Budget 2019: Bankers Seek Special Liquidity Window For NBFCs, Panel To Review Bad Loan Provisions

In a pre-budget meeting with Finance Minister Nirmala Sitharaman, representatives from of India's financial sector and capital markets sought a dedicated liquidity window for non-bank finance companies that can be used as a source of emergency funding and a panel to review provisions made by banks for stressed assets.

Liquidity and solvency issues of non-bank financial companies need to be handled separately, and on a case-to-case basis, Rakesh Sharma, managing director at IDBI Bank Ltd., told reporters after the meeting.

The Finance Industry Development Council—a self-regulatory body for NBFCs—sought funding avenues for the sector for the long term. Higher reporting of bad loans for non-bank lenders and subsequent entry of several banks into the Reserve Bank of India's prompt correction action framework have made it difficult for them to raise growth capital from banks, the association said in a media statement. That forced NBFCs to either shrink their business or resort to securitisation of high-quality assets, it said.

Problems faced by NBFCs has led to a slowdown in auto sales, small businesses and similar sectors, which have had direct implications on capital formation, GDP growth and employment generation, it said.

The bankers also asked the government to infuse capital in regional rural banks, rationalise the securities transaction tax and make corporate tax progressive.

Besides, it was recommended to offer tax exemptions to retail investors for investing in corporate bonds similar to incentives given to mutual fund investors, IDBI Bank's Sharma said.