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RBI against special NBFC window

NEW DELHI: The Reserve Bank of India (RBI) is not fascinated about providing a lifeline to stressed non-banking finance firms (NBFCs), in spite of robust pitch by means of NITI Aayog and business gamers.

The government assume tank has made a robust case for a unique lending window for NBFCs to tide over a cash crunch in the wake of IL&FS’ collapse, which has made banks wary of funding the sector. In addition, NITI Aayog has sought the next lending from banks for the sector, arguing that Raghuram Rajan had opened a identical window all the way through his stint in the RBI.

Finance ministry officers, then again, stated the central bank was not fascinated about accepting the proposal, no less than for now. The RBI, which has already held discussions with NBFCs, is of the view that not all of them are stressed and it's only some which can be highly leveraged due to aggressive lending up to now.

The RBI is wary of opening a unique lending window, for the reason that the finance firms had lent to weaker firms, including several in the stressed real estate sector. “A large number of them are firms that could not get funds from the banking sector and subsequently needed to pass to NBFCs. The high quality of the security may be suspect and it can be tough to just accept the ranking on face value,” stated an official, acknowledging RBI’s concerns.

NBFCs were making a case for a bailout, arguing that the fund crunch available in the market is impacting shopper demand, which is visual in declining auto sales and shopper loans. The housing sector, which was already in the grip of a slowdown, is claimed to be impacted extra.

The demand for lending a serving to hand to NBFCs comes at a time when a new government is at the verge of taking place of work.

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