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NBFCs need to diversify both assets & liabilities: Rashesh Shah, chairman of Edelweiss Group

If needed, NBFCs will have to sell assets and maintain balance sheet quality, Shah said.

Feb 09, 2019, 11.15 PM IST
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Rashesh
"Different sources will have to be tapped like insurance companies, bond markets and even international banks to get funds," Shah said.
Rashesh Shah, chairman of Edelweiss Group, spoke to ET Magazine on how NBFCs can survive this challenging period. Edited excerpts:

How is the current scenario for NBFCs?
Things are slowly coming back to normal. However, March will be a period of tight liquidity and with elections around the corner, this situation may linger till May. Interest rates had gone up in the last few months and were 80-100 basis points higher than what they were six months back. This dampened the demand for car loans and home loans. But among SMEs, there is increased demand for working capital due to the implementation of GST.

Do NBFCs need to limit the size of their balance sheets?
The quality of the balance sheet will also a matter apart from its size. There is a need to be balance-sheet efficient. Indian NBFCs will have to diversify borrowings and bring in funds from newer sources. At the same time, assets will have to be diversified. The concentrated book approach won’t work. If needed, NBFCs will have to sell assets and maintain balance sheet quality. Also, more assets should be liquid.

With mutual funds wary of lending to NBFCs, what can be the alternatives?
Different sources will have to be tapped like insurance companies, bond markets and even international banks.

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