Rajnish Kumar, chairman of State Bank of India, attends a news conference in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

IL&FS Default: No Concern On Liquidity Of NBFCs, Says SBI Chairman

Assuring lending support to non-banking financial companies, State Bank of India Chairman Rajnish Kumar said there was no concern on liquidity of such firms, amid the ongoing debt crisis at the IL&FS Group.

Shares of housing finance companies came under sudden heavy selling pressure Friday as investors raised concerns over rising cost of borrowing for the companies amid crisis at IL&FS.

Experts attributed the fall in NBFC scrips to tightness in the money market and a lack of clarity on IL&FS exposure.

Some comments are being attributed to SBI about the bank being wary of lending to NBFCs. The rumours are baseless. SBI lends support to NBFCs in private and public sector within the regulatory policy framework and will continue to do so.
Rajnish Kumar, Chairman, SBI

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, he added.

“There is no concern on liquidity of NBFCs in view of their liquid cash position and availability of committed lines,” said the top official of the country's largest lender.

Dewan Housing Finance Corporation Ltd. lost Rs 8,158 crore in market capitalisation after the stock closed 42.5 percent lower, after plummeting nearly 60 percent intra-day.

Earlier this month, it came to light that the IL&FS group defaulted on a short-term loan of Rs 1,000 crore from Sidbi, while a subsidiary has also defaulted Rs 500 crore dues to the development finance institution.

While IL&FS has nearly Rs 35,000 crore consolidated debt, IL&FS Financial Services has Rs 17,000 crore of debt, which sits as standard asset for most of the lenders, according to a Nomura India report.

The group has seen its various long-term and short-term borrowing programmes downgraded to ‘default’ or ‘junk’ grades by credit rating agencies, even as the regulators are also probing alleged delay in disclosure about certain loan defaults.