NBFC stocks feel pinch as RBI tightens noose

New Delhi: Shares of NBFCs fell up to 18.5 per cent on Monday after the Reserve Bank of India said it is looking at strengthening the guidelines to avoid situations of asset liability mismatch (ALM) by non-banking lenders. The scrip of DHFL crashed 18.52 per cent, Edelweiss Financial 13.67 per cent, Shriram City Union Finance 6.82 per cent, Cholamandalam Investment and Finance 6.07 per cent, Muthoot Capital Services 4.48 per cent and Motilal Oswal Financial Services 2.48 per cent on the BSE. Among others, shares of Srei Infrastructure Finance declined 2.48 per cent and Mahindra & Mahindra Financial Services 2.37 per cent.

Asserting that the NBFC sector is “overall quite strong”, RBI Deputy Governor NS Vishwanathan hinted at additional efforts to ensure they do not have to undergo ALM in the future. RBI will tighten norms for NBFCs given that many are becoming systemically important and have a higher dependence on short-term sources like commercial papers and mutual funds, CLSA analysts said.

The actions could be on the lines of liquidity coverage requirements for banks, the note added. NBFCs came into focus when India’s major infrastructure financing and construction company, IL&FS, defaulted on some of its debt obligations, triggering a series of rating actions and concerns about the country’s financial sector. Up to last close, shares of Dewan Housing have declined 52.8 per cent this year, while those of Edelweiss, JM Financial and IIFL have fallen 40.8 per cent, 46.5 per cent and 31 per cent, respectively, during the same period.