A financing crunch may hurt India’s economic growth that the non-bank financing companies have helped underpin by providing financing for smaller businesses including restaurant owners, rickshaw drivers and merchants. Such lending, which traditional banks may have avoided, has essentially run on leverage -- the shadow lenders get money from banks or by issuing bonds, and use that for other types of financing.
Shadow Banking Crisis Raises Risk of Indian Bad-Loan Redux
also have more than one trillion rupees of bonds to refinance in both the first and second quarters of 2020, the data show. Maturities will climb to about Rs 3.9 trillion in 2020, an all-time high.
Lenders led by Dewan Housing Finance
Ltd. and tycoon Anil Ambani-controlled Reliance Capital Ltd. are seeking to accelerate asset sales including subsidiaries to meet rising debt commitments. The resignation of one of Reliance Capital’s auditors, delayed payments by Dewan this month and allegations against Indiabulls Housing Finance
Ltd. are hurting an already rough credit environment.
It will take at least a year for the crisis to settle down, and lending to NBFCs
will only return if liquidity issues at some companies are resolved, said Gopikrishna Shenoy, who oversees $20 billion as chief investment officer at SBI Life Insurance Co., one of India’s largest private life insurers.
“The larger NBFCs are going to banks for fundraising and crowding out the smaller ones, which have very limited choices to raise money,” Brickwork’s Bahl said.