The NBFC crisis

Downgrades add fresh stress to the sector

Non-banking finance companies (NBFCs) are once again in the spotlight after a spate of rating downgrades over the past week, including the Anil Ambani group’s finance companies. For the bond market, which has been walking on thin ice since Infrastructure Leasing & Financial Services (IL&FS) defaulted in the second quarter of FY19, the fresh downgrades have revived concerns on NBFCs’ cost of capital and growth. In the past few years, NBFCs accounted for around 70 per cent of the borrowing in the corporate bond market. But after the IL&FS episode, the demand for their papers plummeted, along with evaporating liquidity