India Markets open in 2 hrs 18 mins

Govt to cut extra-budgetary loans; funds to PSU banks meant to boost lending

FE Bureau
NBFC crisis, economic growth, GDP growth, Share of NBFC, public sector banks

The benefits of the partial credit guarantee scheme for purchases of asset pools by banks from non-banking financial companies (NBFCs) could be limited to housing finance companies (HFCs) and microfinance institutions (MFIs), bankers and industry executives said.

Moreover, banks are expected to be particular about the health of the companies they buy pools from, as the Budget offers the credit guarantee to public sector banks (PSBs) against purchase of only high-rated pooled assets of financially-sound NBFCs.

For their part, PSBs are choosing to wait for further guidelines from the regulator before zeroing in on prospective loan pools. Mrutyunjay Mahapatra, managing director and chief executive officer of Syndicate Bank, told FE, "Operating guidelines will probably come later. The finance minister in her speech did not distinguish between categories of NBFCs. We are generally in the market for housing-loan pools and MSME (micro, small and medium enterprises) pools."

Researchers at Icra say the credit guarantee scheme is more likely to benefit retail NBFCs with shorter-tenure assets. Supreeta Nijjar, vice-president, financial sector ratings, Icra, said: "These loans could be personal loans, microfinance or even CV (commercial vehicle) loans."