Finance Industry Development Council (FIDC), an industry lobbying group for the NBFC sector, has written to the government seeking a refinancing body for NBFCs just like there exists one for the housing finance sector.
FIDC has suggested that the National Housing Bank (NHB) which acts as the refinancing body for HFCs can be made the apex refinancing body for the entire NBFC sector and not just HFCs now that its regulatory powers over the HFCs has been transferred to the Reserve Bank of India (RBI).
On the liability side, the NBFCs are heavily depended on banks and their risk averse approach post the IL&FS defaults has led to liquidity crunch situation in the entire sector. Thus, the need of the hour is to develop funding sources for NBFCs outside the banking system, FIDC said.
Moreover, they have suggested that Micro Units Development and Refinance Agency Bank (MUDRA) can also play an important role in refinancing small and medium NBFCs.
In the letter they have also said that, the partial credit guarantee scheme of the government wherein the public sector banks will buy high quality assets from the NBFCs may not have a significant impact if only assets with AA rating or above are eligible under the scheme.
“Any pool of assets having a credit rating of AA and above is anyway easily purchased by banks even without any credit guarantee. Further, in the prevailing scenario of liquidity crisis obtaining such a high grade credit rating itself is a big challenge, inspite of the financial performance”, FIDC said.
They have also asked the government to extend the co-origination of loan scheme to deposit taking NBFCs also. Currently, the scheme is applicable to systemically important non-deposit taking NBFCs.
Deposit taking NBFCs (NBFCs-D), especially the larger ones, have built a large retail investor base which are also the target segment of borrowers under the co-origination of loan scheme, FIDC added.
Another suggestion that they have put forth is, there should be segregation of data that is provided by the RBI on bank credit deployment between government owned NBFCs and privately owned NBFCs as that would give a clearer picture on the status of credit inflow to the cash starved NBFC sector.