It was a stellar day for non-banking financial companies (NBFC). It galloped in trade on the back of the State Bank of India's (SBI) decision to triple their loan purchase target for NBFCs and buy assets up to Rs 45,000 crore. The other banks also echoed a similar sentiment.

Banks feel that the loan buying route will provide the much-needed liquidity boost to the NBFC sector.

To discuss the decision of SBI and other banks, CNBC-TV18 caught with P K Gupta, MD, SBI Joins, KVS Manian, corporate head, institutional & investment banking, Kotak Mahindra Bank, Neeraj Gambhir, independent expert and R Sivakumar, head fixed income, Axis Mutual Fund.

The announcement by SBI ensures that a lot of NBFCs do not end up with liquidity stress and they will have access to funding, said Sivakumar.

As a bank, Kotak Mahindra Bank is willing to lend to the good NBFCs and it is not a problem, Manian said, adding that portfolio purchase is another option the bank is looking at in some selected cases.

“Our shop is open for both buying and lending of portfolios,” said Manian.

Gupta said they believed that

Buying of a portfolio will provide the NBFCs with long-term liquidity and at least in the short-term they will not have to keep looking for rollover whatever borrowings do from MFs as well, said Gupta.

“It will give them some breathing space in terms of restructuring their entire balance sheet. So at this point in time, we believe this is the right approach,” he said.

According to Gambhir, the decision looks more like sentiment driven and the reality is that the asset quality of the NBFCs hasn’t changed overnight.

“IL&FS was a standalone event and one should not be painting the entire NBFC sector with the same colour,” Gambhir said.

When the largest bank in the country steps up and says they are willing to lend to NBFCs and are open for business both on the lending side as well as buying of the portfolio, it brings back confidence to some extent, he said.

First Published:Oct 10, 2018 7:03 PM IST