As per the latest reports, the government is awaiting to facilitate partial credit guarantee to the banks in the public sector on their purchase of assets from the NBFCs can simplify funding burden only for the short-term.
The government has explained in the budget that to buy high-appraised pooled resources of financially healthy NBFCs, amounting to Rs. 1 trillion during the present financial year, it will support a one-time six months’ partial credit guarantee to the banks in the public sector for their first loss of up to 10 percent.
This initiative, however, doesn’t resolve investors’ long-time worries about the vulnerability of NBFCs to disrupted real-estate, rating agency Fitch explained in a report.
As per the agency, “This provided guarantee is sufficient to reimburse typical losses. The government will cover approximately Rs 1 trillion of issuance. We anticipate that this will also cover their liquidity requirements for about six months. ”
The arrangement mentions just to financially-stable NBFCs, which recommends that more fragile entities in need of finance may still have to fight for themselves, it highlighted.
The funding pressure has been generally extreme for wholesale financiers, smaller NBFCs, and fintech, which have managed to get their hands on even bank funds, while large NBFCs still have sound access to funds, but at an increasing expense, the report said.
The government has mentioned six months but it cannot be said whether this relates just to how long the plan is open for or likewise to the term of coverage for every transaction, it said.
