Photographer: Karen Dias/Bloomberg  

Loans Disbursed By Leading Non-Bank Lenders Fall In October 

Loans disbursed by leading non-bank lenders fell in October as they face a liquidity crunch, according to an industry body.

Disbursements by non-banking financial companies contracted 15 percent on a yearly basis during the month, said a media statement by the Finance Industry Development Council, a self-regulatory organisation which compiled the data from some of the leading non-bank lenders. BloombergQuint couldn’t independently verify the figures.

The disbursements contracted 30 percent month-on-month, according to the data. Construction & mining, equipment and automobiles were among the worst hit categories, the council said.

Defaults by Infrastructure Leasing & Financial Services group roiled credit markets, leading to a liquidity squeeze for non-bank lenders. That hurt their ability to lend.

“While a majority of NBFCs have strong balance sheets to meet their liabilities, they need liquidity support to ensure growth in credit delivery,” Raman Aggarwal, chairman of the self-regulatory council, said.

The central bank on Nov. 29 reduced the holding period for loans disbursed by non-bank lenders by half. They can now securitise loans after six months instead of 12 earlier. The earlier rules will help NBFCs and mortgage lenders to sell a larger chunk of their portfolios to banks and increase liquidity. But the relaxation is applicable for loans of original maturity of more than five years.

The council, in its statement, said that would not benefit smaller NBFCs whose loans are typically of shorter maturity. For any significant improvement of liquidity, loans with a maturity of two to five years should be included, it said.

Also read: Securitisation Volumes Jump In October Amid NBFC Strains