After IL&FS crisis, Covid-19 makes NBFCs struggle despite RBI actions

While bank credit to NBFCs has seen a rise of 30 per cent year on year, credit has mostly flown into larger NBFCs with good parentage and ones with better ALM positions.

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While the RBI undertook long-term repo operations to ease liquidity constraints, mostly AAA rated entities and public sector undertakings, got the benefit of the operation and the TLTRO 2.0, which was supposed to provide relief to lower-rated NBFCs, didn’t see a good response. Illustration by Binay Sinha

Subrata Panda Mumbai

2 min read Last Updated : Jun 12 2020 | 11:27 PM IST

The shadow banking sector was already struggling with funds in light of the IL&FS crisis when Covid-19 hit. While bank credit to NBFCs has seen a rise of 30 per cent year on year, credit has mostly flown into larger NBFCs with good parentage and ones with better ALM positions.

After the IL&FS fiasco, private NBFCs have reduced their dependence on commercial papers (CPs) from Rs 2.22 trillion in July 2018 to Rs 64,253 crore in April 2020, and HFCs reliance on CPs has come down from Rs 1.4 trillion in July 2018 to Rs 50,691 crore in April 2020. The share of private NBFCs in total issues has fallen sharply, and there has been a sharper reduction in issues by