday, Sep 21, 2021
Outlook.com
Outlook.com

NBFCs, MFIs to see Rs 50-60k cr funding gap on lack of moratorium: Report

NBFCs, MFIs to see Rs 50-60k cr funding gap on lack of moratorium: Report
outlookindia.com
1970-01-01T05:30:00+0530
Mumbai, Apr 24 (PTI) The RBI may have to open direct liquidity window for small NBFCs and MFIs as banks refuse to offer moratorium to them on one hand, and gave a muted response to the first TLTRO auction, aggravating their funding gap to Rs 50,000-60,000 crore, according to a report.

Small and medium shadow banks and micro-lenders need a direct refinance from financial institutions or the RBI should open direct refinance window for them, Acuite Ratings said, a day after the apex bank said the first TLTRO auction of Rs 25,000 crore saw a tepid response from banks, which put in bids for just half the amount -- only Rs 12,850 crore.

"We believe the liquidity concerns of NBFCs (non-bank financial companies) and MFIs (microfinance institutions) have aggravated and a quick response is the need of the hour. The funding gap is estimated to further increase to Rs 50,000-60,000 crore," the agency said in a report.

The estimate is based on the analysis of "the top 11 retail NBFCs which may find the funding gap of Rs 10,000-20,000 crore in Q1. Without the moratorium or partial moratorium from banks, the funding gap will increase further to Rs 15,000-25,000 crore in Q1. Clearly, the gap for the sector including MFIs in Q1 will be much higher at Rs 50,000-60,000 crore based on broad estimates".

While the Reserve Bank of India has provided a three-month moratorium to all borrowers, including NBFCs and MFIs for March-May, it is increasingly clear that all banks are not likely to grant such a moratorium for their NBFC or MFI borrowers.

Further, a 50 per cent response to the first tranche of bids TLTRO 2.0 indicates that banks are hesitant to take fresh exposures to the sector, particularly to small and mid-sized NBFCs, including MFIs now.

"Thus, a refinance window of Rs 50,000 crore through government financial institutions such as Sidbi assumes significant relevance. We feel that lack of backup or alternative funding lines will have serious implications for the sustainability of NBFCs over the next three months as loan collections likely to be limited during the moratorium," the report said.

With the first targeted long-term repo operations (TLTRO) 2.0 failing fresh funding or refinancing to the sector from this route is unlikely to exceed Rs 10,000 crore unless there is a significant change in the banks'' response in the second tranche, it said.

"We believe that the Rs 50,000-crore refinance window through National Bank for Agriculture and Rural Development (Nabard), Small industrial Development Bank of India (Sidbi) and National Housing Bank (NHB) will be critical," the rating agency said.

Under this, Nabard is getting Rs 25,000 crore, Sidbi is allotted Rs 15,000 crore and NHB is getting the remaining Rs 10,000 crore. Of the three Sidbi has already announced schemes to provide liquidity by extending short-term loans to NBFCs and MFIs.

"While the refinance facility will be available to small and mid-sized NBFCs who provide loans to MSMEs (micro, small and medium enterprises), they need to be rated in the investment grade with a minimum networth of Rs 20 crore and with capital adequacy above the mandatory levels.

"This may provide some short-term relief to the sector and enable some players to sustain their operations for another three months. But, if collections don''t revive rapidly, the liquidity challenges may continue and will necessitate longer term funding," the report concluded. PTI BEN BAL

BAL


Disclaimer :- This story has not been edited by Outlook staff and is auto-generated from news agency feeds. Source: PTI

More from Website

Australia Women Vs India Women, 1st ODI, Live Cricket Scores: Mithali Raj And Co Face Uphill Task Down Under

Australia Women Vs India Women, 1st ODI, Live Cricket Scores: Mithali Raj And Co Face Uphill Task Down Under

AUS-W vs IND-W: Follow live cricket scores of the first Women's ODI match between Australia and India.

IPL 2021: It's A Wake-up Call For RCB, Says Virat Kohli After 9-Wicket Defeat To KKR

IPL 2021: It's A Wake-up Call For RCB, Says Virat Kohli After 9-Wicket Defeat To KKR

Electing to bat, RCB were all out for a paltry 92 in Kohli's 200th IPL game and KKR chased down the target in just 10 overs.

Revitalise Your Bones

Revitalise Your Bones

The expertise of the renowned, Dr Ashish Singh, a Robotic Joint Replacement Surgeon at Anup Institute of Orthopaedic and Rehabilitation Centre, Patna, is gaining immense confidence of patients with brilliant outcomes. Through one-of-its-kind facility in the region, Dr Singh and his team are transforming the way surgeries are being performed with the high precision robotic tech only interventions. In a chat with Outlook, he shares about the era of robotic surgery, which is here to stay.

More from Outlook Magazine

Crouching Tigers

Crouching Tigers

Ghee Bowman brings to light the forgotten story of an Indian force’s role in the Battle of France and their fighting withdrawal through Dunkirk. In this excerpt, individual units arrive in northern France and take their positions, awaiting the Wehrmacht onslaught.

Outlook-ICARE India’s Top Universities Rankings 2021: Top 21 Private Medical Universities

Outlook-ICARE India’s Top Universities Rankings 2021: Top 21 Private Medical Universities

Outlook's annual ranking of India’s top 21 Private Medical Universities in 2021 will help students make an informed choice.

Outlook-ICARE India’s Top Universities Rankings 2021: Top 15 Government Medical Universities

Outlook-ICARE India’s Top Universities Rankings 2021: Top 15 Government Medical Universities

Outlook's annual ranking of India’s top 15 Government Medical Universities in 2021 will help students make an informed choice.

Advertisement

Outlook Newsletters

Advertisement