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'RBI should ensure that banks lend to NBFCs'
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SME Times News Bureau | 10 Jul, 2020
Mahesh Thakkar, the Director General of Finance Industry Development
Council (FIDC) is of the view that Centre and the RBI should intervene
and ensure that well-capitalised banks lend towards the small and medium
NBFCs which largely cater to MSMEs and small businesses.
FIDC is the representative body of assets and loan financing non-banking financial companies (FIDC).
Speaking
to IANS, Thakkar said that although noting that skepticism towards
lending to NBFCs still exists among the banks, it has, somewhat eased
in the past few months since the government's liquidity measures and
sovereign guarantee schemes.
"Problem is that the banks are sitting with huge funds... and where to lend is the problem," he said.
Talking
about the demand-supply mismatch, Thakkar said that there is a gap
between "where the money is lying" and "where it is required" and "the
Government of India and the RBI and the banks need to see that it is
fluid now".
The FIDC DG also mentioned that getting loans from
banks for NBFCs also depends on the relationship of the NBFC with the
concerned bank and its past record.
Talking on the outlook for
the small and medium NBFCs with businesses of around Rs 50-100 crore, he
said that growth of these businesses may suffer in the next few months.
He
expected that as the sources of funds open up by September-October
which would help the sector. As a fallout of the current situation, he
said that there may be consolidation in the segment.
On the
requirement of change in business strategies by these financial
institutions, he said that they may have to rework their strategies, cut
costs, bring in technological enhancement, and strengthen corporate
governance among others.
Thakkar told IANS that demand is
gradually reviving for automobiles, commercial vehicles among others and
as various sectors open up including hospitality and other services
demand for loans from NBFCs will grow further.
He said that
demand should increase to satisfactory levels by the festival season in
November. However, full recovery of credit demand from NBFCs would only
happen in the next financial year, he said.
On the recent
liquidity measures including the Emergency Credit Line Guarantee Scheme
(ECLGS), he said that the progress of its implementation would be known
in days ahead.
In a recent letter to Finance Minister Nirmala
Sitharaman, FIDC had sought inclusion of all loans given to individuals
for purchase of commercial vehicles under the ECLGS announced as the
'Aatmanirbhar Bharat' economic package.
FIDC noted that more than
75 per cent of the customers take loans for buying vehicles for
commercial purposes in their individual names as they don't have any
business establishment in the name of firm or partnerships and they
conduct their business in individual names.
Under ECLGS, 100 per
cent sovereign guarantee is provided to all lenders to help them give
additional funding to MSMEs and other eligible businesses to the total
extent of Rs 3 lakh crore.
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