New Delhi: The government measures to provide partial credit guarantee to public sector bank on their asset purchases from NBFCs can ease funding pressure only for the short-term, says a report. In the budget, the government had said for purchase of high-rated pooled assets of financially-sound NBFCs, amounting to Rs 1 trillion during the current financial year, it will provide a one-time six months' partial credit guarantee to public sector banks for their first loss of up to 10 percent.
The step, however, does not address investors' long- term concerns about the exposure of NBFCs' to stressed real estate, rating agency Fitch said in a report Thursday. "The guarantee is more than enough to cover typical losses. The government will cover up to Rs 1 trillion of issuance. We estimate that this will cover their liquidity needs for about six months," the agency said.
The provision refers only to financially-sound NBFCs, which suggests that weaker entities in need of funds may still have to fend for themselves, it noted. The funding stress has been most severe for wholesale financiers, smaller NBFCs and fintechs, which have struggled to get even bank funds, while large NBFCs still have good access to funding, albeit at a rising cost, the report said.
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