Shadow banks seek special fund for 3-5 yr loans

Non-banking financial companies (NBFCS) want the government to set up a dedicated fund through which they can get loans with tenures of three to five years, as it will help the cash-strapped sector maintain a healthy asset-liability match.

In a representation to Union Finance Minister Nirmala Sitharaman, the Finance Industry Development Council (FIDC) said the average tenure of loans extended to the majority of customers (individuals and MSMES) is 24-48 months. However, funding under the partial credit guarantee scheme, special liquidity scheme, and the refinancing being done by Sidbi are for a short tenure of six months to 18 months.

The tenure of refinancing should be increased to at least 36 months for a healthy asset-liability profile, said the lobby group for NBFCS.

The all-india financial institutions – Sidbi and Nabard – may be assigned the role of refinancing. All NBFCS, irrespective of their size and credit rating (even unrated), should be eligible to get funds, the FIDC said.

The key balance sheet parameters such as capital adequacy ratio, non-performing assets (NPAS), track record along with promoters’ experience and understanding of the market, should be the important consideration for extending financial support to NBFCS.

It said bank lending to NBFCS for on-lending to priority sector to be treated as priority sector lending for banks.

There is a need to carve out a space for small and mid-sized NBFCS within the sectoral cap in bank lending. While NBFCS account for 20 per cent of total credit in the economy, most banks have capped the exposure to the sector (NBFCS) at 8-9 per cent.