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Will Nirmala Sitharaman measures aid NBFC revival?

Nirmala Sitharaman also hinted at new measures for real estate/housing and construction financing next week.

, ET Bureau|
Aug 23, 2019, 11.59 PM IST
MUMBAI: Capital-starved non-banking finance companies are likely to see easier access to funds after finance minister Nirmala Sitharaman announced a slew of measures aimed at reviving the sector.

“The latest measures should give NBFCs a breather as they are likely to resume efforts toward new business expansion ahead of the busy festive season,” said Umesh Revankar, MD & CEO, Shriram Transport Finance. “NBFCs would have more liquidity with NHB releasing an additional Rs 10,000 crore.”

The finance minister announced additional liquidity support. The NHB, or National Housing Bank, can now extend up to Rs 30,000 crore credit lines to NBFCs instead of Rs 20,000 crore earlier. She also said that partial credit guarantee scheme for purchase of pooled assets of NBFC/HFCs, up to Rs 1 lakh crore, will be monitored at the highest level in each bank.

“Investor sentiment would revive now for NBFCs,” said Vishal Kampani, managing director at JM Financial group. “It is a prompt start as the finance minister has clearly taken cognisance of industry concerns. Expected measures on housing finance companies and on construction financing would give relief to the housing sector.”

Sitharaman also hinted at new measures for real estate/housing and construction financing next week.

The announcement of co-origination between banks and NBFCs is an encouraging move, said Jaspal Bindra, chairman at Centrum group.

“The key lies in execution of those measures,” he said.

State-owned banks will also receive upfront Rs 70,000 crore of capital, which will enable those lenders to expand credit.

“Some banks are already flush with funds, and the upfront infusion (Rs 70,000 crore) will make liquidity with them even more abundant,” said Bindra.

The ministry allowed NBFCs to use the Aadhaar-authenticated bank KYC (Know You Customer). This means if a customer is KYC complaint with any bank, she need not to do so again while seeking an NBFC loan.

“NBFCs can use the same KYC instead of the current practice where NBFCs have to do fresh KYC, which is merely duplication,” said Raman Agarwal, chairman FIDC, the umbrella body of NBFCs. “This will streamline the process and also reduce frauds.”

NBFCs will begin to fund last-mile credit as banks are likely to revive lending.

“NBFCs will now get more credit from banks,” said Siddharth Purohit, research analyst at SMC Global Securities. “The business cycle may also start turning. Shares of NBFCs should also bounce back.”

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