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Finance Minister Arun Jaitley on Monday assured that there will not be any liquidity crunch for non-banking financial companies (NBFCs), mutual funds and small and medium enterprises (SMEs).
“The Government will take all measures to ensure that adequate liquidity is maintained/provided to NBFCs, mutual funds and SMEs,” Finance Minister Arun Jaitley said in a tweet nearly half-an-hour before the opening of equity market.
On Sunday, SEBI and RBI had issued similar statements saying, “The Reserve Bank of India and the Securities and Exchange Board of India are closely monitoring the recent developments in financial markets and are ready to take appropriate actions, if necessary.’’
These statements had some impact on the stock market in the initial trade when both the indices opened higher, but soon turned negative. At 10 am, the BSE Sensex was trading at 36,698.27, nearly 144 points below Friday closing, while the NSE Nifty was at 11,084.35, nearly 59 points down. The currency started off Monday’s trade at 72.47 to the dollar against Friday's close of 72.20 a dollar.
These remarks have come at a time when a serious problem in one of the leading infrastructure finance companies, IL&FS, and problems in some NBFCs have spooked the entire financial market and stock markets faced heavy attack from bears last week.
The market is already facing a tough call because of US-China trade war and US policies which led to outflow by foreign portfolio investors. IL&FS episode and heavy selling in housing NBFCs forced the Government and regulators to pacify the market.
Even the nation’s biggest lender, State Bank of India, has to come out with a statement. Its Chairman, Rajnish Kumar, said that some comments are being attributed to SBI about the bank being wary of lending to NBFCs but these rumours are baseless.
“SBI lends support to NBFCs in private and public sector within the regulatory policy framework and will continue to do so. In fact the recent regulatory guidelines on the co-lending model opens up further opportunities for collaboration between SBI and non-deposit taking NBFCs to increase lending to priority sectors. There is no concern on liquidity of NBFCs in view of their liquid cash position and availability of committed lines,” he said.
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