Funding challenges mount for Indian NBFIs, says Fitch
By BFN News | 09:30 AM | Friday 11 May, 2012
Funding costs for the larger Indian non-bank financial institutions could rise following guidelines on securitisation and direct assignment of loan receivables by the Reserve Bank of India, Fitch Ratings warns.
The guidelines may force NBFIs to virtually abandon the popular "direct assignment" route that has accounted for 10%-40% of their funding, and move to more capital-intensive securitisation deals or more costly senior debt.
Fitch says the guidelines come at a time when other regulatory tightening may result in a slowdown in the flow of funds from the traditional sources - commercial banks and debt mutual funds.
It may consequently be difficult for NBFIs to maintain their above-average loan growth compared with the banks, and instead force them to maintain greater liquidity on their balance sheets in the face of weaker funding flexibility.
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