₹30,000-cr liquidity support for NBFCs/HFCs: Outcome belies expectations

It’s official now. The ₹30,000-crore Special Liquidity Scheme – rolled out as part of the Aatma Nirbar Bharat package – to support NBFCs and Housing Finance Companies has fallen short of the expected outcome.

Disbursal lax

Of the ₹30,000 crore that was sought to be allocated for the scheme, only ₹7,227 crore has been disbursed at the end of the scheme on September 30. As of September 30, 39 proposals, involving ₹11,120 crore, was approved.

Of this sanctioned amount, ₹7,227 crore has been disbursed, whereas ₹182 crore will not be availed. The remaining sanction of ₹3,707 crore has lapsed, according to official data.

The scheme only saw one-fourth of the intended support amount utilised by NBFCs and HFCs. It is widely perceived that a majority of the medium and small NBFCs that were looking for liquidity support to do further lending did not get the requisite support coming their way due to the conditions of the scheme.

The liquidity support largely landed at the doorsteps of large NBFCs, while most of the smaller ones did not benefit.

Although the intent of the government was good, the way this scheme was structured and implemented, is not meeting the needs of the larger NBFC universe on the ground.

This scheme has targeted the liability side of the balance sheet of NBFCs and provided support for three months, when small and medium NBFCs were looking for money for three years to lend more.

“Now that the scheme is closed, the government would do well to allocate the balance unutilised amount to SIDBI or NABARD, and direct them to provide direct liquidity support to small and medium NBFCs through term loans and without insisting on minimum credit ratings. We understand this (if done) will not be a game-changer, but at least some lending will happen,” Raman Aggarwal, President, Delhi Hire Purchase and Leasing Companies Association, told BusinessLine .

Srinath Sridharan, independent markets commentator, said the proactive scheme was for a three-month period, with the aim of generating liquidity, using specific debt instruments, to be extinguished within a certain date.

“In the past few months, NBFCs have been making good their payment obligations while one side of their balance sheet is almost shut, and waiting for a solution to rebalance their current Asset Liability Mismatch. They would rather have fresh borrowings available for longer term, as that would allow them to offer onward-lending to their core consumer segments; for this, the debt markets have to kickstart actively without credit or risk aversion, basis any sectoral prejudice,” he said.

Structuring the scheme

So what would have been a prudent way to achieve better outcomes on the liquidity support in trying times?

The Centre should not have adopted the current methodology of first structuring the scheme, announcing it, then implementing it, and finally reviewing it for tweaks. It would do well to first engage with the industry and hold larger discussions before framing the scheme.

“Engaging with stakeholders before structuring the scheme would help. If the scheme were to be structured straight away without engaging with stakeholders, you will later only be willing to tweak (in future) and not be ready to overhaul it if the logic were to go wrong in designing it,” said an NBFC industry insider.

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