State Bank of India (SBI) will continue to lend to non-banking financial companies (NBFCs) within the regulatory framework and there is no cash crunch situation, Chairman Rajnish Kumar said in a statement.
His statement comes after reports emerged that banks are restricting their lending to NBFCs, especially mortgage financiers, and on construction-related priority sector loans.
Additional worries increased after some market players suggested that the Reserve Bank of India (RBI) had directed banks to limit such exposures.
“Some comments are being attributed to SBI about the bank being wary of lending to NBFCs. The rumours are baseless. SBI lends support to NBFCs in the private and public space within the regulatory policy framework and will continue to do so…There is no concern on liquidity of NBFCs in view of their liquid cash position and availability of committed lines,” Kumar said.
On September 22, NBFC stocks mainly Dewan Housing Finance (DHFL) and Indiabulls Housing Finance suffered a major crash after liquidity fears gripped the equity market.
“In fact, the recent regulatory guidelines on the company’s lending model opens up further opportunities for collaboration between SBI and non-deposit taking NBFCs to increase lending to priority sectors,” the SBI statement added.
Analysts feel rising interest rates might have forced many NBFCs to resort to short term borrowings.
The RBI, on September 21, released guidelines on co-origination of loans by banks and non-deposit taking NBFCs in the priority sector, following its announcement in the August credit policy. The move is aimed at leveraging the reach of NBFCs to help banks meet their priority sector lending targets, leveraging the reach of NBFCs.
Priority sector lending includes loans to sectors such as agriculture, micro enterprises, social infrastructure, education and renewable energy.
The co-origination arrangement should entail “joint contribution of credit by both lenders,” RBI said, adding that it should also involve “sharing of risks and rewards between banks and NBFCs.”
Under the new guidelines, NBFCs will take a minimum 20 percent credit risk by way of direct exposure, with the balance being availed by banks.
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