Banks may be forced to increase lending to NBFCs to prevent defaults.
Mumbai: As top 50 non-banking finance companies need Rs 95,000 crore to repay debts, of which Rs 70,000 crore are commercial papers maturing this month, and banks will have to lend more to the sector to avoid defaults, says a report.
Since the IL&FS defaults, it can be noted that NBFCs and housing finance companies (HFCs) were facing a crisis of confidence, sending call money rates higher and overall liquidity tight.
This forced RBI to open a special window for banks but denied the same to NBFCs.
The crisis of confidence comes even as asset quality of NBFCs is largely steady.
“As many as 50 large NBFCs have debt repayments worth Rs 95,000 crore due in November, of which, Rs 70,000 crore are commercial papers (CPs) maturing,” said Krishnan Sitaraman, a senior director at CRISIL, adding some of them are well-placed to meet the debt repayments without drawing down on bank lines, others may have to do so, at least partially.
The report, however, did not say how much of short-tenor debt is due this month at the industry level. In October, the rollover rate of CPs issued by these 50 largest NBFCs was only around 40 per cent of the average monthly issuances betw-een June and August 2018. Consequently, NBFCs were forced to tap banks for funds.