It is not only that non-banking financial companies' liquidity crisis hurting the rural and SME lending, but the economy is also slowing down, said Bajaj in an interview with CNBC-TV18.
Sales of television units reach a peak level during big events but it is very unusual this year that, despite the ICC Cricket World Cup, TV sales were lower than last year, said Sanjiv Bajaj, managing director of Bajaj Finserv.
"So that is a signal," said Bajaj.
It is not only that non-banking financial companies' liquidity crisis hurting the rural and SME lending, but the economy is also slowing down, said Bajaj in an interview with CNBC-TV18.
"The economy is slowing down any way whether it is HDFC numbers or whether our own numbers, we have lower growth and this both consumer space, consumer demand is low. this has nothing to do with the NBFCs lack of ability to lend in the last couple of quarters. That is probably further adding to it but the slowdown is quite apparent," said Bajaj.
The Reserve Bank of India needs to strengthen the regulation of big NBFCs, but the regulator should also give some facilities that are offered to banks, he said. If both are lending to the same consumer or corporate or SME then their loans should be treated in the same way and this is one step towards that, Bajaj added.
“I hope that the RBI takes this clue to significantly strengthen the liquidity support to these large NBFCs in the same way that it is provided to banks," he added.
Having a reasonable amount of margin money for a liquidity buffer for NBFCs would create confidence in the underlying entities in the market and that is what is important because it was loss of confidence and not a real NPA issue with NBFCs so far, he said.
"We, as an industry, have been talking for some time now that large NBFCs which have been playing a significant role for the economy and are today larger than most banks need to be regulated differently from the 10000 NBFCs," said Bajaj.
Even the classification of systemically important NBFCs includes firms with assets over Rs 500 crore but these large NBFCs have gone way beyond that, said Bajaj, adding that the top 10 NBFCs in the country have assets over Rs 10,000 crore and the larger ones have even Rs 1 lakh crore and above.
When asked about the partial credit guarantee scheme, Bajaj said there is no stress in the NBFC sector on quality of loans because NBFCs lend for one, two, three years and they are able to borrow for that period of time.
"We have not seen big defaults in housing space, in HFCs – the only trigger has been the large defaults with IL&FS,” he added.
“So the measures are not required so much on the solvency side, on quality of business side but the measures are clearly required on the liquidity side,” he said, adding that the finance minister had mentioned to jump start this and so they have provided the necessary support to restart the cycle.
Source: CNBC-TV 18
