NBFCs facing liquidity issues but no 'crisis', says Corp Affairs Secy

Amidst authorities working on ways to tackle the IL&FS crisis, Corporate Affairs Secretary Injeti Srinivas on Monday said non-banking financial companies, particularly housing finance firms, are facing liquidity issues but there is "no crisis".

He also emphasised that there is a need to introspect the business models followed in the NBFC sector and adopt the model that is sustainable.

The IL&FS crisis, triggered by debt defaults by some group companies, has sparked off concerns over liquidity in the system, while the Corporate Affairs Ministry last month superseded the holding company's board as part of larger efforts to contain the situation.

Responding to queries about liquidity situation, Srinivas said that basically in the NBFC segment, the issue is more pronounced with respect to housing finance companies that are facing liquidity problems.

"I won't get into individual names. It is segmental problem... these are big entities part of that segment. At the macro level, some measures have been taken.

"This situation should ease but at the same time... the way business is conducted by this sector, they will have to deeply introspect and adopt the model which is sustainable, which takes into account sources of funds, deploy them... so you minimise this mismatch," he said.

He was responding to a query on whether the ministry in a report has flagged concerns about liquidity crunch faced by three leading housing finance companies -- DHFL, Indiabulls Housing Finance and PNB Housing Finance.

Noting that liquidity challenges are more pronounced in some companies, Srinivas said it is across the NBFC sector that requires overall easing, and adequate steps being taken at the macro-level.

"So, I don't see any crisis. It will be addressed duly in the short term. In the medium and the long term, the way you finance and expand all these will have to looked into. All entities should follow sustainable business development approach," he said.

The government has been taking steps to address the liquidity issue in the overall financial system and the RBI infused liquidity by way of purchasing bonds in the last few weeks.

About the Serious Fraud Investigation Office (SFIO) probe into the IL&FS case, Srinivas said there is progress on that front.

"There are more than 300 companies and there are many issues. SFIO is investigating. It is taking a deposition from key personnel," he added.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel