With Narendra Modi-led NDA set to return to power, there are expectations that a stable government will take steps to fix dents in the economy, especially issues troubling NBFCs.
“Something needs to be done to revive the NBFC sector which is struggling. It provides funding to areas where banks cannot reach out to. There is a need to allay the fear of lending to NBFCs,” Keki Mistry, Vice-Chairman and CEO, Housing and Development Finance Corporation, told Moneycontrol.
“Representatives from the Reserve Bank of India and the government need to meet to see what can be done to revive the sector,” he added.
The NBFC sector has been grappling with funding issues as credit lines from banks froze due to the IL&FS mess. In the financial year ended March 2019, most banks had to fully provide for loans given to IL&FS as they slipped into the non-performing asset (NPA) category, impacting their bottom line dearly. Banks have therefore become cautious and are restricting lending to top quality borrowers.
“We have moved to an extremely stringent NPA recognition environment that has created fear among some of the banks, both for SME lending as well as NBFC lending,” said Mistry.
“I think its an extremely decisive mandate which will give the NDA the ability to carry out a lot of reforms on an uninterrupted basis. The focus of the new government should be on boosting economic growth and job creation,” he said.
He added that the construction sector creates jobs and supports core sectors in the economy like cement, power, steel and ancillary industries associated with housing.