RBI's financial stability report raises concerns about NBFCs, says ICRA

“The share of the wholesale book in relation to the capital of some of these NBFCs or the HFCs, there is a substantial rise and in case of top few borrowers going bad, there can be a substantial impact on the capital of the NBFC. So that’s one risk which is highlighted by the financial stability report apart from the fact that some of the wholesale borrowers or the NBFCs continue to have an impact in terms of funding cost and access to the debt capital markets which is going to impact their profitability and liquidity,” Gupta said.

Talking about the NBFCs, Gupta said, “We have been continuously reviewing all our NBFCs since the liquidity crisis which started in the second half. So as and when things are evolving, as and when we see the stress for a particular NBFC, a corrective rating action is been taken.”

“Therefore, it’s not a blanket approach which we are following and an entity specific actions can follow because many NBFCs have also taken corrective actions by way of reducing their short-term borrowings and correction their asset liability management (ALM) position. So the overall approach remains specific to the entities and it is not a sector-specific action which we are looking at,” added Gupta.