Small, medium NBFCs need better credit support, says Industry players

Though the government and RBI have taken steps to support the non-banking finance sector, small and medium-sized NBFCs continue to face challenges in getting access to credit, industry players said on Friday.

There is a need for making enough funding avenues available for these entities, they said.

"Small and medium ones (NBFCs) have been expressing over and over again that they would like to receive better credit support so that they could continue to finance their customers," Mahindra Finance vice-chairman and MD and member of group executive board (GEB) Ramesh Iyer said at an event organised by IMC Chamber of Commerce and Finance Industry Development Council (FIDC).

Iyer, who is also the chairman of FIDC - a representative body of NBFCs, said though the government and the RBI have taken several initiatives to provide liquidity support to the sector, access to credit is not the same for all the players.

Speaking on the occasion, Sundaram Finance MD T T Srinivasraghavan said when it comes to funding, NBFCs who are rated AA and better stand on a very different footing from those rated BBB, or those who are not rated at all.

"Liquidity challenges vary dramatically across the system. So, if you are a public-sector NBFC, virtually funding is not a problem, or if you are a AA or AA+ or AAA-rated NBFC, like many of the larger ones are, then they have access from pretty much everyone - banks, MF, insurance companies," Srinivasraghavan said.

The real problem is faced by smaller NBFCs, as capital and external commercial borrowing markets are close to them, he said, adding "they are effectively left with their own capital and whatever little bank funding that is available".

Iyer further said NBFCs have a good repayment history irrespective of the source -- banks, debenture market, insurance companies, retail deposits, among others -- they have borrowed from.

He also appreciated the RBI's decision, in monetary policy announcement, to ensure availability of liquidity into the system.

The Reserve Bank of India (RBI) Friday announced to conduct on tap targeted long-term repo operations (TLTRO) worth Rs 1 lakh crore to ensure comfortable liquidity condition in the system.

Liquidity availed by banks under the scheme has to be deployed in corporate bonds, commercial papers, and non-convertible debentures issued by entities in specific sectors over and above the outstanding level of their investments in such instruments as on September 30, 2020, the RBI said.

"We would still continue to request that when these liquidity measures are being taken and made available, they are made available to every NBFCs," Iyer added.