Coming to the rescue of cash-strapped non-banking finance companies (NBFCs), State Bank of India decided to buy their assets to the tune of Rs 45,000 crore, a move that will provide liquidity support to non-banking financing companies facing headwinds after a series of loan defaults by IL&FS group firms.
NBFCs along with mutual funds have been facing a liquidity crunch following a series of loan repayment default since late September by IL&FS and its group companies.
Gagan Banga, vice chairman and managing director of Indiabulls Housing Finance; Rajkiran Rai, managing director and chief executive officer of Union Bank of India; R Varadarajan, managing director of Repco Home Finance; Umesh Revankar, managing director of Shriram Transport Finance Company and Pawan Singh, managing director and chief executive officer of PTC India Financial Services, shared their views and outlook on whether the other banks are likely to follow suit and how much can this help ease the liquidity squeeze.
Banga said Indiabulls Housing Finance will be selling Rs 3,000-4,000 crore worth of loans this quarter, "In my view, the debt market as well as the equity market in some ways is differentiating between credits."
"For quite a few players, especially the midsized players and the smaller players, this is an extremely welcome step. I think, this will help some players to tide over the current issues in the market,” he added.
Rai said it's a continuous process for banks and we will continuously buy these portfolios, "Right now, we are processing about Rs 2,000 crore of portfolio buyout; the due diligence is going on and we have space for up to Rs 5,000 crore of portfolio buyout in the next one or two months."
Varadarajan said Repco Home Finance don't have any immediate liquidity problem to selloff our assets. However, in case of any difficulty, the option is open for us, "I do not see any immediate requirement of selling but banks are willing to buy, they have already indicated to us also."
Talking about banks, Varadarajan said, "As far as home finance companies, particularly, our company is concerned, we are in discussion with various banks. They have already sanctioned the credit line to the extent of about Rs 1,700 crore and they are willing to take additional exposure also."
“Banks will be selective in their approach. They will not only see the asset liability management (ALM), they will also see the business model. For example, we do not have any exposure to builder and therefore, banks are willing to lend,” he further added.
Revankar said there is an enthusiasm and it should really help every NBFCs as this is a positive from the largest bank of India, "NBFCs by and large play a complimentary role for the bank and we enlarge our reach and build network for the banks. So that’s very positive."
Singh said PTC India Financial Services is focusing primarily on infrastructure and renewable space, "Wherever we have exposure limits in terms of good promoters, probably, we would be looking at down selling certain portion and probably pick up areas, where we can lend to the same promoters, wherever higher margin is possible."