BIZ-RBI-NBFC-MEET

Representatives of the troubled

shadow banking sector met Reserve Bank governor Shaktikanta

Das Wednesday and are understood to have discussed a host of

issues surrounding liquidity, which they have been struggling

with since the IL&FS crisis broke out late August last.

There has also been a suggestion to have a bi-annual

meeting between the governor and the representatives of the

sector which is most likely to be implemented, sources said.

"We discussed our problems, starting with the

liquidity issues. It is not as bad as November on liquidity

right now, but the costs have gone up. We hope cost will come

down soon," one of the attendees of the meeting, told PTI.

Das, who has been meeting all the key stakeholders,

including banks and MSME representatives, after taking charge

last month , told the meeting that NBFCs play a significant

role in credit flow to the economy, sources said.

He also sought suggestions on how to improve the

credit flow, they said, adding no assurances were offered at

the meeting.

Some NBFCs are said to have requested the monetary

authority to allow them to access public deposits, which can

give them access to funds, sources said, adding to take care

of security, a minimum bar on the asset under management was

suggested.

It can be noted that the NBFC sector has been facing

problem since infra focused lender IL&FS started defaulting on

loans in late August. The non-payment led to worries over

other NBFCs and an aversion of both equity investors as well

as others like MFs which used to provide them with finance.

The infra lender owes over Rs 55,000 crore to banks out of its

over Rs 94,000 crore of group level debt.

In what seemed to aggravate the problems, the then RBI

management under Urjit Patel refused to meet them and also

refused any immediate relief through a special window, making

them go to the government in New Delhi for help.

The RBI diagnosed the problem as one which emanates

from asset liability mismatch, wherein some NBFCs, especially

those having long-term assets, were funding them through

short-term borrowings.

As the interest rates increased, NBFCs were unable to

rollover their short-term borrowings without disturbing their

margins, resulting in the problems.

Starting with the state-run bank chiefs, Das has met

representatives of private sector lenders and small businesses

as well.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)