A HDFC Bank Ltd. teller counts Indian 100 rupee banknotes at the company’s bank branch in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Your Primer For Commercial Paper Redemption In November

Non-bank lenders need to refinance or replace about Rs 1.52 lakh crore in November as debt matures.

More than Rs 31,000 crore of commercial papers have been redeemed in the first three days of November, according to reports by Edelweiss and ICRA. Nearly Rs 16,000 crore were redeemed on Monday alone, the prominent among them being Dewan Housing Finance Corporation Ltd.’s Rs 1,150-crore paper.

The housing finance company, in a statement, said it repaid close to Rs 1,775 crore, and is in the process of raising further liquidity. The company has also offered to buy back all commercial papers maturing by Nov. 15, according to the statement.

Also read: NBFCs Creating Liquidity Cushion To Tide Over Next Few Months, Says Rashesh Shah

The street and the regulators are closely monitoring the redemptions of key housing finance companies like Dewan Housing, Indiabulls Housing Finance Ltd. and PNB Housing Finance Ltd.

That’s amid fears that non-bank financial companies may default on repaying debt within the next six weeks if additional liquidity is not provided immediately, Bloomberg reported quoting anonymous people who cited a Finance Ministry letter. The letter was first reported by financial news website Moneycontrol.com.

“It’s basically a segment of NBFCs and housing finance companies which is facing liquidity problems. It’s more pronounced there. I won’t get into individual names. It’s a segmental problem. These are big entities part of that segment,” said Corporate Affairs Secretary Injeti Srinivas.

A recovery of cash flow at such lenders is crucial to revive confidence in the market at a time the country is grappling with higher crude prices, weaker rupee and liquidity crisis among NBFCs following defaults at IL&FS Ltd.

“At macro level some measures have been taken. This situation should ease but at the same time...the way business is conducted by this sector, they will have to deeply introspect and adopt the model which is sustainable and takes into account sources of funds, deploy them to minimise this mismatch,” Srinivas said.

Also read: What The Post-NBFC Crisis ‘New Normal’ Looks Like