Addressing the annual meeting of industry body Finance Industry Development Council, Sanyal said, “The good thing is that the financial system (including NBFCs) is now better capitalized than before, which makes them ready to lend. “We are keen to expand to NBFCs. There is a big role for them”.
He cited recent policy initiatives by the government including the recent approval of the Factoring Regulation Amendment Bill in the Monsoon Session of Parliament. “With this reform, a potentially large financial segment will be opened up for NBFCs who can now finance MSMEs based on receivables”. Factoring services help a company use its invoices receivable to obtain finance from third parties. Globally it is an important source of working capital for both medium sized and large firms.
In addition, the government has also allowed bilateral netting that facilitates capital savings and the development of a responsible credit default swap markets that protect against risks, he said, underlining the need for policy makers and market players to work together. did.
He highlighted the need to facilitate higher flow of funds to lower corporates as most of the lending is to top-rated borrowers. A recent study by a rating firm indicated NBFC Lending to top-rated borrowers grew by around 10 per cent in the last five years, but remained sub-zero for low-rated corporates.
“There is a down corporate bond market for triple A rated companies” he said while interacting with NBFC players. We should be able to lend to riskier sectors. Most of the funding for this segment comes from risk-averse equity investors and rarely receives adequate debt financing.
Sanyal also said that there is a need for a refinancing body to fund such NBFCs to increase the credit resource for NBFCs.