INSUBCONTINENT EXCLUSIVE:
As thousands of crores come up for redemption, senior officials of close to 20 large non-banking finance companies (NBFCs) and housing
finance firms met in Mumbai this week to figure out the road ahead.
They fear that another default or failure to roll over commercial paper
funds, which have been a ready provider of credit for years, sitting on cash to meet possible redemption pressure from investors.
According
to a senior official of a Mumbai-based NBFC, about Rs 50,000 crore of CPs are coming up for redemption by November 9
Of this, around Rs 5,000 crore were issued by a troubled housing finance company.
At the meeting, held in the office of Tata Capital on
Monday, it was decided that the industry would try to marshal support from large industrialists and senior members of the financial markets
having interest in financial services companies to seek a meeting with the RBI governor
Some of us have had informal discussions with RBI officials, but we think it would make a difference if business leaders meet Urjit Patel to
central bank is not fully appreciating the liquidity problem
But even a single default could spark panic, push mutual fund investors to seek redemption, which would cause the funds to sell top-rated
debt papers, and this would pull down many other security prices
So, many MFs are holding a large portion in cash, some NBFCs are prepaying CPs as they are not investing
comparatively more dependent on CPs which lower the cost of fund
The total size of HFC industry would be Rs 6 lakh crore against Rs 22 lakh crore for NBFCs.
HFC REGULATIONAccording to the person, there is
HFCs are regulated by the National Housing Bank, which is a refinance institution, and NHB is no longer a subsidiary of the central bank
situation is slightly better than what it was a fortnight ago
For instance, a Mumbai NBFC raised Rs 1,300 crore of CPs on Tuesday
by cherry-picking NBFC assets rather than directly lending to an NBFC or HFC
