MUMBAI :
Finance minister Nirmala Sitharaman announced measures worth ₹75,000 crore for liquidity-starved non-banks, mortgage lenders and micro financiers as part of the government’s economic rescue package.
The government allocated ₹30,000 crore to buy investment-grade debt of non-banking financial companies (NBFCs), home finance companies (HFCs) and microfinance institutions (MFIs). The second measure is a partial guarantee scheme worth ₹45,000 crore on primary market paper sold by NBFCs.
Of the two measures, the first one affects debt funds the most as it allows for both primary and secondary market purchases. This will be done by banks with a government credit guarantee on such papers, a debt fund manager said on condition of anonymity. It supplements the central bank’s targeted long-term repo programme, which allows banks to borrow at the repo rate for the purchase of secondary market debt.
“The 30,000 crore liquidity facility is likely to support MFIs, HFCs and NBFCs in that order. I don’t think large NBFCs are likely to benefit in a big way. However, it will help them and debt funds with NBFC paper at the margins,” said Akhil Mittal, senior fund manager-fixed income at Tata Asset Management Ltd.
Recent downgrades in certain NBFCs have added pressure on mutual fund portfolios. The finance minister also announced a partial guarantee scheme for primary market borrowings of NBFCs, including bonds and commercial paper. In this provision, the government would bear the first loss of up to 20% on such paper. This facility is worth ₹45,000 crore and covers debt below AA rating, including unrated paper. But it applies only to primary borrowings and can only indirectly help mutual funds by shoring up NBFCs’ the balance sheets. Mittal said that even this package will mostly benefit small NBFCs and is aimed at them.
A B&K Securities Report in April said mutual funds collectively have an exposure of ₹1.19 trillion to NBFCs, of which ₹43,573 crore is maturing over the next three months.
