Letter to BS: Avoiding AQRs will only result in problems at a later stage

This refers to “DHFL assigned default ratings, MFs bleed” (June 6). I would like to reiterate the need for an asset quality review (AQR) of non-banking finance companies (NBFCs) and housing finance companies (HFCs), both from the point of view of financial stability and stakeholder awareness. The former chief economic adviser Arvind Subramanian had also spoken about the need for AQR of NBFCs. Banks, mutual funds, pension funds, NBFCs and HFCs are closely connected. The credit exposure of NBFCs and HFCs to low rated borrowers or group entities often ends in default that impacts the other entities mentioned. 

Keeping in mind the large volume of stressed assets of public sector banks, the last thing the public would like to know is growing stressed asset portfolios of NBFCs and HFCs. It is time for transparency about their credit and investment portfolios as well as their lending and investment practices. Both these sets of entities have large asset portfolios and the depositors, investors and the public at large need to know about their health. Avoiding AQRs will only result in bigger problems at a later stage. It is important from the point of view of financial stability that banks, financial institutions and financial markets are well regulated and supervised. As they say a stitch in time saves nine.

Arun Pasricha, New Delhi
 

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