INSUBCONTINENT EXCLUSIVE:
Non-banking financial companies (NBFCs) and housing finance companies (HFCs) are maintaining adequate liquidity buffer to manage any
mismatches in their asset-liability maturity (ALM) profiles, rating agency Crisil said Friday
The business fundamentals of non-banks including growth potential, asset quality and capitalisation, still look solid, the agency said in
"The liquidity position of the large non-banks - both NBFCs and HFCs shows that they are maintaining adequate liquidity buffer to manage
mismatches, if any, in their ALM profiles," the report said
Over the past few months, a number of non-banks have been looking to maintain additional liquidity in the form of cash and equivalents
Liquidity back-up in the form of cash and equivalents is the best option in an uncertain market since it can be tapped on demand
"In an environment where access to funding has become a function of market confidence, the quantum and quality of such liquidity cushion
will be the key differentiator," said Krishnan Sitaraman, senior director, Crisil
Commercial papers (CPs) have become an attractive short-term funding source over time because of attractive pricing and greater
Between March 2016 and March 2018, the share of CP borrowings in the resource mix of NBFCs increased 500 basis points to 15 per cent, or
more than twice 2014 levels; and the share of CP borrowings by HFCs was 10 per cent as of March 2018 versus 8 per cent in March 2016,
Crisil said it is important for NBFCs and HFCs to maintain adequate liquidity cushion to offset the potential risk in CPs, which emanates
from high dependence on rollovers and refinancing on maturity
The ability to do so is very sensitive to the confidence levels in the market especially among investors like mutual funds, it said.
