The Hindu Business Line : NBFCs expect banks to be more responsive

Mumbai, Nov. 17 Non-banking finance companies expect banks to loosen their purse strings and lend more freely to them in the wake of the measures announced on Saturday by the Reserve Bank of India to enhance credit flow and liquidity management.

The RBI measure will provide an impetus to the flow of credit from banks to NBFCs. This is because banks now have sufficient liquidity. But ultimately, the decision to give loans to NBFCs will be a commercial one taken by the banks based on their business strategy, said Mr R. Sridhar, Managing Director, Shriram Vehicle Finance Company.

On Saturday, the Reserve Bank of India had reduced the provisioning requirement for banks on standard advances in the commercial real estate sector, personal loans, and capital market exposure and non-deposit, taking NBFCs from 2 per cent to 0.40 per cent.

It had assigned a uniform risk weight of 100 per cent to the claims on rated as well as unrated non-deposit taking systemically important non-banking financial companies.

The RBI had also extended the special term repo facility that it had introduced to help mutual funds and NBFCs facing fund shortage till end-March 2009.

‘will take a few days’

“It will take a few days to see the positive impact. At least we have started going to the banks and they are responding positively. We think we will start getting money from banks within two-three days,” said Mr Ramesh Iyer, Managing Director, Mahindra & Mahindra Financial Service.

The company borrows money from about 25 banks, including national and private banks.

However, automobile manufacturers are not feeling the effect of recent measures of RBI to enhance credit flow. “As on today, only public sector banks have done some minor adjustments.

The private banks, which finance more than 65 per cent of the total car sales, haven’t cut their interest rates. So the positive impact of RBI measures has not been reflected at the ground level,” said Mr P. Balendran, Vice-President (Corporate Affairs), General Motors India.

He said that following the credit crunch that impacted consumer financing, the public sector banks’ share in vehicle finance has increased.

“Currently, 20 per cent of the car purchases are financed by public sector banks. Earlier, it used to be 15 per cent,” he said.

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