In a bid to request further relaxation in priority sector lending (PSL), Small and medium sized non-banking finance companies (NBFCs) have requested the Finance Ministry to sort a refinancing body in the lines of the National Housing Bank (NHB). Underlining the matter, Finance Industry Development Council (FIDC), on behalf of NBFCs, have written to the Union Finance Ministry and requested to bring down the level of fund dependency of NBFCs on banks.
The representative body has stated that generating bank funding is becoming challenging for small and medium NBFCs, particularly in the last two years, due to several reasons.
FIDC has suggested the ministry to form a refinancing body for Small NBFCs and suggested that the role can be given to SIDBI (Small Industries Development Bank of India) and Nabard (including its subsidiaries like NABKISAN & NABSAMRUDDHI). It wrote that these institutions could fund as per the rules of term loans for a tenure of 3-5 years.
In a communication sent to The Banking & Finance Post, FIDC stated that , “A vast majority of loans given by NBFC to MSMEs and individuals are for average tenure of 24 to 48 months. Therefore, it is imperative that NBFCs need to borrow for a commensurate period in order to maintain a healthy asset liability match.”
“Currently, funding under the PCG 2.0 (including the Govt guarantee), SPL and the Refinancing being done by SIDBI, are all for a short tenure of 6 months to 18 months only. We request if the tenure could kindly be increased to at least 36 months for a healthy liability profile,” said FIDC.