The RBI on Friday said it will revise the asset-liability guidelines for NBFCs, as there have been recent concerns over mismatches between their borrowings from the short-term money market and their lending practices.
In its recent monetary policy statement, RBI highlighted its concern on increasing asset-liability management (ALM) mismatch by NBFCs.
It commented, “Relying on short-term liquidity to fund long-term assets is not a prudent strategy and companies adopted this strategy to protect margins and market share”. The brokerage firm expects regulatory directions on ALM for NBFCs
“With increasing regulatory scrutiny on ALM, we expect NBFCs
to ‘normalise’ their borrowing profile, i.e., migrate from opportunistic funding to more stable and sustainable funding. This would lead to a larger-than-expected increase in the cost of funds. We believe this would have a twin impact on both margins and growth. We expect growth to taper down for some of the fastest growing NBFCs,” Motilal Oswal Securities said in a note.
“Looking at the current scenario, we believe the NBFCs, both asset financing as well as HFCs, will have to tone down their growth rates, which is logical as well. The market has taken cognizance of the slowdown in the business and hit in margins and accordingly, the stocks have corrected sharply. However, we feel the damage in terms of price has been quite significant in the last few weeks,” according to Siddharth Purohit, research analyst at SMC Institutional Equities.