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Rising risk of contagion in India's financial sector, cautions S&P

A recent contagion analysis released by the Reserve Bank of India (RBI) suggested that the failure of any top-five HFC or NBFC could result in the default of up to two banks

Abhijit Lele  |  Mumbai 

NBFCs in repair, rebuild and recalibrate mode as funds position improves

Indian is on the boil as the crisis engulfing non-banking financial companies (NBFCs) lingers, raising risks of contagion and capital shortage, according to rating agencies.

Global rating agency Standard & Poor’s (S&P) said the risk of contagion is rising in the Indian financial sector, where credit markets are charging huge premiums for debt raised by riskier companies. The systemic crisis in may lead to capital shortfall, said another

The failure of a large company could have other consequences, such as draining of available credit to the sector. With the added risk of spreading to real estate companies. companies are the largest lenders to this segment, S&P noted.

India’s finance companies are among the country's largest borrowers and a substantial part of this funding comes from banks.

Meanwhile in a report, Fitch Ratings said Indian banks may face a capital shortfall of about $ 50 billion in the event of a systemic crisis in the NBFC sector.

First Published: Wed, October 23 2019. 12:02 IST