NeoGrowth’s Founder & MD, Piyush Khaitan (PK), shares his views on the news around current liquidity crunch for NBFCs.

Liquidity crisis: Crucial to give well-run NBFCs their due; it isn’t right to paint all of them with the same brush

The growing uneasiness about liquidity fears is affecting the Non-Banking Financial Companies (NBFCs) space, bringing back painful memories. As NBFCs grapple with commercial paper maturity worth over Rs 1 lakh crore in November with big chunks slated to start from Monday onwards, the current crisis-like scenario is being compared to parallels in past cycles that occurred in 2009 and 2013.

The Indian government and Reserve Bank of India (RBI) are taking swift measures to shore up liquidity and ease crunch fears. But, in this confusion, all NBFCs irrespective of their balance sheet strength and businesses are being painted with the same brush. What started due to default on debt obligations by a single entity is now being given the unfair perception of an ‘industry-wide’ problem, pushing up markets-based borrowing costs and affecting liquidity strength for everyone in the system. It is important for stakeholders to separate the wheat from the chaff.

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