NBFCs want only primary market to be allowed under Rs 30,000-cr liquidity window

By Ankur Mishra

Non-banking financial companies (NBFCs) are of the view that only primary market purchases should be allowed under the Rs 30,000-crore special liquidity window announced by finance minister Nirmala Sitharaman last week.

“I think the government could have excluded secondary market purchase in announcing Rs 30,000-crore liquidity for NBFCs,” IIFL Finance CEO Sumit Bali told FE. “If secondary market purchase is allowed, intended liquidity may be distributed to sectors other than NBFC,” he further said.

Another chief of an NBFC said, “By allowing secondary market purchase, mutual funds (MFs) may benefit more as they will offload their NBFC papers.”

In a bid to provide funds to the stressed NBFC sector, the finance minister had announced a Rs 30,000-crore special liquidity window for entities that are finding it difficult to raise money from debt market amid the Covid-19 crisis. Under this scheme, investment will be made in both primary and secondary market in investment-grade debt papers of non-bank finance companies (NBFCs), housing finance companies (HFCs) and microfinance institutions (MFIs), she said at a press conference last week. The government is yet to notify the scheme officially.

According to Crisil, the NBFC sector may face liquidity stress with almost Rs 1.75-lakh-crore debt obligations maturing by June this year. Although NBFCs have provided moratorium on term installment payments to its clients, the lender banks have agreed to give the same relief to NBFCs on a case-to-case basis.

The FM had also announced a `45,000-crore partial credit guarantee scheme 2.0 for NBFCs, HFCs and MFIs with low credit rating to help them extend loans to individuals and MSMEs. The Reserve Bank of India (RBI) had also announced targeted long term repo operation (TLTRO) 2.0 of Rs 50,000 crore to begin with for NBFCs. However, the first auction under TLTRO 2.0 for Rs 25,000 crore with a three-year tenor received total bids worth RS 12,850 crore, implying a poor response with a bid to cover ratio of 0.5.