INSUBCONTINENT EXCLUSIVE:
debt instruments because of fears that this will have a cascading effect, tightening the liquidity squeeze in the sector, analysts said
While mutual funds have been selective about funding NBFCs after the Infrastructure Leasing Financial Services (ILFS) default in September,
banks are reluctant to fund mid and lower-level finance companies, they said.
In addition, on Tuesday, CARE Ratings put PNB Housing Finance
on watch with developing implications as it needs to raise money to maintain comfortable capital adequacy and gearing levels
CARE had lowered securities of Reliance Home Finance Ltd (RHFL) and Reliance Commercial Finance Ltd (RCFL) to junk and default status on
roiled the market as NBFCs struggled for cash
Bankex fell 1.22 per cent on Tuesday while the BSE Finance index declined 0.6 per cent
Reliance Capital, IFCI, PNB Housing, Edelweiss Financial Services, DHFL, Indiabulls Housing Finance and LT Finance declined between 5 per
juncture NBFCs are finding it difficult to raise or rollover the funding as banks or mutual funds are not in a position to lend to these
ILFS crisis.
Mutual funds are estimated to have over Rs 5,000 crore invested in eight Reliance Group companies, of which nearly Rs 2,600
crore is in RHFL and RCFL securities
about what could happen to IndusInd Bank as they also have exposures to the controversial ADAG group where companies have been downgraded on
Anil Dhirubhai Ambani Group, or ADAG.
Mutual funds, the main source of funding for NBFCs, have slashed their exposure to NBFCs since the
Their exposure to stressed business houses such as Essel and Reliance Group is anywhere between 4 per cent and 15 per cent of the total,
About a 10th of this, or Rs 2,200 crore, is through close-ended plans with more than half maturing now, it said
The remaining Rs 18,100 crore is through open-ended funds, according to Credit Suisse.
However, some believe that NBFC crisis is temporary
and the central bank will make sure liquidity in the system is adequate.
