KKR India's chief executive officer Sanjay Nayar Tuesday said the ongoing troubles at non-bank lenders will lead to a correction in their valuations and the private equity firm is keen to up its funding to them.

Nayar, whose company also operates as a non-banking financial company (NBFC) in the country, said it will take up to four months for the liquidity related issues in the sector to settle down.

"Structurally, there will be a correction (in valuations), which is good in the long term," Nayar told reporters on the sidelines of a conference organised by industry body CII.

Return on equity cannot be created by overleveraging with the business having a thin net interest margin (NIM), he said, wondering how such firms trade at four times the book value.

He said the leverage ratios have to become "a lot more prudent" over time and added that liabilities have to be funded long term.

When asked if his company will be upping its play in investments and portfolio buys of NBFCs, Nayar replied in the affirmative and also added that KKR is underleveraged at present but will not take any decision in a hurry.

He refused to comment on reports of the company being in the race to buy Aadhar Housing Finance.

Echoing the views of many experts including the Reserve Bank of India (RBI), Nayar said the present difficulties are emanating from asset liability mismatches and will be resolved in three to four months.

Nayar said the NBFC sector is critical to the economy and the stronger entities will be able to come out of the current difficulties.

However, there will be a better assessment of risk from here on and it may lead to an increase in rate of interest charged by the players from borrowers, he said.

Even as analysts are predicting a setback to consumption story because of the NBFC troubles, Nayar said it will not have an impact and funds will be available to those wanting to buy anything, albeit at an elevated cost.

NBFCs will become very conscious from here on and will have a better understanding of their customer base.

It can be noted that the NBFC sector has been facing liquidity constraints for over the last two months, ever since infra lender IL&FS' financial troubles erupted out.

There have been massive corrections in the stock prices of listed companies in this time as investors turn wary about the sector.